Jay is the author of www.MarketFolly.com, a site that tracks top hedge funds and provides daily updates on what they're buying, selling and why. MarketFolly covers SEC filings, hedge fund letters, buyside investment conferences and more.
Market Strategist Jeff Saut: Best Stock Ideas For Next 3-5 Years
Posted on 01/28/13 - 02:56 PM EST
Given that markets have been ripping higher, we thought it a prudent time to check in with market strategist Jeff Saut. His latest investment outlook is entitled "For All the Sad Words of Tongue and Pen" where he looks at how market rallies can last longer than one would think.
He highlights how at around the 18th day of a typical 17-25 day buying stampede, certain investors will start to question whether or not they've missed "the bottom." This then leads to a new round of buying from people who don't want to miss the big move, and thus the rally extends.
So when might this rally cease? Saut mentions rallies can typically last up to 30 sessions while today is session 18. He points out some of the cautious signals he is seeing:
"The S&P 500 (SPX/1502.96) remains overbought with 92.6% of its stocks above their respective 50-day moving averages (DMAs), as well the NYSE McClellan Oscillator is still overbought in the short-term. However, the stock markets can remain overbought for longer than most think in a bull move. Further, the Volatility Index (VIX/12.89) is not confirming the renewed stock strength and some of the hitherto leading stocks are not acting well."
Raymond James' Best Stock Ideas For 3-5 Years
Saut recalls Ray Dalio's recent interview where the legendary manager said that "the shift of that massive amount of cash is what will be a game changer." If it moves into stocks (from pension funds and other large institutions), he wants to be prepared.
As such, Saut has highlighted his analysts' best stock ideas for a 3-5 year holding period with the following criteria:
- Recurring revenue stream
- High barriers to entry
- Not as dependent on economy/financial markets
- Can grow EBITDA at 5-10% annually
- Competitive edge in its sector
- Strong management
His analysts recommended the following stocks: Altera (ALTR), Conceptus (CPTS), Denbury Resources (DNR), NIC Corp (EGOB), Equinix (EQIX), EV Energy Partners (EVEP), IDEXX Labs (IDXX), Iridium Communications (IRDM), LKQ (LKQ), National Oilwell Varco (NOV), Verisk Analytics (VRSK), and Wabtec (WAB).
For more from this strategist, we've highlighted how Saut has been short-term conflicted and long-term bullish and how he's focused on housing as the key driver.