A few new names are on the watch list for MoneyShow's Jim Jubak, also of Jubak's Picks, as we enter the summer months with an eye on the next rally.
Yes, Virginia, there will be a second half to 2013. And yes, the current sell-off will end.
US stocks will find a bottom at the April low of 1,542 on the S&P 500 or at the February low of 1,488. I'd vote for either the February low or the 200-day moving average at 1,446. With the index at 1,592 at the close on June 21, 1,446 is another 9.2% lower, and would bring the total drop from the May 17 high to 13.3%.
Even the carnage in emerging-market stocks will end. The drop in the iShares MSCI Emerging Markets Index (EEM) exchange traded fund has fallen 14.8% from the May 7 high. That might be hard to believe, since the fall in emerging markets has been so hard and so painful. The index is down 14.8% from its high in May, versus a drop of 4.6% from the May 21 high for the S&P 500.
Check out my recent column for my take on the timing...but at some point in the second half (July or August for Japanese stocks, September for US stocks, and sometime after that for other markets is a reasonable projection), this drop goes from scare to opportunity.
What do you want to buy, then? Here are my ten choices for stocks for the second half.
Cheniere Energy (LNG)
This was the first company to get a license to export liquefied natural gas from the United States, and it is on schedule to start shipping gas away in 2015.
Thanks to the boom in natural gas from shale in the mid-continent, US natural gas sold on June 21 for $3.77 per million BTUs (British thermal units) in the United States, but the same amount of liquefied natural gas sold for $9.58 in the United Kingdom, $14.10 in China, and $14.50 in Japan.
A second export project recently got a license in the United States, but that project isn't scheduled to start exporting gas until 2017. And, the thing I like about Cheniere in the current economic environment is that the stock should go up—without any need for higher global economic growth to drive up natural gas demand or prices—as Cheniere gets closer and closer to first ship date.
For this stock, the driver is pretty much internal: As long as the project stays on schedule, the stock should move up.
The shares were down 16.7% as of the close on June 21 from the May 17 high. This is the only stock in this list of ten that I'd buy now. And in fact, I am adding it to my Jubak's Picks portfolio.
This company has one of the strongest production pipelines of any of the international oil majors, with new finds in home waters off Norway, in deepwater off the coast of Brazil, in the Gulf of Mexico, and off the Newfoundland coast.
In addition, the company has growing production from its acquisitions in US oil and natural gas shale geologies. Even before the stock's current drop, however, Statoil was a wait-for-2014 story. That's the year that capital spending starts to fall and production starts to rise.
The recent market drop has only added another leg to a decline, in that has taken the New York-traded ADRs down 22.3% from the February 1 high through the close on June 21. The ADRs are down 12.8% from May 8 through June 21.
At the current price you get paid reasonably well to wait for 2014—the yield on the ADRs is 5.46%. Statoil is a member of my Jubak's Picks portfolio.
Industrias Bachoco (IBA)
I recently named Mexico's Industrias Bachoco (which also trades as BACHOCOB.MM in Mexico City) one of my 10 food stocks for a post-Smithfield world.
Industrias Bachoco is Mexico's largest poultry producer (and its No. 2 producer of eggs) with a 35% share of the Mexican chicken market and a 10% share of the egg market. In 2011, the company bought OK Industries, a US chicken producer, to increase its market share in the United States.
In the first quarter of 2013, revenue grew by 7%, but operating margins fell to 7.6% (from 8.3% in the first quarter of 2012) as the company took a one-time charge as a result of an outbreak of avian flu (influenza H7N3). Net income fell 3.6%.
Mexican stocks have sold off along with other emerging markets. And the peso, one of the world's stronger currencies before worries about Federal Reserve policy heated up, has sold off.
The New York-traded ADRs of Industrials Bachoco are down 11.2% from their May 23 high as of the close on June 21.