Investors now seem almost obsessed on when the Dow Jones Industrial Average will pass through 13,000. That’s an interesting tidbit for those in search of sound bites but it is both inevitable and of only passing significance. Like the breaking of the four-minute mile record back in 1954, it should encourage investors as the Dow heads for 14,000 and, in all probability, 15,000 in a couple of years.
Such speculative chatter makes good cocktail chatter but doesn’t address the fundamental questions as to what actions investors should take as the stock market winds its ways. I consistently recommend that investors stabilize their portfolios with a base of solid, well financed, growing companies.
That advice seems more welcomed in periods of nerve-racking volatility than it does when sustained advances tend to induce complacency. Excitement usually builds first in the technological sector where positions should be anchored with Apple (AAPL-$512) and Intel (INTC-$26).
Apple has been such a spectacular success that it has created its own technological ecosystem. Analysts often tout some lesser stock as being a supplier or potential supplier. That may work but I prefer the real thing and would use any price dips below $500 to add to Apple positions.
Intel dominates its sector. Its earnings will be almost flat this year but it is trading for only 11 times earnings while yielding 3% after raising its dividend for the eighth straight year. It invests more in research than the total sales of many of its competitors and will continue to be an undramatic but rewarding investment.
An improving economy, low interest rates and returning investor confidence will enhance returns on less established tech companies. Solarwinds (SWI-$39), a recently recommended young IT company, is making new highs. Cognizant Technology (CTSH-$70), a much larger IT outsourcer, took a hit last fall on a rare earnings miss but is coming back nicely. Both its forecast earnings growth and P/E ratio are around 20, a good combo.
Oil prices have also been grabbing headlines with crude trading over $100 for sometime, resulting in painfully apparent rises in retail gas prices. This has very little to do with U.S. political actions and everything to do with interruptions and threats of further interruptions in the Middle East, particularly regarding Iran and speculative news stories about its nuclear capabilities.
Chevron (CVX-$108) and Occidental (OXY-$104) are solid performers. Both have excellent records of dividend increases, soothing the nerves of their stockholders as the world oil markets gyrate.
Atwood Oceanics (ATW-$46), an offshore oil driller, is my newest recommendation. No dividend but earnings for 2012 forecast around $4.00, increasing at around a 15% rate thereafter. Finances are sound and the company is taking delivery on newly constructed advanced drilling platforms.
SandRidge Permian Trust (PER-$23) is an oil and gas royalty trust with properties in the Permian Basin in Texas. It is up 35% since my recommendation in October while paying around 9% in royalty distributions. SandRidge is planning another Trust offering, named SandRidge Mississippi Trust II, which should be available to investors in a few months.
Feeding the world provides steadily rising demand for global agricultural suppliers. DuPont (DD-$51) continues to emphasize its hybrid seed and agricultural chemical lines. Swiss-based Syngenta (SYT-$66) attracts little attention from U.S. analysts despite its excellent growth record in improving crop yields.
Deere (DE-$84), a world leader in agricultural equipment, has grown earnings at a compounded rate of 26% for 10 years. All three of these companies provide excellent dividend returns to ease the cyclicality of farming. Investors should expect good harvests from the solidly grounded companies recommended here.
Tony Crowell manages stock portfolios for individuals and their trust and retirement accounts with CROWELL•ROBERTS Investment Counsel, a registered investment advisor in Laguna Beach since 1993. [email protected] 949.494.1376/