Analyzing various data series with an eye on tenths of a percent is getting down to the bone. Change in momentum is the name of the game.
Before any pivotal series can reverse trend, the norm is to see a change in momentum from a previous trend, whether up or down. I just completed my monthly scan of the leading, coincident and lagging economic indicators, which, when dissected one against the other, offer excellent long-term guidance on the health of our economy.
“Buzzing” is the word that aptly describes current conditions. Not smoking, but certainly buzzing. The last single (no double) monthly decline in the leaders was the revised negative 0.1% decline logged in January 2014, and a later revision could wipe out this mini negative.
Although both the leaders and economic indicators continue to track positively, there has been some lost momentum in recent months. As I’ve noted often, the employment data is in the winter of its cycle, and there is little likelihood that the jobless claims series can offer much better readings. The average workweek indicator is about as strong as it gets in any recovery cycle.
Yet now, in the winter of an economic cycle, the Federal Reserve is looking to raise interest rates. If the Federal Reserve times the first uptick in the Fed funds rate just right, it may be able to hit the actual peak in the economic recovery cycle or that point at which the Fed would historically be getting ready to begin cutting interest rates.
What a disaster. The Fed should have altered course a couple of years ago. But no, the Fed, with its low interest rate policy, has continued to let retired grandpa and grandma subsidize Wall Street, corporate America and big government. Some strategy!
So, as long as the economy continues to buzz along and the Fed does not run wild with interest rates, the stock market will find reason to advance. A whiff of a turn to recession, and the party will end fast.
Here are four stocks with charts that look plenty strong in current market conditions:
4 Outperforming Stocks to Buy – Target Corporation (NYSE:TGT)
The history of Target Corporation (NYSE:TGT) goes back to George Draper Dayton, who purchased land in Minneapolis on Nicollet Avenue in 1881. There, he formed the Dayton Dry Goods Company, which would eventually become Target.
Dayton was a philanthropist and business pioneer who wowed America with his determination and business creativity. In 1920, he used two Curtiss Northwest Airplane Company planes to haul goods from New York to Minneapolis after railroad strikes shut down overland transport. At the time, the trips were the longest commercial flights ever.
Today, Target operates 1,934 stores in the U.S. and Canada and employs 366,000 people. Target is ranked 22nd on Fortune‘s list of the World’s Most Admired Companies. In 2013, Target produced revenues of $72.6 billion, of which 25% represented household essentials, 21% food and pet supplies, 19% apparel and accessories, 18% hardlines (things like hardware, automotive parts and accessories, sporting goods, electronics, toys, etc.), and 17% home furnishings and décor.
You can see on my price chart that Target’s shares have popped above previous resistance from mid-2013. Buy on this bullish signal.
4 Outperforming Stocks to Buy – Northrop Grumman Corporation (NYSE:NOC)
The competition for the next Air Force bomber contract is underway, and Northrop Grumman Corporation (NYSE:NOC) is pushing hard to win.
If you live in Washington, D.C., or Dayton, OH (home to Air Force Materiel Command), you may have seen the Super Bowl ad run by Northrop for its latest bomber concept. There are so few aircraft contracts awarded by the military these days that if Northrop’s competitor Boeing Co (NYSE:BA) doesn’t win, it will be out of the combat aircraft business by 2018.
Northrop could become an acquisition target if it wins the contract. Northrop is a top defense company with 10 consecutive years of dividend increases recorded.
My relative strength chart illustrates Northrop’s strong outperformance of the S&P 500 since 2013. Buy NOC.
4 Outperforming Stocks to Buy – CVS Health Corp (NYSE:CVS)
As rules from Obamacare drive consolidation in the health care industry, it’s more important than ever for pharmacy businesses to have partnerships with the massive health care systems that are gobbling up the private practices across America.
CVS Health Corp (NYSE:CVS) leads the way with 51 partnerships and has beaten the S&P 500 hands down on my relative strength chart since 2011. Buy CVS stock.
4 Outperforming Stocks to Buy – Colgate-Palmolive Company (NYSE:CL)
On Feb. 19, Colgate-Palmolive Company (NYSE:CL) announced a 6% increase to its annual dividend. The increase is the 52nd consecutive annual dividend increase for Colgate.
That dividend increase ties Colgate for the 12th longest streak of dividend increases for American companies with The Coca-Cola Co (NYSE:KO), Illinois Tool Works, Inc. (NYSE:ITW) and Johnson & Johnson (NYSE:JNJ).
You can see on my chart that Colgate shares have built a stable trend of price increases. Buy CL stock today.
To get the rest of Dick Young’s top stocks to buy this month for stability and long-term dividend growth, sign up for his newsletter, Intelligence Report.