I’m not a pessimist–I’m just trying to inject a little reality into the conversation. And unlike the presidential contenders, I practice what I preach. Take the Top 5 Stocks on my Blue Chip Growth Buy List: They’ve gone up an average of 12% so far this year! That’s compared to a 12% DROP in the S&P since January 1 and the worst June since the Great Depression.
The key to success in this market and knowing where to invest is to not rely on false hope or feel-good stories. I stick to the facts–earnings growth, sales growth, P/E ratios. I look for stocks that are growing at a rapid rate and have the fundamental values necessary to succeed on Wall Street right now. Instead of hopping around on stocks that have temporarily fallen into favor, I look for stocks that will continue to generate great returns over the long term. And you should too (by the way, here’s who made my Top 5 Stocks for August).
Make Your Choices Based on the Facts
Some politicians briefly win support because they look good in a suit and deliver feel-good speeches full of empty promises. But eventually, their weaknesses are exposed and they fall out of favor. The same is true for many stocks right now–they see a temporary jump in value before they nosedive to the bottom of the barrel again.
Regulators at the Federal Reserve, the Securities and Exchange Commission (SEC) and the Financial Accounting Standard Board (FASB) have been throwing the kitchen sink at the credit crisis. Few of their actions have produced any lasting changes, however–they’re merely succeeded at creating the illusion that everything is going well in the financial sector (see also, “Read My Lips: The Feds Can’t Fix This!“).
We’ve seen the dollar gain some momentum in recent weeks, and crude oil prices have drawn back more than 20% from mid-July’s record high of $147.27. Financial stocks have rallied briefly, prompting some gullible economists to say that the oil bubble has burst and financials are the way of the future.
But just as voters eventually figure out that some politicians are all flash and no substance (see also, “Election Season: A Great Time to Sell Stocks“), Wall Street will soon have to come to grips with the fact that the economy hasn’t really changed at all.
Obviously, financial stocks will give back all of their gains after investors are wise to this. If you’re still not sure where to invest, just know that the stocks that will succeed are the ones that continue to post massive profits and sales growth this year.
In the recent round of earnings reports, we’ve had several Blue Chip Growth stocks report earnings double, triple or even quadruple the numbers they posted in 2007! Those stocks were all commodity-related–from the agricultural chemical companies that help boost crop yields to energy companies that are accessing new supplies of crude oil.
Those strong sales and profits won’t dry up any time soon. Prices for commodities like corn, oil and gold have rolled back a bit, but they’re set to surge again (see also, “Commodities: Your Guide to Profiting Smartly“).
As inflation continues unchecked and the seasonal demand for energy peaks this winter, we’ll see…> the same boom in prices that we saw earlier in 2008.
The biggest reason for the decline in commodity prices is that the dollar has gained some strength. After all, 88% of the world’s commodities are traded in dollars, and a weak greenback pushes up the prices of everything from metals to energy. But don’t be fooled into thinking the dollar’s recent gains are a sign the American economy is on the road to recovery! (see, “Profit From the Dollar’s Free Fall“)
Things are still pretty bad in the U.S., but they’re even worse abroad. Recession is sweeping through Europe, with Denmark, Germany, Italy and France all reporting shrinking GDP. So think of the dollar as the winner of a race between two unpopular candidates! Any lasting strength of the dollar has to be built on positive developments at home–not worse news abroad.
It’s easy to see how hopeful investors are drawn to recent events, but they’re exposing themselves to big risks! I don’t want to see you do the same thing. I can help you avoid these traps because I pick stocks based on fundamental values like earnings growth and operating margins. My exclusive stock-ranking tool, PortfolioGrader Pro, calculates grades for thousands of companies based on eight fundamental values and helps me and my subscribers determine where to invest our money now. This tool ensures that my Blue Chip Growth subscribers only own companies that are growing and thriving right now!
The Commodities-Financials Seesaw
Think of today’s market as a giant seesaw, with commodity stocks on one side and financials on the other. Right now, we’re seeing cheaper crude oil, grains and metals thanks to a short-lived rally in the financial sector. But as soon as Wall Street sees how bad things are at banks and brokerages, the money will flood out of these stocks and right into the many commodity-related companies on my Blue Chip Growth Buy List!
Make no mistake: Financials have already started dropping like lead balloons. Financial stocks have had four horrible quarters, and a laundry list of problems that continue to plague this sector. Look at the recent headlines and you’ll see what I mean: Analysts estimate Goldman Sachs (GS) will follow JP Morgan (JPM) and write down as much as $2 billion in the third quarter. Five major banks recently settled lawsuits over the collapse of the auction-rate securities market, and agreed to buy back billions of dollars worth of the risky investments that started this whole mess in the first place. Things at Merrill Lynch (MER) have gotten so bad that the company has enacted a hiring freeze that will last for the rest of 2008, and could be extended through 2009.
Remember, you can’t invest on hope, fear or any other emotion. You have to look at the facts and buy stocks accordingly. This is the reason my Blue Chip Growth Buy List has shattered the S&P’s performance in the past decade. For 10-1/2 years, Blue Chip has beaten the S&P with returns of 267.2% to gains of just 56.4%–that’s 4.7-to-1! Join Blue Chip Growth today to get in on the profits!
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