March madness indeed: For the third week in a row, the stock markets moved enough to compel me to send out a Flash Alert.
Last week was stressful on Wall Street, but as I mentioned earlier, much of it was just profit-taking on tech and biotech stocks. In fact, I used the pullback as an opportunity to add shares of some of my favorite stocks.
If you remember back to about a year ago, we had a similar correction, just before first-quarter earnings season began. A correction will happen from time-to-time; short sellers will sometimes try to beat up high-flying stocks heading into earnings season.
But what happened last year, and what I expect will happen again, is that the stocks that are backed by strong fundamentals will shine during earnings season.
When you take the long view, these corrections become blips on the radar. While we’ve had our shares of ups and downs along the way, the S&P 500 has rallied over 11% since last April. So, whenever you see the market pull back, it’s important to look at the bigger picture and figure out what’s causing the selling action.
In this day of HFT Systems and the 24-hour news cycle, too many investors react first and then think later. That’s the last thing I want us to be doing here.
If there’s one thing that I want you to take away, it is that money is not going to leave the U.S. stock market. The S&P 500 has an average dividend yield of 2%, which is higher than the 10-Year Treasury and higher than the bank. Further, now that the euro has plunged 22% against the dollar, foreign investors are putting their money in U.S. Treasuries, which is putting even more pressure on Treasury interest rates.
So, if you’re looking for a decent yield, the stock market is really the only option. That’s exactly why we have strong dividend-payers like Altria Group Inc (NYSE:MO), Reynolds American, Inc. (NYSE:RAI) or even HCP, Inc. (NYSE:HCP). Given the low interest rate environment, investors will not cash out of the stock market; rather, they’ll transfer it to more promising stocks.
For the past several months, I have been structuring more portfolio so that we’re positioned in the stocks that others will flock to once earnings season commences. Our average stock has 21% forecasted annual sales growth and 24% earnings growth. This is while the S&P 500 is expected to see sales fall 2.8% and earnings decline 4.6% over Q1 2014.
As far as I’m concerned, we’re “locked and loaded” heading into earnings season. I understand that the recent market volatility has been trying, but nothing has really changed. Now that earnings season is just a few weeks away, we don’t have long to wait until we can really see our stocks in action.
Louis Navellier is the editor of Blue Chip Growth.