"It's a stock-picker's market" will be the cry this week on financial television.
It is always a stock picker's market. Too often this phrase is used to avoid the question of where the market is headed and what sectors will be successful; it is a politic way of saying, "I don't know."
Still, no stock exists in a vacuum. Macro events affect where to invest and stay invested. It's important to realize the macro events that affect the equity markets.
Iran, for example, is a problem for world oil markets and the world in general; it has been for a long time. We created Mr. Chavez in Venezuela due to having no real energy plan (from both sides of the aisle), and now we are dealing with communism in South America. Terror will be with us, unfortunately, for some time. Russia's dispute with Ukraine over natural gas prices raised concern but was really about reversing former Soviet energy policies that are no longer valid. Finally, China and India are growing like crazy.
Now, let's make some money.
Oil prices are going to stay high. Natural gas will not keep going lower. This means that alternative energy is a place to make a lot of money, because it makes it more economically viable to use and build infrastructure. I have a stock for you that's a perfect fit for future energy, water, and defense investments.
Way, Way Ahead of the Curve
is a terrific company whose death has been greatly exaggerated. Recently, a
article questioned how former chairman Jack Welch funded the insurance arm of the company. Mr. Welch defended his actions in a very well written reply.
In the earnings call Friday morning, the insurance arm, Swiss Reinsurance Co., was reported to have caused GE to take a $2.7 billion charge, resulting in a 46% year-over-year drop in earnings. The stock suffered accordingly. What is very important to note is that the charge was due to the discontinued operations of the insurance arm. Otherwise, GE, matched analysts expectations.
Whatever the past is for GE and its insurance company, it is the past. GE sold it to get away from a pesky business. Investors should be applauding the move; instead, they are punishing the company.
GE even raised the lower end of its 2006 estimates. GE is a company that trades at a forward price-to-earnings multiple of around 15 (based on consensus numbers of $1.98), close to the market multiple, and has growth prospects greater than the market. This is a great company to own, which I do, because of its exposure and leading position in the growing water and alternative energy markets.
As I wrote in a
previous article for
, I believe water will be the hot commodity worldwide over the next few decades. GE is in the forefront on desalination plants, building the first in Mexico. I was recently in Mexico performing for the
; the need for pure water there is huge to say the least. GE has been making acquisitions of water companies.
Meanwhile, as oil and gas prices are becoming a drag on the consumer, GE has entered into the wind, solar, and nuclear businesses. GE has positioned itself for the future, yet it has been dead money for quite some time. With a 3% dividend yield and NBC Universal being the only segment under double-digit growth, this stock looks like a buy.
Tired of the Dog Biting You?
Another company I like that has a new and needed technology is
. Itron is making the meter reader look very much like the eight track.
In a high-tech world, 70% of electricity meters are still read manually. Itron has a product that allows meter readers to simply be in a van on the same street, hence no more dogs chasing them. Itron also has a product that, with the customers' consent, allows the utilities to trim back power to certain houses and reduce the stress on the grid.
The energy grid had a blackout in the Northeast just a few years ago; the grid is an antiquated system that has to be updated. Itron will benefit from the upgrade mindset.
With a consensus EPS estimate of $2.00, ITRI trades at a forward multiple of 21.5. Estimates are for over 16% earnings growth in 2006, resulting in a very reasonable P/E-to-growth ratio of around 1.3.
Itron is the next generation that happens in every industry; it has outdated the old way of doing things. This is a great stock to own.
being poor is bad; staying that way is stupid.
At the time of publication, Layfield was long GE, although holdings can change at any time. A former All-American offensive lineman at Abilene Christian University, John Layfield played professional football for the then-Los Angeles Raiders and later in the World League. After wrestling in Japan, Mexico and Europe, Layfield arrived in the WWE in the mid-1990's. A former WWE champion, JBL was a featured wrester at WrestleMania 21 and can also be seen on
Friday Night SmackDown!
on UPN. Outside of the ring, JBL is a self-taught investor who was recruited to write a personal finance book,
Have More Money Now
, which was released in the summer of 2003. He has appeared on finance shows on CNN and Fox News Network. He is co-chairman of the Smackdown Your Vote! Campaign and he has joined both the USO and Armed Forces Entertainment (AFE) for tours through Iraq, Afghanistan and other Middle East countries. He regularly visits the Walter Reed Army Medical Center and the Bethesda naval hospital to meet with wounded troops.