Posts Tagged ‘investor sentiment’
For 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.
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.
More gains ahead—or at least I’m sensing the stock market has more room to advance, especially with the bullish investor sentiment that has characterized the majority of the year continuing to hold.
The S&P 500 and Dow Jones Industrial Average continued to advance to record heights last Wednesday and again on Thursday. The near-term trend is pointing higher. The S&P 500 will likely break 1,800 prior to the year-end, unless consumer spending tanks.
The stock market even appears to have discounted in some tapering in December or January. Traders realize the tapering is coming and they’ve come to terms with that—as long as it’s slow and the economy delivers stronger and steady growth. A slight rise in long-term rates and the 10-year bond yield is not going to hurt the stock market that much.
The rise in the Dow Jones industrials continues to be confirmed by an associated rise in the Dow Jones Transportation Average, as reflected on the chart below. Both the industrials (red candlesticks) and transportation stocks (green line) are trending higher, and that means more gains ahead.
Chart courtesy of www.StockCharts.com
Fighting the trend is fruitless at this point. The breakout appears to be holding, as indicated by the blue oval on the chart above. Now we could see a correction down to around 14,700, but this would be a buying opportunity, as I sense the stock market will continue to edge higher. (Read “Vulnerable Key Stock Index May Be Signaling Upcoming Buying Opportunity.”)
As we move toward year-end and into 2014, I expect the stock market to advance higher. So make sure you are … Read More
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