It occurred to me a few days ago - here in the shadow of the second bug pullback of the year and hopefully the onset of the subsequent recovery - that I really don't have the desire to be a stock jockey this summer. Investors aren't quite sure what to make of the market anyway, which will only augment the season's usual tepidness. Instead, I'm content to load my portfolio up with names I'm comfortable not watching every day, and just let it cook. Does this sound like you too?
Of course, those kinds of stocks are few and far between. I've identified two groups that fit the bill though, and four picks of the litter from those two industries. I think you'll like them as lazy summertime plays as well.
IN PICTURES: 6 Ways To Save Money This Summer
Method to the Non-Madness
Where'd I come up these picks? A low beta is a good starting point, but a lack of volatility doesn't inherently mean forward progress. No, I'm looking for less volatile arenas that have demonstrated consistent success (i.e. gains), even if modest. (Learn more about what beta is, see Beta: Know The Risk ).
I came up with food distributors and cable/satellite broadcast companies.
I know, I know...neither of those groups has been a market leader in any time frame since the rebound began in March of 2009. That's the point. Yesterday's leaders become tomorrow's laggards, and vice versa - I don't want to have to worry about that this summer. My goal is to find stocks that have been consistently, say in the top 20% of performers (modest enough to be off the radar), for all the major time frames over the last twelve months. The odds are good they'll be able to maintain that relative performance position and outpace the market.
Oh, and if you don't think consistency matters, it does - it leaves far less ground to 'make up' after pullbacks. Check out how the minimal volatility from the S&P 1500's Cable/Satellite and Food Distributors indexes has helped those two groups easily outperform the broad market over the last twelve months.
|Performance||S&P 1500 Cable & Satellite||S&P 1500 Food Distributors Index||S&P 1500 Index|
|2-Week Pct Chg||7.86%||2.25%||1.50%|
|3-Week Pct Chg||5.62%||0.04%||-2.93%|
|1-Mon Pct Chg||3.00%||1.79%||1.17%|
|2-Mon Pct Chg||-0.49%||-3.22%||-7.01%|
|3-Mon Pct Chg||5.05%||3.54%||-5.29%|
|6-Mon Pct Chg||16.28%||9.45%||-0.27%|
|12-Mon Pct Chg||42.40%||32.93%||21.40%|
Some people may chalk it up to coincidence; others know there's no such thing as coincidences when it comes to the market.
This Summer's Hot, Er, Lukewarm Prospects
So which stocks are best poised to maintain this reliable - and deliberately modest - uptrend? As is the case with many of my picks, they're bordering on obscure.
From the cable television and satellite group, I dig Dish Network (Nasdaq:DISH) and Comcast Corporation (Nasdaq:CMCSA).
Say what you want to about Dish Network's lousy customer service and shrinking earnings - I won't argue with you. There's just something about the recurring revenue model that I can appreciate, assuming they figure out how to stop the bleeding. Besides, the downside appears to have been priced in back in late 2008; it's been nothing but reliable - albeit erratic at times - progress for DISH shares ever since.
As for Comcast Corporation, we've seen three straight years of top and bottom line increases, and four straight quarters of EPS beats. I'm convinced. World Cup Soccer can only help.
Easy to Stomach
Food wise, I'll resist the temptation to be predictable and say something like Dole Food Co. (NYSE:DOL) or Fresh Del Monte Produce (NYSE:FDP). Both are fine companies, and both sport single-digit projected earnings multiples for the coming fiscal year. They just feel a little too obvious though - not to mention both stocks are still struggling.
Instead, I find myself attracted to Spartan Stores (Nasdaq:SPTN) and Corn Products International (NYSE:CPO),
Spartan is just average in terms of fundamentals (past and future), but the stock itself is just now starting to come out of a lethargic period; there's still lot of room for it to recover before hitting the headwind of prior highs again.
CPO shares look expensive on a look-back basis, but investors may be overlooking the fact that a non-recurring charge from the middle of last year is dragging down the 12 month numbers. On an operating basis, the company has actually beat estimates in all four of its last quarters, making the 2010 EPS estimates of $2.55 low hanging fruit (my apologies for the pun).
All four of these stocks have been consistent and stable lately. Anyway, you get the idea and the industry rationales, even of you're planning on shopping for other stocks. At least now you can enjoy a relatively worry-free summer.
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