Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Blue Chip

A company that is well-known and that has been established over a number of years is considered a blue-chip stock. They have been through the boom times and recessions, giving investors confidence that they will remain a viable entity in the future. Blue-chips are usually less volatile than other stocks, as they have a steadier stream of predictable income and usually have extensive ownership by institutions, which can hold shares for a longer period of time than individual investors. Blue-chips are usually the market leader in their respective sectors.

Why Key Stock Indices Can Still Advance in Wake of New Monetary Policy

By for Profit Confidential

Key Stock Indices Can Still Advance in Wake of New Monetary PolicyThe broader market is showing renewed strength in anticipation of the Federal Reserve’s decision on quantitative easing and third-quarter earnings season.

Typically, September is a volatile and tough month for stocks, but there’s a real resilience to the current stock market. Even the NASDAQ Composite is holding up well, considering Apple Inc.’s (AAPL) drop last week.

A key metric for me remains the Dow Jones Transportation Average and the components of the Dow Jones Industrial Average. Top- and bottom-line growth for blue chips is very modest, but balance sheets remain strong, and the institutional drive towards stock market safety and consistency remains a solid investment theme.

Dividends and the prospect for more dividends remain highly attractive in a slow-growth economy, and new funds for equities have to go somewhere. I see no reason why the Dow Jones Industrials can’t come through with their earnings outlooks going into the last quarter of the year.

But regardless of corporate fundamentals, the Federal Reserve has been and will continue to be the clear driver of this stock market. Institutional investors are still of the mantra that it doesn’t pay to fight the Fed and betting against it by those who get paid to play the stock market is highly unlikely.

Unless there is some new shock to the system, the stock market is likely to finish off a very good year.

If corporations are still wary about investing in new plant, equipment, and employees, the outlook for balance sheets and rising dividends remains strong. For years now, it’s been much easier for corporations to borrow cheap money and buy back shares in … Read More

This Old Economy Stock’s a Moneymaking Winner

By for Profit Confidential

Old Economy Stock’s a Moneymaking WinnerI’ve always liked railroad stocks; they are the backbone of North America, and they’re very good at making money. Often in this column we consider the stock market performance of Union Pacific Corporation (NYSE/UNP). I firmly believe that this company will continue to be a winner for investors.

As part of an ongoing series in this column, we’ve been looking at some of the best long-term performers the stock market has to offer. So far, we’ve considered PepsiCo, Inc. (NYSE/PEP), Union Pacific, and Colgate-Palmolive Company (NYSE/CL). While a track record can’t tell you where a stock is going to go in the future, for me, it lends a lot of weight to making a new investment decision. What I’m trying to find are great, dividend paying stocks that investors can accumulate when they’re down. If a stock has a history of recovering strongly from periods of price weakness, this lends a lot of credibility to its story.

Looking at railroad stocks specifically, one of the best-performing companies on the stock market has been Canadian National Railway Company (NYSE/CNI), which trades on both the New York and Toronto stock exchanges. Among railroad stocks, this company’s long-term wealth creation on the stock market is unmatched. The company’s dividend yield isn’t as large as other railroad stocks, but its capital gains are very impressive. The company’s stock chart is featured below:

Canadian National Railway Company Chart

Chart courtesy of www.StockCharts.com

This stock has basically been going straight up since the stock market correction in 2008/2009. On a split-adjusted basis, the stock was worth approximately $50.00 a share at the beginning of 2008, $20.00 a share in 2004, … Read More

Going Large-Cap for Capital Gains? Yep, and It Works

By for Profit Confidential

Going Large-Cap for Capital GainsBack in April of 2012, oil and gas giant ConocoPhillips (NYSE/COP) created spin-off Phillips 66 (NYSE/PSX) from its downstream energy assets. In the energy business, the term “downstream assets” refers to refining and marketing. For every two shares held in ConocoPhillips, shareholders received one free share of Phillips 66. It was a great bonus for shareholders, and it’s a gift that keeps on giving. Phillips 66 listed on the stock market around $34.00 a share last April; now it’s at $52.00, and the stock pays a dividend.

Every once in a while, the stock market offers up a bonus like this one. A big company sells off or splits up its different businesses, and this can create a lot more wealth for shareholders. The former Kraft Foods Inc. recently did this, and now shareholders have two dividend paying businesses to contend with. Many investment banks and consulting firms advise big corporations to do this, but not only because of the great fees spin-offs create; the whole idea is to let the stock market decide what individual businesses are worth, because in a conglomerate, it’s difficult to place a value on any one division.The company’s stock chart is featured below:

Phillips 66 Chart

 Chart courtesy of www.StockCharts.com

I was a stockbroker in the late 1990s, and that was a time when the stock market was roaring. The trading action was so good, day trading was a cinch. I saw all kinds of stocks fly high and then crash. I saw all kinds of initial public offerings (IPOs) hit the market and then crash in value. When the bubble was really building, people off the … Read More

How to Use Blue Chips for Capital Gains

By for Profit Confidential

How to Use Blue ChipsI still think that the best investment strategy for a stock market investor is to keep their assets at home. The eurozone is in recession, and emerging markets are just that—emerging. Now, I’m not referring to trading where there are lots of opportunities in small-cap technology companies and U.S.-listed Chinese stocks. I’m talking about building blue chip positions for long-term wealth creation—and preservation. These are the kind of stocks that you can use to build a nest egg for retirement, or use for income while in retirement.

Previously, I featured PepsiCo, Inc. (NYSE/PEP) as the kind of blue chip company with which I think long-term investors can build a position when the stock is down. The best strategy with an investment in this kind of blue chip company is to take its dividends and reinvest them in new shares. You can do this through a dividend reinvestment plan (DRIP), and the company allows you to reinvest all or a portion of its dividends into new shares. Dividend reinvestment in a blue chip stock that has a solid track record is an excellent way for you to create wealth.

Another blue chip company that has a great track record of making money for shareholders is Colgate-Palmolive Company (NYSE/CL), which is much more than just a toothpaste business. I like this company, its products, and most importantly, its track record of wealth creation on the stock market. Pull up a long-term chart on Colgate-Palmolive, and you’ll see what I mean. This is a company that you can invest in when its share price is down. Build a position in Colgate-Palmolive over time, … Read More

Dividends Going Up Because Companies Don’t Want to Invest

By for Profit Confidential

Dividends Going UpThere is now more evidence that companies with huge cash hoards are returning the money to shareholders, rather than making any bold new investments themselves. Last Friday, General Electric Company (NYSE/GE) announced that it would increase its quarterly dividend to $0.19 a share, up from $0.17, and it authorized an increase in the amount of shares it can repurchase to $10.0 billion by the end of 2015.

On the stock market, General Electric (GE) has been recovering pretty well, but since the financial crisis, the stock has underperformed the main stock market indices. Investors all love dividend increases, and I’m the first to applaud the company for doing so. But the return of excess cash in the form of dividends and share buybacks also represents the unwillingness of companies to make any bold new investments in its operations. It’s a very uncertain world out there, and companies aren’t willing to bet like they used too. GE’s stock market chart is below:

GE General Electric Co. stock market chart

Chart courtesy of www.StockCharts.com

GE has been a solid dividend payer but a terrible stock market investment over the last 12 years. The company’s heyday on the stock market, it would seem, was the 20 years leading up to 2000, when the stock appreciated 58-fold, not including dividends. Today, the stock is trading today at less than half of its record high, which is not the kind of blue-chip performance you expect from such a large company. (See “Dividend Yields Going Up—the Outlook for Stocks, Not So Good.”)

Just like last quarter, there’s a very high chance of a lot more dividend hikes when fourth-quarter earnings season … Read More

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Why Key Stock Indices Can Still Advance in Wake of New Monetary Policy

By for Profit Confidential

Key Stock Indices Can Still Advance in Wake of New Monetary PolicyThe broader market is showing renewed strength in anticipation of the Federal Reserve’s decision on quantitative easing and third-quarter earnings season.

Typically, September is a volatile and tough month for stocks, but there’s a real resilience to the current stock market. Even the NASDAQ Composite is holding up well, considering Apple Inc.’s (AAPL) drop last week.

A key metric for me remains the Dow Jones Transportation Average and the components of the Dow Jones Industrial Average. Top- and bottom-line growth for blue chips is very modest, but balance sheets remain strong, and the institutional drive towards stock market safety and consistency remains a solid investment theme.

Dividends and the prospect for more dividends remain highly attractive in a slow-growth economy, and new funds for equities have to go somewhere. I see no reason why the Dow Jones Industrials can’t come through with their earnings outlooks going into the last quarter of the year.

But regardless of corporate fundamentals, the Federal Reserve has been and will continue to be the clear driver of this stock market. Institutional investors are still of the mantra that it doesn’t pay to fight the Fed and betting against it by those who get paid to play the stock market is highly unlikely.

Unless there is some new shock to the system, the stock market is likely to finish off a very good year.

If corporations are still wary about investing in new plant, equipment, and employees, the outlook for balance sheets and rising dividends remains strong. For years now, it’s been much easier for corporations to borrow cheap money and buy back shares in … Read More

This Old Economy Stock’s a Moneymaking Winner

By for Profit Confidential

Old Economy Stock’s a Moneymaking WinnerI’ve always liked railroad stocks; they are the backbone of North America, and they’re very good at making money. Often in this column we consider the stock market performance of Union Pacific Corporation (NYSE/UNP). I firmly believe that this company will continue to be a winner for investors.

As part of an ongoing series in this column, we’ve been looking at some of the best long-term performers the stock market has to offer. So far, we’ve considered PepsiCo, Inc. (NYSE/PEP), Union Pacific, and Colgate-Palmolive Company (NYSE/CL). While a track record can’t tell you where a stock is going to go in the future, for me, it lends a lot of weight to making a new investment decision. What I’m trying to find are great, dividend paying stocks that investors can accumulate when they’re down. If a stock has a history of recovering strongly from periods of price weakness, this lends a lot of credibility to its story.

Looking at railroad stocks specifically, one of the best-performing companies on the stock market has been Canadian National Railway Company (NYSE/CNI), which trades on both the New York and Toronto stock exchanges. Among railroad stocks, this company’s long-term wealth creation on the stock market is unmatched. The company’s dividend yield isn’t as large as other railroad stocks, but its capital gains are very impressive. The company’s stock chart is featured below:

Canadian National Railway Company Chart

Chart courtesy of www.StockCharts.com

This stock has basically been going straight up since the stock market correction in 2008/2009. On a split-adjusted basis, the stock was worth approximately $50.00 a share at the beginning of 2008, $20.00 a share in 2004, … Read More

Going Large-Cap for Capital Gains? Yep, and It Works

By for Profit Confidential

Going Large-Cap for Capital GainsBack in April of 2012, oil and gas giant ConocoPhillips (NYSE/COP) created spin-off Phillips 66 (NYSE/PSX) from its downstream energy assets. In the energy business, the term “downstream assets” refers to refining and marketing. For every two shares held in ConocoPhillips, shareholders received one free share of Phillips 66. It was a great bonus for shareholders, and it’s a gift that keeps on giving. Phillips 66 listed on the stock market around $34.00 a share last April; now it’s at $52.00, and the stock pays a dividend.

Every once in a while, the stock market offers up a bonus like this one. A big company sells off or splits up its different businesses, and this can create a lot more wealth for shareholders. The former Kraft Foods Inc. recently did this, and now shareholders have two dividend paying businesses to contend with. Many investment banks and consulting firms advise big corporations to do this, but not only because of the great fees spin-offs create; the whole idea is to let the stock market decide what individual businesses are worth, because in a conglomerate, it’s difficult to place a value on any one division.The company’s stock chart is featured below:

Phillips 66 Chart

 Chart courtesy of www.StockCharts.com

I was a stockbroker in the late 1990s, and that was a time when the stock market was roaring. The trading action was so good, day trading was a cinch. I saw all kinds of stocks fly high and then crash. I saw all kinds of initial public offerings (IPOs) hit the market and then crash in value. When the bubble was really building, people off the … Read More

How to Use Blue Chips for Capital Gains

By for Profit Confidential

How to Use Blue ChipsI still think that the best investment strategy for a stock market investor is to keep their assets at home. The eurozone is in recession, and emerging markets are just that—emerging. Now, I’m not referring to trading where there are lots of opportunities in small-cap technology companies and U.S.-listed Chinese stocks. I’m talking about building blue chip positions for long-term wealth creation—and preservation. These are the kind of stocks that you can use to build a nest egg for retirement, or use for income while in retirement.

Previously, I featured PepsiCo, Inc. (NYSE/PEP) as the kind of blue chip company with which I think long-term investors can build a position when the stock is down. The best strategy with an investment in this kind of blue chip company is to take its dividends and reinvest them in new shares. You can do this through a dividend reinvestment plan (DRIP), and the company allows you to reinvest all or a portion of its dividends into new shares. Dividend reinvestment in a blue chip stock that has a solid track record is an excellent way for you to create wealth.

Another blue chip company that has a great track record of making money for shareholders is Colgate-Palmolive Company (NYSE/CL), which is much more than just a toothpaste business. I like this company, its products, and most importantly, its track record of wealth creation on the stock market. Pull up a long-term chart on Colgate-Palmolive, and you’ll see what I mean. This is a company that you can invest in when its share price is down. Build a position in Colgate-Palmolive over time, … Read More

Dividends Going Up Because Companies Don’t Want to Invest

By for Profit Confidential

Dividends Going UpThere is now more evidence that companies with huge cash hoards are returning the money to shareholders, rather than making any bold new investments themselves. Last Friday, General Electric Company (NYSE/GE) announced that it would increase its quarterly dividend to $0.19 a share, up from $0.17, and it authorized an increase in the amount of shares it can repurchase to $10.0 billion by the end of 2015.

On the stock market, General Electric (GE) has been recovering pretty well, but since the financial crisis, the stock has underperformed the main stock market indices. Investors all love dividend increases, and I’m the first to applaud the company for doing so. But the return of excess cash in the form of dividends and share buybacks also represents the unwillingness of companies to make any bold new investments in its operations. It’s a very uncertain world out there, and companies aren’t willing to bet like they used too. GE’s stock market chart is below:

GE General Electric Co. stock market chart

Chart courtesy of www.StockCharts.com

GE has been a solid dividend payer but a terrible stock market investment over the last 12 years. The company’s heyday on the stock market, it would seem, was the 20 years leading up to 2000, when the stock appreciated 58-fold, not including dividends. Today, the stock is trading today at less than half of its record high, which is not the kind of blue-chip performance you expect from such a large company. (See “Dividend Yields Going Up—the Outlook for Stocks, Not So Good.”)

Just like last quarter, there’s a very high chance of a lot more dividend hikes when fourth-quarter earnings season … Read More

A Top Stock with Increasing Dividends and Record Profits

By for Profit Confidential

Stock with Increasing Dividends and Record ProfitsIt’s pretty clear that investors have stepped away from the stock market, either sitting on the sidelines or not participating at all in new positions. This market looks tired, directionless, and generally displeased with the current state of things. The earnings picture is modest, but corporate balance sheets are strong. There’s the potential for a new business cycle, but a lot of things have to change in order for this to happen. It’s low and slow for the foreseeable future.

As part of a series in this column, I’d like to highlight an “old economy” company that’s proven to be a solid wealth creator on the stock market. This company has a history of increasing dividends to shareholders (one recent dividend increase was huge), as well as generating solid earnings growth and a track record on the stock market that’s very admirable.

Union Pacific Corporation (NYSE/UNP) is one of the top railroad operators in North America. With a stock market capitalization of approximately $60.0 billion, the company operates in 23 states, mostly in the Western half of the U.S.

As a stock, Union Pacific (UP) has mostly gone upward in value throughout its history. There was quite a long period between 1993 and 2005 when the position was flat on the stock market. Investors just weren’t interested in dividend paying stocks; they wanted technology companies. But with rising earnings and dividends, UP recovered on the stock market after every major pullback and is currently trading right near its all-time high. The company’s recent stock chart is below:

Union Pacific Corporation Chart

Chart courtesy of www.StockCharts.com

Not surprisingly, one of the best buying … Read More

A Portfolio of Winners, It Doesn’t Have to Be Complicated

By for Profit Confidential

Portfolio of WinnersIf you put a list together of some of the greatest blue chips the stock market has to offer, you might include The Procter & Gamble Company (NYSE/PG) among others. Procter & Gamble is just the kind of company that can thrive in a slow-growth environment. Institutional investors like it for its dividend (current yield is about 3.2%) and stability. The company offers predictability for stock market investors.

I remember when Procter & Gamble had a big miss in its quarterly earnings, right at the time when the bubble in technology stocks was bursting. The stock was basically cut in half and took a solid five years to recover—five full years, just to get back to where it was trading on the stock market before the breakdown. Even for a growing blue chip company, that’s a long time for investors.

This fiscal year, Procter & Gamble’s revenues and earnings are expected to be about flat with last year. Current expectations for fiscal year 2013 are for earnings-per-share (EPS) growth of approximately eight percent. Combined with its dividend, you could argue that this blue chip company is doing its job. The company’s stock market chart is below:

Procter & Gamble’s Company Chart

Chart courtesy of www.StockCharts.com

Other dividend paying blue chips with great track records on the stock market include Colgate-Palmolive Company (NYSE/CL), International Business Machines Corporation (NYSE/IBM), PepsiCo, Inc. (NYSE/PEP), and Johnson & Johnson (NYSE/JNJ). I would argue that all five of these blue chip stocks are worth considering when they’re down. With dividend reinvestment, I think this group makes for a great stock market portfolio.

The one thing that’s in short supply these days … Read More

Dividend Yields Going up—the Outlook for Stocks, Not So Good

By for Profit Confidential

Dividend YieldsDividend yields are creeping higher, and in a lot of stocks, they are pretty darn hefty. The problem, of course, is that as a stock market investor, you have no idea what’s going to happen to your capital. The dividend income is secure, but the stock market isn’t.

The way I look at this stock market and the global economy, I figure an equity investor with a diversified portfolio can really only expect a rate of return just slightly above dividends earned. That is to say, with all the current information, I don’t expect the stock market to advance materially in 2013. It could easily be a down year for the main stock market indices.

E. I. du Pont de Nemours and Company (NYSE/DD), otherwise referred to as du Pont, just broke the four-percent dividend yield barrier, as the company’s share price recently tumbled after reporting a tough third quarter. According to the company, its 2012 third-quarter revenues fell nine percent to $7.4 billion. About half of this decrease was due to changes in currency values. Earnings dropped significantly to only $10.0 million, or $0.01 per diluted share, down from $452 million, or $0.48 per diluted share. The company has instituted a new restructuring plan to control costs. Management reduced its 2012 full-year earnings-per-share (EPS) outlook to between $3.25 and $3.30, down from the previous range of $4.20 to $4.40 per share. In the first quarter of this year, du Pont increased its regular quarterly dividend by five percent to $0.43 per share. The company’s stock chart is featured below:

Dupont Company Chart

Chart courtesy of www.StockCharts.com

You might say that it’s a … Read More

Beat the Market? There’s Only One Way to Do It

By for Profit Confidential

Beat the MarketIf you look at the stock market over the last dozen years or so, you really would not have done that well owning any of the major indices. The S&P 500 is trading at the same level it was back in 1999, so the notion of buy and hold in the stock market didn’t prove itself during this time period.

There are two keys to success in the stock market: timing and dividends. During the 1980s and ’90s, owning the S&P 500 was a hugely profitable endeavor; during the 2000s, it was not. If you break it down and look at individual stocks, timing (buying goods assets when prices are down) and dividends are the essential factors in wealth creation.

Consider a company like PepsiCo, Inc. (NYSE/PEP). If you pull up a very long-term chart on the company, you’ll notice that it has gone up a lot in value over time. But by time, I mean a long period of time. And for much of its history on the stock market, PepsiCo’s share did nothing. The only return you would have got was your dividend payments. The company’s recent stock chart is below:

Pepsico Inc Chart

Chart courtesy of www.StockCharts.com

According to the stock’s history, buying shares in PepsiCo during its major price retreats has proven to be a good investment strategy. If you took the company’s dividend payments and reinvested these funds into additional shares of the company, your returns over time would have been significantly higher.

The stock market crashed because of the subprime financial crisis, with the S&P 500 hitting a low in March of 2009. Say, for example, you … Read More

NASDAQ Composite in Jeopardy—Earnings Growth Disappearing

By for Profit Confidential

NASDAQ Composite in JeopardyDaily stock market trading action is without conviction, and there have been countless days when the trading session starts out positive, only to end in negative territory. In corporate earnings, we continue to see the lack of consistency in business conditions among industries. Revenue growth is low and, in a lot of cases, it’s not due to organic demand.

Cisco Systems, Inc. (NASDAQ/CSCO) reported solid revenue growth of 5.5%, bringing revenues to $11.9 billion in the stock’s latest quarter; but this growth was mostly spurred by discounting prices. The company’s adjusted earnings grew to $0.48 a share, beating consensus of $0.46 a share, due to increased sales and job cuts. The company has cut almost 8,000 jobs over the last year, according to Bloomberg, and revenues and earnings in the current quarter are expected to come in flat. Cisco’s stock chart is below:

Cisco Systems Chart

Chart courtesy of www.StockCharts.com

While the stock market was pleased with Cisco’s latest numbers, they really weren’t that great, all things considered. (See “More Dividend Increases Coming Soon—Is This Good or Bad?”) Competition, as the company refers to it, is fierce, and weakness in the eurozone, which represents about a quarter of the stock’s total business, is hampering the company’s growth. It’s a very similar story to a lot of large-cap technology companies. Growth in revenues and earnings is disappearing.

The breakdown in large-cap technology stocks is now pronounced, and I don’t see the broader stock market being able to advance without this group. Countless blue chip names within the sector are deteriorating significantly in this market; many of which were the stock market’s leaders … Read More

Many Stocks Already Experiencing Their Own Market Correction

By for Profit Confidential

Stocks Already Experiencing The S&P 500 Index pretty much has to keep above 1,375 or risk defining an actual stock market correction. The stock market has mostly been presented with good economic news lately, but the reaction of the main stock market indices has been very lackluster. This is clearly a market that’s tired, and a full-blown market correction in the near future is a real possibility.

The Dow Jones Transportation Index (or average) continues to provide no meaningful confirmation; the index has been extremely flat for the last two years and is at the exact same level that it was at in 2007. We’ve also had a meaningful breakdown among technology stocks and, to me, it doesn’t just look like a well-deserved selloff from the leaders; blue chip technology stocks have been trending lower since May. Intel Corporation’s (NASDAQ/INTC) chart illustrates the trend.

For many former stock market leaders, a market correction already exists and the only saving grace is a broader market that isn’t expensively priced. I don’t think a major stock market meltdown isn’t likely this year, even in the face of declining expectations for earnings growth in the fourth quarter. But there are a lot of issues coming down the pipe; the so-called “fiscal cliff” being one that policymakers really need to address for the good of the U.S. economy, to prevent a full-blown stock market correction.

Intel Corp Chart

Chart courtesy of www.StockCharts.com

But getting back to technology stocks, some of the largest of the group are now experiencing the same breakdown that others have been experiencing since the beginning of the year. Countless names within the group are feeling … Read More

Blue Chips: How They’re Looking in This Market

By for Profit Confidential

Blue Chips How They’re Looking in This MarketJust like the U.S. economy, not all companies are experiencing the same level of business activity. However, among blue chips, there remain a number of great companies that are trading right around their all-time highs, and the kicker is that their stock market valuations are very reasonable.

Consider, for example, The Clorox Company (NYSE/CLX), a blue chip founded in 1913. This consumer goods company sells a number of household brand names in what are mature but stable businesses. Some of the company’s brands include “Pine-Sol” cleaner, “Kingsford” charcoal, “Brita” water filtration products, “Glad” plastic bags, and “Burt’s Bees” skin care products. Clorox is a blue chip company with an excellent long-term track record on the stock market. The company’s recent stock chart is below.

clx stock market quotes chart

Chart courtesy of www.StockCharts.com

Clorox just reported its financial results for its fiscal first quarter of 2013, ended September 30, 2012. According to the company, it generated three percent in sales growth for the quarter, with a gross margin of 42.9%, up from 41.8%. Net earnings were $133.0 million, or $1.01 per diluted share, compared to $130.0 million, or $0.98 per diluted share. Of course, this might not seem like enough growth to even warrant consideration by stock market investors. But, when you consider the company’s $0.64-per-share quarterly dividend (providing a current dividend yield of 3.5%), the fact that the company has increased its annual dividend each year for the last 11 years, and the idea that the U.S. economy is not growing faster than the rate of inflation, a stable blue chip like Clorox doesn’t sound all that bad.

What we’ve seen over the last … Read More

No Wonder This Stock Market Index Outperformed

By for Profit Confidential

Wonder This Stock Market Index OutperformedAutomatic Data Processing, Inc. (NASDAQ/ADP) is one of those blue chips that have a good thing going with their private sector U.S. jobs reports. The stock market moves on the news, and so does Automatic Data Processing (ADP). According to ADP’s National Employment Report, the nonfarm private sector added 162,000 jobs from August to September on a seasonally adjusted basis. Manufacturing added 4,000 new jobs, while construction added 10,000, the strongest showing since March (which had a boost in construction jobs due to mild winter weather). The financial services sector added 7,000 jobs in September, representing the 14th consecutive monthly gain. The vast majority of new employment growth was from small and medium-sized businesses.

ADP is another one of those blue chips that is trading right at its 52-week high on the stock market and boasts a current dividend yield of just under three percent. The stock is about nine points away from its all-time high set in September of 2000 and has done well since the financial crisis of 2008/2009 on consistently lower trading volume. ADP’s stock chart is featured below:

Automatic Data Processing Chart

Chart courtesy of www.StockCharts.com

ADP belongs to the NASDAQ-100 Index, which is full of many stock market blue chips, both domestic and international, which are non-financial companies trading on the NASDAQ. Weighted by market capitalization, this index has significantly outperformed all other blue chip averages, including the Dow Jones Industrials, S&P 500, and even the NASDAQ Composite over the last several years.

It’s no wonder this stock market index has outperformed; it’s full of all kinds of growth companies and blue chips that have appreciated tremendously. Below is … Read More

How You Can Tell the Stock Market Party’s Almost Over

By for Profit Confidential

Stock Market Party’s Almost OverIn my view, the stock market’s little bull is slowly deteriorating, even though investor sentiment remains quite robust. We still don’t have confirmation from the Dow Jones Transportation Average and many blue chip, brand-name companies are issuing warnings. Realistically, this stock market won’t really be in trouble until the “AGA” stocks—Apple Inc. (NASDAQ/AAPL), Google Inc. (NASDAQ/GOOG, and Amazon.com Inc. (NASDAQ/AMZN)—begin to break down, which hasn’t happened yet. But more and more companies are issuing warnings and, for the most part, it’s because of weakness outside the U.S. economy.

Just like in previous quarters, some parts of the U.S. economy are doing much better than others. But what we’re seeing now is worrisome, because the earnings and revenue warnings are coming from consumer-driven businesses—which make up so much of the global economy.

Nike Inc. (NYSE/NKE) is the latest blue chip company that just announced a 12% drop in its quarterly earnings due to weakness in China. Nike’s shares recently hit an all-time record high on the stock market, topping $114.00 a share in May. The stock’s been in decline ever since, and it is now trading around $92.00 per share, which can be seen in Nike’s recent stock chart below:

Nike Chart

Chart courtesy of www.StockCharts.com

Another blue chip company in the consumer services sector just announced weaker financial results. Drugstore chain Walgreen Co. (NYSE/WAG) reported quarterly earnings fell 55% (which actually beat consensus) and revenues dropped five percent to $17.1 billion, down from $18.0 billion a year ago. Here’s a recent stock chart for Walgreen:

Walgreen Chart

Chart courtesy of www.StockCharts.com

So this remains a stock market full of dichotomy; many blue chipRead More

Corporate Profits Meeting Expectations— Stock Market Action Positive

By for Profit Confidential

Corporate Profits Meeting ExpectationsThe stock market is ticking higher in the face of continued weak economic news, and it’s mostly due to the good corporate profits we’re getting. For the most part, we’re so far seeing good corporate profits, because expectations were already reduced. Some companies are slightly reducing their outlooks for the rest of this year, but the declining visibility is modest. Corporations are being extremely conservative with their forecasts and rightly so. It makes it easier not to disappoint.

Corporate profits are mostly expected to be flat compared to last year. This makes dividend income all the more important. If you look at a number of blue chip, dividend paying stocks in this stock market, you’ll notice that many of them are actually trading right at their 52-week highs. While expectations for corporate profits continue to be very modest, institutional investors keep buying the dividends. It’s the only way to beat the inflation rate and the probability that the stock market will return little, if any, capital gains going forward.

I expect the U.S. economy will toy with a technical recession next year. I also expect that returns from the main stock market averages will be low, but that corporate profits will hold up well. One or two more years of difficulty will set the stage for the next business cycle to begin.

Intel Corporation (NASDAQ/INTC) slightly beat the Street for the second quarter, but revised its third-quarter outlook for corporate profits downward. The company warned that business conditions in the U.S. and particularly Europe are getting worse. This is no surprise, and due to its fair valuation, this is likely … Read More

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

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In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

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Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

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