Climbing a 'Wall of Worry' and Catching a 'Wave of Wealth' with Stocks

NEW YORK ( TheStreet) -- The prophets of fiscal doom are at it again, and who's to say that they are completely wrong. A recent headline in The Wall Street Journal capitalized on the current angst by proclaiming "As Stocks Rally, U.S. Companies Worry."

The article spoke of the Dow Jones Industrial Average nearing its record high. "But a different mood is pervading U.S. companies, where executives are less optimistic about the global economy and their prospects, and many are lowering financial forecasts."

It also claimed that 63 S&P 500 companies (so far) "...have lowered their forecasts for first quarter earnings, according to FactSet Research, while 17 have raised them, the largest disparity since the firm began tracking the data in 2006."

This rhetoric reminds me of how the ocean tides go out before the next big waves come rolling in again. Many see the action by central banks around the world to stimulate the global economy as a harbinger of a "tsunami of wealth" which will cause stocks, real estate and commodities to be inflated to new heights.

Porter Stansberry, writing Wednesday in Dr. Steve Sjuggerud's DailyWealth online publication continues to warn that profligate fiscal stimulation and monetary policies that re-inflate investments are leading to another disastrous bubble.

"Sadly, the best way to protect yourself from this looming catastrophe is to benefit from the same policies that are causing it. That means making sure you have your wealth not in paper money, but in blue-chip businesses, productive real estate and gold. Make sure you buy them before it's too late," he concludes. This is a reminder that when you can't beat them it may be better to join them.

A number of companies see this "wave of wealth" heading our way. They took note of President Obama's State-of-the-Union speech Tuesday night where he emphasized the need to "build and repair infrastructure, spur alternative-energy sources, expand early education and raise pay for workers."

Where's the money going to come from for those proposals to become realities? "So, to underwrite his programs, he proposed in some cases recycling existing money or asking Congress again for funds previously denied. In other cases, he said he would seek his goals not with dollars but with regulations and tax incentives to prod the private sector to do Washington's bidding" today's WSJ commented.

The president called for $50 billion in spending on rebuilding bridges, repairing old highways and building rail lines, and would pay for that by seeking once again funds previously requested yet never approved by Congress.

To financially supplement whatever the government spends on infrastructure, he suggested public and private partnerships for projects important to businesses such as power grids and energy pipelines, a plan that implies relying on private funding rather than taxpayer dollars.

All this is why companies like Polaris Industries ( PII) which manufactures and sells motorcycles, off-road vehicles, snowmobiles, and on-road vehicles primarily in the U.S., Canada and Europe is optimistic.

The Medina, Minn.-based company plans to double its investment spending to roughly $200 million this year on top of a 22% increase last year. Polaris is proactive and it's building a new factory to produce off-road vehicles in Europe... that's right... Europe, where in spite of all the bad press last year it saw sales increase to the point that this region of the world accounts for 10% of PII's revenues.

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The 5-year chart below shows "the long and winding road" Polaris has been on that has led them to also be able to expand factories in the U.S. and south of the border in old Mexico. The price trajectory looks like it should be accompanied by the song "Climb Every Mountain" as does the quarterly revenue per share growth. PII Chart PII data by YCharts

PII pays a $1.68-per-share dividend at a sustainable payout ratio of 38%. It has total cash (most recent quarter) of more than $417 million and operating cash flow (trailing 12 months) of more than $416 million. Polaris' trailing 12 months return on assets is more than 22% and its return on equity is a thrilling 52.46%.

Another company planning on some huge increases in spending is General Dynamics ( GD) which is currently selling around $66-a-share, more than 11% below its 52-week highs.

GD is an aerospace and defense company, providing business aviation, combat vehicles, weapons systems, munitions for the military and commercial shipbuilding. It also creates communications and information technology products and services worldwide. Some investors have been afraid to invest in GD even though it pays a current dividend yield-to-price of nearly 3.1%. Looking at its key financial numbers I took note that in the most recent quarter it has a manageable debt load with total cash of $3.3 billion dollars, operating cash flow (trailing 12 months) of $2.68 billion and levered free cash flow (trailing 12 months) of $2.87 billion.

Certainly, as the 5-year chart below illustrates, GD has been impacted by the worldwide economic recession and the recent cutback in defense spending by the government. Yet it has many ways to attract business including the manufacturing of corporate jets, ships and replacement equipment for the communications and information technology industries. GD Chart GD data by YCharts

If you're looking for a more diversified alternative to GD you might consider Lockheed Martin ( LMT) which trades at a low forward (1-year) price-to-earnings ratio of 9.5, pays more than a 5% dividend and has $1.2 billion in levered free cash flow (trailing 12 months).

As I wrote in an earlier article "As the late Benjamin Graham (the mentor of Warren Buffett) wrote in "The Intelligent Investor," his classic book, "It is far from certain that the typical investor should regularly hold off buying until low market levels appear... except when the general market level is much higher than can be justified by well-established standards of value."

There's plenty of worry right now that "...the general market level is much higher than can be justified..."but as the Federal Reserve and segments of the private sector begin spending more than $1 trillion in 2013 alone, the next wave of wealth should lift most investments higher and higher. Make sure you're positioned to benefit from these unprecedented financial opportunities.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.