We're in for a Rocky Summer

07/07/2006 12:00 am EST

Focus:

Keith Fitz-Gerald

Editor, High Velocity Profits and Total Wealth

Keith Fitz-Gerald is an exceptional advisor and professional trader with a safety-first focus on defensive portfolio management and hedging his risks. He expects a little turbulence ahead, but advises investors on how to profit from this summer’s volatility…

 

“There’s no doubt in my mind that our long-term prospects are golden, but getting my investors through a rocky summer unscathedand profiting safelyis my top priority. Large-cap stocks should again prevail once the market swings in the other direction, regardless of duration. Those with mega-dividends and global footprints should do even better, and that’s what we’ll target.

 

“Large-cap stocks are 30% to 50% less volatile than small-caps. This is particularly important given how fragile the present markets are and how closely they resemble other critical fall-offs in history.

 

"Small-caps are also less liquid and harder to trade. In this month’s Keith’s Edge, we’re nibbling on Johnson & Johnson (JNJ NYSE). While I’ve steered clear of domestic companies this year due to the state of the US economy and dollar, J&J is about as apple pie as they come. It is by far one of the most trusted brands, making everything from bandages to high-tech medical instruments. And with inflation’s wrath finally reaching consumers’ wallets in places other than the gas station, the healthcare sector, and particularly staples like J&J, should be a safe and profitable position to own in our portfolios for the summer.

 

"J&J broke through a one-year falling trend line on January 10, and has continued its gradual move up. At just 17 times next year’s estimated profits, this stock is very cheap for one of the world’s strongest and safest companies. J&J has grown its earnings at a double-digit rate, compounded, for more than a century, and it’s a steal at current levels. The company pays a dividend of 2.4%.

 

“If the idea of beefing up your portfolio over the summer with an options play appeals to you, I urge you to buy a piece of this all-American company at a 15% discount. We’re betting that J&J will continue rising, or at worst, stay even for the next 18 months.”

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