By John Manning – email@example.com
There were record increases in stock markets around the world in 2013 as capital sought ever diminishing returns in all asset classes. What will be the sectors that see the biggest gains in 2014? John Manning seeks to answer that question.
Invest in Cyclical Stocks
All the major economies are well past their blue days and almost every sector has noticed improvement in the past few quarters. Cyclical stocks can be an excellent investment for the year considering the growth in global economy. We can expect better performance from industrial and tech stocks in 2014. According to the S&P Capital IQ analysts, cyclical stocks might gain an EPS of 10.6% in 2014 and considering the P/E of 14.9, these stocks are bound to grow. The current global development suggests an upward movement towards global expansion and it is the right time to invest in cyclical stocks.
Last year was nothing short of a dream run for the stock market and the S&P 500 generated 26.4 percent returns. Some of the biggest tech stocks including Google, Facebook, and Amazon saw major returns in 2013. Here some technology stocks to offer balanced returns for your investments.
- Cisco (CSCO): Cisco is a global leader in telecommunications infrastructure and possesses a strong financial position in the market. With a net cash of $30 billion and a P/E ratio of 11X, the company offers 3.2% dividend yield and an alluring payout of 33%. In the past 10 years, the EPS of Cisco has grown by 12 percent along with a 10 percent free cash flow yield.
- Apple (AAPL): Apple has bounced back with its tablets and iPhone 5/5c in 2013. Tim Cook, Apple CEO, has announced a new line of products in 2014 including an early launch of iPhone 6 and Apple TV again in the news. The current deal with China can bring up to 700 million customers for Apple and things are certainly looking good for the company. Most of the stock experts believe that Apple will increase significantly in 2014 for its investors.
- IBM: With a market cap of $203.34 billion, IBM has a dividend plus share buyback yield in excess of 7 percent along with a free cash flow of 9%. Some investors might disagree with the inclusion of IBM in this list, but the earnings per share for IBM has grown by over 12 percent in the past 10 years. The company has a strong history of offering mid-teen profit margins for past several years. If you already have IBM shares, it is time to HOLD the stock for a bit longer.
The industrial stocks have impressed every market expert over the last fortnight and the trend is likely to follow in 2014. One of the major reasons to hope for better days is the improvement in the Euro consumer market and improving Japanese economy.
In addition to the improving Euro zone, the energy independence of the U.S. is boosting consumer confidence and offering an additional edge to the American industries. As per the U.S. Energy Information Administration, the oil production in October, 2013 exceeded its oil imports for the past two decades. Further, the Administration is hoping that the U.S. oil production might exceed Saudi Arabia’s production by 2016.
- Schlumberger Limited (SLB): With a market cap of $116.12 billion, SLB is one of the best service companies with a wide of investments and can offer excellent returns in 2014. As of now, it pays 1.4% dividend and has a consensus target of $110. The company is planning for more spending in the production sector, and considering the independence of the U.S. in energy sector, we can expect better returns.
- Danaher Corp. (DHR): The consolidation has helped in boosting share price for Danaher Corp. It has performed surprisingly well in 2013 and with a market cap of $54.16 billion, this stock has a current P/E of 21.71 and EPS of 3.58. All of these factors bag a permanent position for DHR in a balanced portfolio.
- S&P 500 SPDR (SPY): For passive investors, S&P 500 SPDR is the best ETF to put their money and get hefty returns. This ETF made an all time high in December and 2013 has been nothing short a dream run for this ETF. With a market cap of $174.85 billion and year-to-date returns of 32.31%, it is indeed one of the best places to your money.
Being the hottest sector of December, 2013, it is safe to put your money in industrial stocks. Some interesting industrial investments for 2014 are:
- Industrial Select Sector SPDR (XLI)
- Eaton Corporation (ETN)
- Emerson Electric (EMR)
Consumer Discretionary Stocks
Thanks to the US consumers, consumer discretionary stocks have outperformed S&P 500 with the returns of 36.74% against 26.10 percent for the S&P. It is a positive indication and reflects the trust Americans have in their economy. There is a chance that consumer spending might increase to 2.6% in 2014 against 1.9% in 2013, according to Bank of America Merrill Lynch Global research.
- Ford Motor Co. (F): Ford Motor Co. should be top of your list in consumer discretionary stocks. Ford has a market cap of $63.39 billion and an EPS of 1.42%. The quick growth in its EPS has helped the company gain market trust. It is offering dividend of 2.6% with a UBS price target of $18 and $18.50 as its consensus.
- Comcast Corp. (CMCSA): Comcast Corp. has grown at a surprisingly higher rate, starting at a share price of $39.20 in January 2013 to $53.54 within a year. This cable company has earned an excellent reputation in the entertainment industry. The company offers a current dividend of 1.5% with a UBS price target of $60.
- J.P. Morgan Chase & Co. (JPM): The US financial sector has improved significantly in the past few years and an improved economy has offered a sigh of relief. Last year was not exactly a good one for JPM with government fines and trading loss scandal, but 2014 is looking promising for the company. With a market cap of $219.85 billion, the company offers a 2.6% dividend and a UBS price object of $65.
- CVS Caremark (CVS): CVS became the first integrated drugstore in US healthcare industry after acquiring Caremark in 2007. The company has over 7,300 stores in the U.S. and it is the primary provider of Medicaid services, employer health plans, and Medicine Part D prescription plans. The company has a market cap of $83.69 billion and with its recent announcement to acquire Coram LLC., we can expect the company to grow rapidly.