Last month, I debuted a FREE buy list of stock picks based on my commentary — with the promise that I would keep the recommendations coming, and update you on previous investments.
March’s first batch of picks did very well, returning an average of 3% in the last 30 days vs. 1.8% for the market.
I remain convinced that the rally has some gas left in the tank as we enter the second quarter. Consider that the three months from Jan. 1 to March 31 marked the best first-quarter performance for stocks in more than a decade — and reports like this one in the The Wall Street Journal indicate investors are willing to shoulder more risk despite the rally, rather than take profits and run for the hills.
There are undoubtedly threats to the market and the nascent economic recovery — high gas prices, persistent troubles in housing and unemployment and the ever-looming risk of smoldering sovereign debt trouble in Europe reigniting. But if you wait for everything to be hunky dory, you’ll likely miss the lion’s share of the rally.
Consider that from March 2009 to December 2009, the market added over 40% in nine months. From January 2010 to December 2010 the market added only 10% in 12 months — meaning investors who waited too long for the “all clear” would have missed out on the biggest profits.
That’s why I’m recommending cautiously getting back in the driver’s seat before this next leg of the bull market runs out of gas.
You can find a recap of previous stock recommendations at the end of this article, but I’m sure you’re more interested in the current hot picks than old advice. So let’s jump right in with my “editor’s picks” for April: Goodyear (NYSE:GT), JPMorgan Chase (NYSE:JPM) and small-cap tech stock Fusion-IO (NYSE:FIO).
Goodyear has admittedly been restructuring for what seems like forever. In fact, it just recorded another $23 million in restructuring charges for its fiscal fourth quarter — the latest chapter in an effort to “right size” the business.
But after bleeding cash during the recession due to the slowdown in auto sales and supplier contracts, Goodyear returned to profitability last year. What’s more, it’s forecasting significant growth in 2012 — with earnings per share of $1.85, which would be a nearly 50% surge over fiscal 2011! Revenue is back above 2008 levels to boot after a 20% expansion last year.
The strong growth in the auto sector is starting to show up big-time in the data, so there’s reasons for optimism going forward. Consider that in 2012 auto exports and auto imports soared at the beginning of the year, proving that China’s booming vehicle market and recovering demand in North America are providing great opportunities for investors.
Yes, Goodyear is down 15% year-to-date and has sat out the rally. But despite significant improvement in its fundamentals, GT stock has a price-earnings ratio of less than 7 based on fiscal 2012 forecasts.
Sounds like a bargain to me. Goodyear has been flat for a year, but it could be quite a turnaround story 12 or 24 months from now. I like its long-term growth prospects as Goodyear turns its self around — especially considering that if all GT does is revisit its 52-week high, you’ll be sitting on a 65% gain.