I observe market sentiment is not where it was, but we called for an advance of gargantuan proportio...
9 Best Buys for Bargain Hunters
08/16/2011 1:30 pm EST
A lot of really sound and high-yielding stocks sold off too strongly in last week’s correction, and the buy signal couldn’t be clearer for Cash Machine’s Bryan Perry, who shares his favorite bargains in this exclusive interview with MoneyShow.com.
Bryan, we’ve got some pretty volatile times going on. Market’s up. Market’s down. Who knows what’s going to happen. What do you see lies ahead?
Well, I’ve been alerting our Cash Machine subscribers recently, in the last few days here, about the tumultuous times and what lies ahead...and the rise of the machines, the augmented program trading. You’ve got velocity trading taking over.
You’ve got just a lot of components here of uncertainty about the Eurozone, things that are really out of their reach of the investor’s ability to control. Those types of things are going to do what they do in the market, where you have little mini flash crashes.
The Fed came out and has said they’re going to go ahead and maintain a zero interest rate policy for the next two years. So that was a relief, because basically they told businesses that lending’s going to be cheap. That’s actually a net positive for the economy.
But we’re also seeing a lot of revisions downward for GDP, from 2.5% to 2% to 1.5% on average right now for the balance of 2011. As long as we’re hamstrung by weak jobs and housing markets, then these conditions are going to persist.
It’s going to be a long workout, basically. So it’s imperative that investors that are seeking to be involved in the market really manage their way by buying really good high quality right now, and then looking to spread out and broaden their risk portfolio as the market finds a bid.
I do think based upon what I’ve seen recently that the S&P 500 will probably find support at 1,100 on the index. And at that level there, even with re-revised S&P earnings down from $105 a share to $95, give it a pretty good haircut, then we’re looking still at a forward price of around twelve times or eleven times earnings, which is dirt cheap historically speaking. And then you have an S&P dividend yield up around close to 3%.
That is where you’ll find deep-value money will start to show up from around the world, and start to look at five-star, blue-chip names. From there, if we do find a bid in the market at that level, then I would tell people to start buying in a third, a third, and a third as the markets broadens out.
Do you have any specific picks?
Sure. If you want to start with staying conservative, certainly the utilities are a good place to go.
You want to look at Dominion Resources (D), paying about 5%. You want to look at Southern Company, (SO), also around 5%. You want to certainly consider PPL (PPL), also around 5%. Verizon (VZ) is paying almost 6%. So I like those. The ones that, we have to have electricity and we have to have phones.
You can look at Nestle (NSRGY) for instance. They just upped their earnings guidance from around the world because of their exposure to emerging markets.
With commodity prices having pulled back here, that’s very strong for those types of names. I call them the household, kitchen, and bathroom stocks, all-weather-type names.
And that’s where you start benchmarking yourself in equities, if you want to buy these worldwide blue-chip franchises which do 60% of their sales overseas in growing markets, where the GDPs are much higher than 2% or 3%. That’s how you start to work your way back into the market while we’re down 17% or 18% on the S&P.
So this is where when there is blood on the street, that’s when real money is made. This is a good time for people to just shop for the best names in the world that are right down at major support levels, because those dividend yields are up around 5%. That, to me, in my 25 years of doing this, is a buy signal.
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