Performance is relative. If a stock manages to move sideways or
modestly rise when most stocks are plunging, then investors should
be pleased. Better yet, these are precisely the kinds of stocks
that tend to outperform when most other stocks simply stabilize.
We're not there yet, but we're getting awfully close. So it pays to
take a close look at the companies showing impressive
to find clues as to where to focus your investing dollars. And even
though the past few sessions have been up, the
need not rally for these S&P 500 stocks to move ahead.
One way to buck the tide: find a buyer.
offered a $12. 5 billion dowry for
Motorola Holdings (Nasdaq:
in July, helping that stock to rise 60% in the past three months.
It also helps to offer a fat
to entice investors. Utilities and tobacco stocks held up very well
in the third quarter, thanks to their hefty payouts.
But it's unwise to expect further
for these stocks. In most instances, their dividend yields are
simply too small to entice high-yield investors. And in a more
stable market, the unwinding of the "
flight to quality
" trades may cause these stocks to lose some appeal, especially if
investors move back farther out on the risk curve.
But there are a dozen other stocks that have managed to rise in an
otherwise tough market. Which of these are poised for further gains
as the market stabilizes?
To expect continued gains for gold producer
Newmont Mining (NYSE:
, which at one point was up more than 30% in the quarter, you have
to have a very
outlook for gold prices. Why has Newmont done far better than its
peer group? Because it announced plans in July to make major
investments in Peruvian and Australian mines that should set the
stage for 7 million ounces in annual gold production by 2017. Of
course, high gold prices would be necessary to generate the
to fund these projects. Is gold headed back toward the $2,000
per-ounce mark -- or higher? That's not a wager I'm personally
looking to make. [See my piece: "
2 Major Reasons Why Gold Prices Could Continue
In a similar vein, I remain in awe of
, which tacked on another 9% in the last quarter (even after a $40
pullback since Sept. 20). And the stock is surely cheap at less
than 10 times next year's
when cash is excluded. But I remain fearful that the company's
is near a peak as cutthroat competition in the consumer electronics
market will eventually crimp growth and margins.
Yet there are a few names that look quite appealing -- even in
these tough times.
1. VF Corp. (NYSE:
If you're on the prowl for companies that can benefit from rising
such as India, Russia, Mexico, Brazil and China, then you should
know this name. VF owns brands such as Timberland, Wrangler, Vans,
the North Face and others. These are iconic U.S. brands, synonymous
with the "great outdoors." And they're quickly gaining adherents in
The June 2011,
of Timberland in particular is turning this into a solid move.
Aided by that deal, sales are expected to rise 20% this year and
another 20% in 2012 to about $11 billion. Equally important,
management has proven quite savvy in managing costs through better
of raw materials. Gross margins are on track to rise from 44% in
2008 to 46% this year. With such a large sales base, a 200 basis
point increase in gross margins really fuels the
. Notably, cotton prices had been surging, but have recently pulled
back, which should
gains in 2012.
Merrill Lynch, which upgraded its rating on VF from "neutral" to
"buy" in late September, figures the company can
its strong brands and solid cost controls into healthy
free cash flow
, projecting a rise from $600 million this year to $1 billion by
2013. It also predicts
will rise to $140. That may only be 15% above current levels, but
this potential return also comes with a fairly low degree of risk
2. Bristol-Myers Squibb (NYSE:
Faced with a never-ending onslaught of patent expirations and tepid
new drug pipelines, investors have come to see Big Pharma as a
no-growth industry. There is one notable exception: Bristol-Myers
Squibb, which has less exposure to imminent patent expirations and
a fairly robust pipeline of new drugs waiting in the wings.
To be sure, the quarters ahead will be a challenge. Sales are
expected to drop 13% in 2012 to $18.3 billion, while
earnings per share (
could slump by a similar amount, from $2.28 to $2.06 in the same
period. From there, business should improve markedly. Goldman Sachs
estimates a string of new drugs should hit the market beginning in
2012, which will likely eventually constitute 70% of sales by 2016.
(Notably, new drugs tend to carry the highest
margins.) Goldman's analysts say "Street forecasts underestimate
the margin implications of BMY's burgeoning new product lineup,
which should lead to significant upside in the 2014-2016 period."
Goldman sees shares rising from a current $31 into the upper $30s
once the rest of Wall Street starts to appreciate the company's
plans. Coupled with a current 4.3% yield, this stock offers income,
stability and growth all in one platform.
Risks to consider:
Some of these stocks have rallied simply because they are seen
as safe havens during stormy times. As the market calms, these
"flight to quality" names may lose some appeal.
Action to Take -->
A key theme of these stocks is that they appear to be
well-positioned to grow in an uncertaineconomy . In addition to VF
Corp. and Bristol-Myers Squibb, companies like health care
should see increasing adoption for their goods and services. But
price still matters. Cerner, at 30 times projected 2012 profits,
appears fully-valued, so it should be watched in case of a
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.