Posts Tagged ‘large-cap companies’
A positive bias remains to current stock market action. Earnings are still modest, but for the most part, many are positive.
The S&P 500 Index did an excellent job recovering from a small (Federal Reserve/market-misread-induced) consolidation in June. Since the beginning of the year, the Dow Jones Industrial Average has led other key indices—that is until recently.
Major stock market indices have been usurped by the stunning performance of the Russell 2000 Index. When small-cap stocks start moving, it’s a powerful signal.
Strength in small-cap stocks reveals a lot of innate aspects in investor sentiment. It means that there is more speculative fervor and willingness on the part of investors to buy less safe names. It also means that the market expects improving business conditions from domestic businesses, as small-cap stocks typically aren’t as global as larger companies.
I’ve noticed a stock market trend over the last couple of quarters. Smaller technology companies have been reporting better financial results. But many of the positions I watch haven’t moved materially on the stock market until only recently. Perhaps there is some correlation to the performance of component companies in the Russell 2000.
Regardless, this index has been very strong over the last three weeks.
In the larger-cap space, many of the stock market’s biggest brand names are reporting decent earnings with mediocre sales growth. Once again, it’s looking like it’s going to be another quarter of one financial metric, either revenues or earnings, coming up short of Wall Street consensus.
The most important thing is stability of operations and meeting or beating one Wall Street estimate. That’s my read on how … Read More
Most large-cap companies are not reporting great earnings, and this makes sense. You can’t have runaway earnings in an economy with very slow growth. But corporations are increasing their dividends and improving their balance sheets. If it matters to individuals, large-cap corporations are looking great and any pick-up in business will go right to the bottom line.
Canadian National Railway Company (NYSE/CNI), a company with an excellent track record of making money on the stock market, just reported solid earnings that met consensus. The company announced an increase in its quarterly dividend by 15%, representing the 17th time it has done so since 1995.
Of course, the stock market is taking all the earnings news with a grain of salt. No one company is blowing the doors off Wall Street estimates. According to the numbers I’m reading, corporations are once again being highly conservative with their earnings outlooks for the rest of the year. They have to be, because there’s very little in the way of real economic growth available.
Johnson & Johnson (NYSE/JNJ), which is a great benchmark stock, reported fourth-quarter revenues just shy of consensus. The company’s 2013 full-year earnings forecast also came in just below current consensus. Still, Johnson & Johnson’s largest business—medical devices and diagnostics—grew to $7.4 billion, for a solid gain of 13.7%. On the stock market, Johnson & Johnson has been doing well lately. The company’s long-term stock chart is featured below:
Chart courtesy of www.StockCharts.com
Most big brand-name companies are holding their earnings with modest revenue growth. It will be very interesting to see what happens when we get into large-cap technology … Read More
Who has all the money these days? While the government has most of it and can make more of it when it wants, it also owes a lot of money. Rather, large corporations are best off these days, and they aren’t investing much in new plant, equipment, and/or employees. But there is hope out there in the universe of cash-hoarding corporations, and that great hope is in enterprise information technology (IT). Forget retail technology; it’s the enterprise-level IT suppliers that stand to be the big beneficiaries of corporate spending over the next several years.
For a corporation, things are very simple. Company management might ask: should we build a new plant for a new line of windmills? The answer, of course, would be “No,” and they’d then contract it out to China. They ask: should we hire a few more people in the sales department, customer service, or IT support? “Maybe,” they’d answer, “but no full-time employees and let someone else handle payroll.” Management decides they really need to update the company’s e-commerce efforts, asking: should we hire more computer programmers? “No” would be the answer again and they’d contract it out to India. So, who wins in a system like this?
We know the outsourcing corporation wins—it’s winning already. Within this system, though, there are players that are required for it all to work seamlessly and efficiently, the one group poised to benefit from it all: application software, database management, server and storage, cloud and IT “strategy alignment.”
Hindsight is always 20/20 when it comes to the stock market, and it’s impossible to be right with your picks all of the time. Recently, in this column we’ve been looking at a number of large-cap companies that I view as being worthy of consideration when they’re down in value on the stock market.
One of the most successful initial public offerings (IPOs) in recent history is MasterCard Incorporated (NYSE/MA). Among large-cap companies, this one only pays a very small dividend, but it’s been a powerhouse wealth creator on the stock market. The stock just hit an all-time record high, and while it did pull back with the broader market during the financial crisis of 2008/2009, it’s been going virtually straight up since being listed in 2006. I remember when both MasterCard and Visa Inc. (NYSE/V) listed on the stock market, and I thought that they would both make for good investments. What a mistake it was not buying shares in these companies. MasterCard’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
MasterCard is now a $65.0-billion company. The stock doubled over the last year and a half, and it tripled over the last three and a half years. A lot of investors might not think those kind of returns are available from large-cap companies, but obviously, the market proves they’re wrong.
Another powerhouse wealth creator among large-cap companies is Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN), which doubled in value on the stock market over the last year and a half. (Alexion has recovered from every major price retreat it experienced over the last 10 years.) Pharmaceutical and biotechnology … Read More
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