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

Where to Look for Profits While Waiting for Stock Market Correction

Tuesday, November 19th, 2013
By for Profit Confidential

dividend yieldFor a company with just one operating division that’s generating meaningful growth, E. I. du Pont de Nemours and Company (DD) seems to have an uncanny ability to appreciate in value on the stock market.

DuPont is a big player in the agriculture sector, and this operating division is somewhat of a proxy on the sell-side industry.

Last quarter, the company reported sales growth of five percent to $7.7 billion. The company’s agricultural division experienced the best gain, with a 15% hike in sales to $1.6 billion.

If institutional investors buy the stock market based on improving balance sheets, DuPont’s fits the bill. The company’s third-quarter cash position soared from $4.3 billion to $7.0 billion.

The stock was trading around $45.00 a share at the beginning of the year, and it is currently trading at approximately $62.00 with a 2.9% dividend yield. For such a mature enterprise, an impressive capital gain like this is indicative of a monetary policy-induced stock market, where even slow-growth enterprises have been bid significantly.

Across the board, Wall Street has been increasing DuPont’s earnings estimates for this year and next. For 2013, total sales are expected to grow approximately three percent, accelerating to 6.3% in 2014.

  • Profitable Options Trading Made Simple...

    "I'm offering you the easy, shortened version of a $17,000 Harvard-type options trading program that could generate you tens of thousands of dollars a month for as long as you want." ~ George Leong, B.Comm.

    Full story here.

Current earnings growth consensus for 2014 is approximately 12%, and with a three percent dividend yield, a forward price-to-earnings (P/E) of 14 isn’t unreasonable. (See “My Six Favorite Growing Dividend Payers.”)

These big, brand-name corporations can really pay, but usually only after a major correction or shock that provides a good entry point into the stock market.

Blue chips can trade sideways for considerable periods of time and then explode, just like they did after the March 2009 low. The business cycle is very real and the same exists in the stock market. There is a time to reap and a time to sow new positions. With such a strong price performance from a company like DuPont, the state of the cycle in equities is obvious.

But what DuPont does illustrate for long-term investors is that you can generate very good rates of return with blue chip stocks that pay dividends. An equity investor doesn’t have to chase the latest and greatest stocks in order to generate a decent rate of return. Everything is a cycle, and this is especially the case in capital markets.

With the stock market at an all-time high after a tremendous performance so far this year, it isn’t the most ideal time to be considering new equity investments.

Investor sentiment changes on a dime, and the stock market is very capricious. The cycle, so far, has been all about safety; with institutional investors wanting to buy the safest names with the highest predictability in earnings and dividends.

The cycle this year has shown a willingness for more aggressive betting as the performance of the NASDAQ Composite illustrates. With the prospect of a major stock market correction a useful technical development, I still think that blue chips are the best bang for the investor’s buck in an environment of continued slow economic growth.

VN:F [1.9.22_1171]
Rating: 0.0/10 (0 votes cast)
VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.

Mitchell Clark - Equity Markets Specialist, Financial AdvisorMitchell Clark, B. Comm. 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, such as Income for Life and Micro-Cap Reporter. Mitchell, who has been with Lombardi Financial for 17 years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. Add Mitchell Clark to your Google+ circles

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.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

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.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

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

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.