General Motors Company (NYSE:GM) just reported earnings for the fourth quarter and 2014. It was stellar. Ford Motor Company (NYSE:F) also reported great results for the past quarter and year. And January auto sales were strong.
But don’t count on that doing much for the whole year.
First, how many cars will U.S. consumers buy? Second, cheap oil and low interest rates won’t last the year. And the super-strong dollar will continue to dent overseas sales. If it wasn’t for the U.S., GM would have had a hard time; European revenues were off 60%, largely because sales were off and the euro is small shadow to the dollar at this point.
And speaking of the strong dollar, superstar Apple Inc. (NASDAQ:AAPL) had a record-setting quarter thanks to iPhone 6 sales in China. But now they have them — and recent numbers show tablet sales are diminishing.
There’s also that repatriation of foreign assets. The Obama adminstration is seeking to close the tax loopholes whereby companies like AAPL set up a headquarters abroad in a tax favorable country so they don’t have to pay U.S. taxes on their money.
Estimates are, AAPL would owe about $10 billion in taxes if the IRS went after them.
Now, this isn’t a forecast of economic doom for these blue chips, but it is strong advice to look to other stocks that have a better shot at getting through the year building on strength rather than staving off weakness.
These three A-rated picks are just what the doctor ordered.
Better Than Blue Chips: Xcel Energy Inc (NYSE:XEL)
Minnesota-based utility Xcel Energy Inc (XEL) blew away estimates in the fourth quarter by almost 15% and is well-positioned to continue to grow its business and revenue moving forward. Just this week it updated its guidance for 2015, estimating earnings between $2 and $2.15 per share; consensus is $2.09 a share.
The company has been investing in infrastructure and renewable energy resources, which should help XEL as federal regulations become more stringent on power plants.
What’s more, as volatility increases in the markets, investors will be gravitating toward rock-solid long-term investments. And XEL provides all the conditions conservative income investors are looking for.
Its 3.2% yield is solid and adds a nice kicker to one of the best-positioned utilities in the country.
Better Than Blue Chips: Southwest Airlines Co (NYSE:LUV)
One industry that stands to gain from low oil prices — no matter how long they last — is airlines. And the top stock in the sector is Southwest Airlines Co (NYSE:LUV).
Credit Suisse just upgraded its rating on LUV from the current short-term price target of $48 a share to $62. It also boosted it rating from “Neutral” to “Outperform.” And 10 other analysts have raised their short-term price target to $55 — the stock is currently trading at $44.
LUV always seems to find a way to be profitable, even when its competitors are just trying to find a way to stay in business. But low oil prices will help with margins significantly. And the longer it lasts, the more money LUV has to leverage.
Even if oil prices rise by the middle of the year, that’s six months of lower than expected costs for LUV.
Better Than Blue Chips: Northrop Grumman Corporation (NYSE:NOC)
Even with increased military spending toward the latter part of last year, 2014 wasn’t a banner year for the defense sector on the whole. But even in slow year, Northrup Grumman Corporation (NYSE:NOC) managed to grow earnings by 17% for the year. It also posted $2.1 billion more in profits than it did in 2013.
The odd thing was NOC managed to do this while sales for the year shrank by 3%.
Imagine if NOC has a good year of growth! The fact is, some of its earnings boost was from stock buybacks, so it looks good but isn’t really as impressive as it sounds.
As the economy recovers, defense spending will increase. And as long as ISIS is stirring up things in the Middle East and Putin is antagonzing Ukraine, defense stocks are a very good bet for 2015.
And the best of the bunch is NOC.
Louis Navellier is the editor of Blue Chip Growth.
More From InvestorPlace
- Best Stocks for 2015: An Update
- Mixed Signals, Extreme Volatility Plague Market
- This Stock Is the Best Growth Story in Retail