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There’s always a lot to fear in a bull market. In today’s, one of them is the feeling of déjà vu all over again.
Last year began with the defensive sector — think healthcare and utility stocks — blazing the upward path. As the year wore on, we rotated into more economically sensitive areas of the market as the economy appeared to gain traction.
But by the end of the year, the most economically sensitive stocks refused to participate fully in the transition to 2014. Investors weren’t convinced of economic growth, and once the year turned, it was again the defensive sectors of healthcare (up 7.4 percent year-to-date as of Monday) and utilities (up 4.3 percent) carrying a sagging whole-market attempt to continue the rally. There’s reason to be very cautious here despite the apparent bullish bias of short-term traders.
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| There are opportunities within the relatively underperforming industrials sector worthy of further analysis. |
That said, there are opportunities within the relatively underperforming industrials sector (+0.11 percent) worthy of further analysis, as indicated by the Weiss Ratings Model.
I’m what I guess one would call a cautious bull in the current investment environment. Although we’ve seen some general weakening in reported economic fundamentals, the general consensus out there is that corporate earnings will rebound sooner rather than later. And that some indications auguring the resumption of durable global economic growth will outstrip the consistent drag of debt-ridden governments and a wary industrial contingent in the real economy.
Of course, I’m a little concerned that the market has gotten ahead of itself, but I see strong opportunities out there as potential buy candidates. And right now, I think bullish-minded investors should focus on the relatively underperforming industrials sector for tomorrow’s winners.
I’ve made solid profits for the Weiss Ratings Portfolio by investing in big-name industrials like General Electric (GE — Rated A-) and Raytheon (RTN — Rated A). And I see a cluster of opportunity suggested by the Weiss Ratings Model that I would like to highlight today.
Two of the most highly-rated stocks in the industrials sector manufacture railcars — a very old-economy industry, serving a vital transportation function for national and regional economies. These two gems are mid-cap manufacturer Trinity (TRN — rated A+) and smaller-cap American Railcar (ARII — rated A+). With the increase in all types of rail traffic over the past decade, and the current focus on railcar safety, I think these two firms can flourish in the near term despite what happens in the global economy.
Another firm I think can weather any further fears of economic weakness — and also indicative of a Ratings trend toward similarly specialized manufacturers, is A+ Rated Mueller (MLI — Rated A+), a maker of plumbing supplies and accessories. With turnover in housing and commercial construction seemingly back on track, there has been a sturdy nascent demand for MLI’s products that I think will become stronger in the near future.
Keeping a vigilant eye can save you a lot, which is why I am biased towards highly rated stocks throughout any short-term market environment.
Best,
Don Lucek
