Friday, I tackled the first five of
10 Stocks to Grow With. Today, the second five:
Johnson & Johnson
The first company, IBM, is another stock that is no stranger to this column. I've analyzed this chart numerous times over the years and have seemingly been wrong every single time! My error has been to consistently underestimate this monster, but when you look at the chart below, you can see why. For years and years -- many of the years I worked there -- you lost a fortune overestimating the stock. Once Lou Gerstner came in, though, things really turned around.
So now IBM is clearly locked in a steep uptrend channel. I'd certainly give it my full approval, except the sheer rise over the past few years bothers me. Like a few other stocks I've looked at, IBM's ascent has been steep. But, since 1993, a 1,000%-plus rise is
steep for a company like IBM. Yes, maybe it's now a newfangled Internet company. And maybe things truly are different. Still, after all those years of underperformance, is the story really that different? Well, I don't work there anymore, so maybe.
Bottom line: It certainly should be in your portfolio, but my tendency would be to make it a secondary holding. Again, though, that's just gut feel, as there's nothing wrong with the chart.
In contrast to IBM, take a look at JNJ's chart. Yes, it too had a bit of a dip in the early '90s (as did many stocks, by the way) but, prior to that, it was going up, vs. IBM's decline.
But for now, JNJ's chart is flawless, with a nice, steady uptrend. In fact, this is one of the few stocks very close to its trend line, making right now an excellent buying opportunity. I like JNJ here, and would certainly recommend it as a buy.
WCOM is next, and now I'm beginning to sound like a broken record. So, I'll make this one nice and short. It's clearly a winner. The only minor flaw is that I'd like to see WCOM a bit closer to its trend line before I went long. But, again, we're thinking long term, so perhaps I'm splitting hairs. WCOM is fine, next!
And next up is TYC, a stock I'd deem a recent phenomenon. Like many other stocks in this column, the uptrend is steady and strong. One item of interest, though, is in TYC's volume. See that huge increase in volume a few months earlier this year? That's usually a warning sign that something's amiss. Usually, I like to see nice steady volume as the stock grows. However, in this case, TYC had just burst from almost five months of congestion, and the resulting surge in volume brought a new high. So perhaps we can ignore this one warning sign. With that in mind, and at the risk of being repetitive, I boringly have to also recommend TYC.
Ah, but finally I get to end on a nonboring stock, and perhaps the only miscue in
list: UAL. If you look back at most of the other stocks, you'll notice nice steady up slopes. Some steeper than others, but few had big ruts in the road.
Not so with UAL, as this stock almost appears down more than up right now. Yes, maybe for the long run, UAL is a great pick. But judging from the chart, it's just too unpredictable to make any kind of sizable investment in. In fact, this is the only stock in the list I'd recommend as a pass.
So, that concludes my look at
"10 Stocks to Grow With." And, in spite of having no technical analysis to accompany their fundamental view, they did a pretty good job of picking a number of winners.
That said, let me add a few caveats.
One, I generally like every stock on the list. However, if I had to rank them, I'd make CSCO a sure buy, and UAL a sure avoid.
Two, if I went long or was already long any of these stocks, I'd dump them if the upward trend line was broken. For that reason, I naturally prefer buying stocks like JNJ that are currently right near their trend line as the reward/risk is at the highest.
Finally, I am fully aware that many of these charts are driven by an overall bull market. It did not escape me that many charts went sideways or down in the early '90s: exactly when the overall market went sideways. It is difficult for any company, no matter how great or how strong technically, to escape a pervasive selling mood. The market has been rocky lately, and while I'm not forecasting any kind of downtrend, a long period of congestion is certainly possible. And if that happens, most of these stocks will do nothing but move horizontally.
On the other hand, if I was determined to buy and hold for the long term, I'm not sure I could do better than the list
has presented. So, my hat is off to the people there. It's certainly no
, but not too bad for a bricks-and-mortar publication!
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at