Top Long-Term Wealth Creator Right Now

How to Create Wealth in This Stock MarketStocks are selling off after companies report their fourth-quarter earnings and that’s a positive development. It’s time for earnings and expectations to catch up to share prices. We could very well get trendless, choppy trading action for a number of months.

While corporations are not beating Wall Street estimates with conviction, the numbers are not that bad and balance sheets remain strong.

In terms of equity market dynamics, speculative fervor is diminishing, especially with initial public offerings (IPOs). It all seems to be a function of a marketplace that’s a little tired and wants to just digest data instead of betting on the future. If investor sentiment is currently subdued, it’s all perfectly normal after seeing such strong capital appreciation last year.

There are lots of good numbers out there. Biogen Idec Inc. (BIIB) just ploughed through $300.00 a share after consolidation of around $225.00. (See “A Must-Read for Long-Term Equity Investors.”) This biotechnology company’s fourth-quarter sales grew 39% to $2.0 billion, earnings grew 57% to $457 million, and management guided 2014 total sales higher than consensus.


Also in the biotechnology space, Amgen Inc.’s (AMGN) fourth-quarter sales grew 13% to just over $5.0 billion. The company’s adjusted earnings per share grew 30% to $1.82, while GAAP (generally accepted accounting principles) earnings per share grew to $1.33 from $1.01. Amgen also boosted its quarterly dividend by 30%.

Even The Dow Chemical Company (DOW) reported a solid fourth quarter that handily beat Wall Street consensus. Total quarterly sales grew three percent to $14.4 billion on a two-percent gain in volume and a one-percent gain in prices. Adjusted earnings per share grew to $0.65 from $0.33 comparatively. The company boosted its first-quarter dividend by 15% to $0.37 a share and substantially increased its share repurchase program.

Corporate financial results are decent so far and this bodes well for long-run investors. Stocks are still selling off even if companies beat consensus, and this is a reflection of the strong capital gains achieved last year and reductions in quantitative easing. Earnings are catching up to share prices and the market is seemingly not willing to place new bets just yet.

Continued softness in equity prices is likely. Corporate outlooks are decidedly cautious, but this is typically the case so early in the year. Many companies are saying that business conditions are improving, but they are unwilling to adjust current earnings expectations.

Stocks may experience price consolidation for the entire first half of 2014. Sentiment has definitely changed with the Federal Reserve being so keen to cut its stimulus.

But balance sheets remain strong and earnings results, while not uniform, are mostly decent again. The outlook for increasing dividends is solid and dividend reinvestment is still a great way to create wealth for yourself over time.

The stock market’s been due for a material price retrenchment for quite a while. If share price weakness extends through the next several months, it will still be a healthy development for the long-term trend.