Correction Among Stock Market Leaders Creates Good Opportunity

By Monday, November 12, 2012

Correction Among Stock Market Leaders Creates Good OpportunityThe stock market has more downside over the near term, but it’s likely to hit a floor as soon as price-to-earnings (P/E) multiples are no longer excessive. In many ways, the current pullback is the selloff we didn’t get after the third round of quantitative easing (QE3) was announced. This is a market that’s fragile, and investors are worried about new austerity measures in the near future.

As the main stock market indices pull back, there are a number of market leaders that are now more attractively priced, and they are worth keeping an eye on. Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN) is one of the market leaders among biotechnology stocks, while The TJX Companies, Inc. (NYSE/TJX) is one of the market leaders among retailers.

The TJX Companies operates many brand-name stores that you might be familiar with, including T.J Maxx, Marshalls, HomeGoods, Winners, and HomeSense. This company has been hugely successful both in its operations and on the stock market over the last couple of years, and it’s because economic times have been tough. Selling clothing and home goods at an attractive price point, The TJX Companies has been able to grow its business when other retailers, like J.C. Penney Company, Inc. (NYSE/JCP), have struggled. You can see the contrast in the companies’ stock charts featured below.

tjx stock market chart

Chart courtesy of www.StockCharts.com

stock market chart

Chart courtesy of www.StockCharts.com

The TJX Companies is one of a number of market leaders in this stock market, and it’s up about ten-fold since the beginning of 2000. The stock has been appreciating very consistently and has proven to reaccelerate after all its major price corrections. This is why the company is worth following right now.

All the uncertainty in the global marketplace and the fiscal problems in the U.S. are the reasons for the current stock market pullback. (See “Stock Market Bounce? The Price of Oil Says No.”) But I’m not bearish going into 2013, just realistic. With the stock market in retreat, I’m making lists of fairly priced market leaders that are off their highs. I think many of the market leaders will be able to reaccelerate on the stock market in the not-too-distant future.


About the Author | Browse Mitchell Clark's Articles

Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »

Sep. 2, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter) $1014.15
Trailing 12-month Price/earnings multiple (Most Recent Quarter)

17.44

Dow Jones Industrial Average Dividend Yield 2.71%
10-year U.S. Treasury Yield 2.14%

Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.

Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.

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