Long-time readers know of my affinity for following a number of large-cap, benchmark stocks for the purposes of honing my own stock market view. Every quarter, I always write the same thing—that earnings season is the absolute best time to be researching the stock market and new investment opportunities. You get the latest, most up-to-date information available from a company, you get their operational forecasts for the future and you see how investors react to the news. All these data are available to help shape your own personal outlook for the future.
I always make a point to follow what’s happening with United Technologies Corporation (NYSE/UTX). This large-cap conglomerate operates in so many businesses that I think it’s actually a better barometer on the economy than General Electric Company (NYSE/GE). With a heavy presence in commercial and residential heating, fire protection, aviation and the installation of elevators, United Technologies has got its finger on pulse of the industrial economy.
The stock just hit a new 52-week high, and it is just a few points away from breaking its all-time record high set in 2007, which is a real accomplishment. Street analysts recently increased the company’s earnings expectations for the fourth quarter of 2010, the first quarter of 2011, and for all of this fiscal year. United Technologies reports on January 26; if you want to do yourself a favor, read the company’s financial report and its forecast for the future. What United Technologies says about its business is a great indicator for the rest of the domestic economy.
Another great benchmark company to follow remains Caterpillar Inc. (NYSE/CAT), which is the kind of business that gives you a good sense as to the health of the global economy. This Dow stock just hit a new all-time record high on the market and the shares are up some 50% just from this past August.
Caterpillar reports the day after United Technologies and the consensus is for an excellent quarter. Street analysts also expect the company to grow its earning significantly this year and they continue to increase their estimates on a regular basis. If you think about, it’s no wonder Caterpillar’s stock price is soaring; there’s solid demand for construction equipment in Asia and increasing demand on a global basis for the company’s mining equipment. Industrial companies seem to be the real engine of today’s stock market.
Finally, there’s Hewlett-Packard Company (NYSE/HPQ). If the domestic economy is doing well, then so is Hewlett-Packard. This company has got its fingers in a lot of business pies related to technology, both at the corporate and consumer level. That’s why it’s worth following, because it’s the ultimate benchmark in technology.
The company just got a major upgrade from a big investment bank. It’s a bet on the company’s upcoming fiscal first-quarter earnings and quite a bold move. The stock is well off its 52-week high set early last year, but has recently recovered quite a bit. If Hewlett-Packard is doing better on the stock market then you know the Main Street economy is getting better.
I find it tremendously helpful to review what these three companies say about their businesses. You can really develop your own market view just listening to what these benchmark companies report.