RSS feedMaybe I’m showing a bit of hubris here by attempting to share my investment predictions for the next year. But, what’s a blog for right? This post is pure conjecture, but I will revisit it in a year to see how close any of predictions were. So, let’s do a run down of a few themes I think will dominate the investment landscape next year.
The Consumer Isn’t Dead
American consumers putting away the credit cards? Come on. Pundits keep saying that everyone will stop spending, and they keep coming out en masse to help fuel our capitalist economy. I had a lot of fun shopping on Black Friday and Super Saturday this year and I didn’t see anyone holding back. What I did see was empty shelves in Circuit City; Best Buy; and Bed, Bath and Beyond. Might hot growth in the US slow a little bit? Possibly, but a weak dollar should drive global purchasing power towards our shores. I’m not afraid of companies which thrive on consumer demand and remain high on J. Crew and Mastercard (which I already own) as well as a few stocks which I feel have been truly beaten down like Nordstrom and Ralph Lauren and a few others mentioned next…
Global Growth Remains a Story
Okay, hot emerging economies like China and India need to slow down eventually. We saw a bit of a slow down in some of these stock markets last year, but that doesn’t mean that middle classes will continue to blossom around the world. And, we’re lucky that, for now, American brands often represent coveted status symbols. I’m liking Nike, Tiffany’s, and Starbuck’s for their brand recognition and international presence.
The Pump is Primed
It’s an election year and George Bush doesn’t want to leave add a floundering economy to his legacy. He’s got Hank Paulson advising him on fiscal policy and Ben Bernanke and his boys in the Fed continue to be pump liquidity into the market. Will housing and financial recover and ascend back to their stratospheric heights? No way. But, there’s a ton of value here and both sides of our economic policy - fiscal and monetary - want to give them a fighting chance. I don’t expect things to turn around right away, but it would seem that at current price levels you wouldn’t have to time to bottom to make out like a bandit. Morgan Stanley seems to have things on track with the exception of one horrendously bad trading team and you can bet John Mack won’t let that happen again. Bear Stearns was much maligned after being the first to admit to problems in its credit market investments and has seen its shares fall nearly 50%. Bank of America’s foray into investment banking continues to embarrass the great brand, but its true core business continues to execute and it would seem the dividend is safe. All are trading at price points almost too good to pass up. Blue chip AIG has been unfairly punished during this credit crisis and those shares are trading at quite teh discount as well.
We Live in the Future
Tech is where its at next year if you’re looking for explosive growth. Semiconductors and semiconductor equipment manufacturers seem the safest rout with stabilizing pricing and good inventory levels. Naturally, I believe MEMC Electronic Materials is best in class (because I own it). But, I also think Cymer and Cree could be interesting plays especially given the recent pullback in both firms’ stocks.
For more pure tech plays, you can’t not love Google. The pricing isn’t great right now, but this is a story you play for a decade. Not just a year.
Finally, a tangential technology pick, Corning. This is a great play on the continued proliferation of LCD screens. Corning is THE supplier for LCD module glass to manufacturers in Taiwan and currently priced at just 15 times forward earnings. It’s mired in a 3-year long base despite the appearance of some serious earnings performance over the last year plus. Can it continue to deliver? 2007 was a mixed bag from quarter to quarter, but I smell a winner here.
