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3 Signs of Life as Sectors Shift

01/19/2012 9:45 am EST


Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Beaten-down stocks are more the rule than the exception these days, and while it might be winter, there are some green shoots already rising if you look hard enough, writes Mark Skousen of High-Income Alert.

Wall Street had a rocky start in the first week of trading, with renewed worries about Europe, but our portfolio of high-dividend paying stocks has jumped ahead, with six out of our eight positions in the black.

The biggest winners so far have been in sectors that were laggards in 2011. To paraphrase Warren Buffett, "The investor of today does not profit from yesterday’s trend."

Financial stocks were clobbered last year, but now Huntington Bancshares (HBAN), the Midwest commercial bank, is up 11% in two months. Yet it is still a bargain and has more to run. It’s selling close to its book value of $5.83, and enjoyed considerable insider buying back in October. Let’s raise our protective stop in HBAN to $5.50 here.

Real estate also has been weak, but yesterday a new report stated that “the number of improving housing markets nearly doubled,” including Dallas, Denver, and Philadelphia. I’m bullish on income-producing properties.

A good way to play the property rebound is to buy Armour Residential (ARR), a residential REIT that pays out a whopping 18.5% current yield. And, as with Huntington, there was significant insider buying back in October. Let’s raise our stop in ARR to $6.70.

The next best performer is Intel (INTC), the world’s biggest chipmaker. It’s ahead 7% in just three weeks, and the call options are 72% higher than when we first recommended them.

This week, Intel wowed tech experts at the annual Consumer Electronics Show in Las Vegas with its new laptop computer, code-named Nikiski. The laptop builds on Intel’s Ultrabook with added features, including an extended screen that also doubles as a touchpad. Let’s raise our stop in INTC to $24.

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