Jack Welch is the opposite of Jeff Bezos who doesn’t know how to spell quarterly earnings. Whe...
3 Stocks Ready for the Second Half
07/20/2011 8:30 am EST
The stock market is giving off signs that the second quarter may well end stronger than anticipated, so now it’s time to get into the winners, writes Bryan Perry of Cash Machine.
Having spent a number of years in Washington, DC, I tend to have a bent toward conspiracy theory.
Right now, for example, it seems way too coincidental to me that the Fed’s pre-announced ending of QE2 was met with a substantial rally in equities. So I’d be willing accept the view that the Federal Reserve or the Treasury Department stepped in and bought equity futures or stocks for their own accounts, in order to cushion any possibility of a market meltdown.
I can’t prove my speculation about this theory. But when you consider the facts, I think you’ll agree…
Right after QE2 "ended," a market melt-up began that saw the S&P 500 push right back to 1,350, and within 20 points of the 2011 high. But that move came despite the fact that:
- Washington had (and still has) no budget deal;
- Europe’s fiscal crisis is still just that…a crisis;
- and oil prices have rallied back to $100 per barrel, which is sure to take gas prices back up to $4 per gallon by Labor Day.
It appears the stock market, even given last week’s correction, is looking past these issues. Investors have taken the threat of a double-dip recession off the table, and now expect the summer soft patch to give way to renewed growth in GDP in the second half of the year.
More good news is that the bearish case for a slowdown in emerging markets has been put to rest. China’s economy continues to hum along at a more than 9% growth rate. The balance of the BRIC countries, Brazil, Russia, and India, are also maintaining more than 6% GDP growth, while the rest of the Pacific Rim and Latin America are exhibiting resilient growth.
Europe remains the redheaded stepchild of the global growth picture. But it’s becoming more evident that major equity markets can withstand a dysfunctional Europe, and even forge ahead, while the Eurozone rediscovers the virtues of capitalism.
As of this writing, the market is pricing in a strong second-quarter reporting season, a budget deal well before August 2, a stable dollar, zero European fiscal contagion, no further calamity in the Middle East, and crude prices staying at or below $100 per barrel.
I would say that is the equivalent of all the stars lining up perfectly…and I have my doubts about all of the above, with the exception of a strong earnings season.
But if Santa Claus wants to come early this year, I will welcome him with open arms.
E-TRACS 2x Leveraged Long Wells Fargo Business Development Company ETN (BDCL)
BDCL gives us another great way to participate in the business-development company sector. And it doesn’t hurt that it’s currently boasting a 12.20% yield either.
Remember, though, this is a relatively new IPO, and shares could come under steady accumulation by income investors.
Aberdeen Chile Fund (CH)
As I mentioned earlier, emerging markets in Latin America are on track to post robust economic growth this year.
One of the leaders of the pack is Chile, which is expected to show GDP growth of 6.3%. And this fund, with its very attractive 8.79% yield, is a great way for us to participate in this growth.
Fifth Street Finance (FSC)
Given how tight the banks have been to extend credit to small businesses, specialty finance companies like FSC should post a strong second quarter in terms of lending. With a yield above 10%, there is ample room for capital appreciation from current levels.
BDCs have been weighed down by a weak bank sector, but they should post robust growth going forward and shares should push higher.
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