as part of our
As 2013 unfolds, it's clear that US household debt has declined
as a percentage of the nation's gross domestic product (
) and remains on track to continue dropping.
This year, deleveraged consumers will likely succumb to their
pent-up desires to spend money, providing a lift for the stocks in
our consumer staples and consumer discretionary sleeves.
Buoying consumers' spirits is a
rebounding housing market
. According to CoreLogic (
), a leading provider of mortgage data, home prices are up about 6
percent from a year ago, placing them on a path for their best year
Meanwhile, corporations are sitting on huge hoards of cash: up
to $1 trillion for S&P 500 companies, as of mid-2012. Managers
have already signaled that they plan to tap this money in the
coming months for long-deferred IT investments, a boon for
What's more, the World Bank in December upwardly revised its
projection for China's GDP growth in 2013 from 8.1 percent to 8.4
percent, as the globe's second-largest economy undertakes ambitious
infrastructure projects and other stimulative policies.
China will serve as the growth engine for the aviation sector's
resurgence; see my article
The Red Dragon Spreads its Wings
for my favorite play on soaring aircraft demand in China.
The confluence of these trends will lift financially fit
companies in 2013 and beyond. Rising consumer confidence and
spending will particularly benefit financial sector stocks, most
Discover Financial Services
In December, Discover reported higher fourth-quarter earnings as
total loans increased and the company wrote off fewer delinquent
balances. Earnings reached $541 million, or $1.07 in earnings per
share (EPS), an increase of 6 percent from the same period a year
The rate at which the company wrote off unpaid credit card
balances dropped to a historic low of 2.29 percent. For the full
year, Discover's revenue reached $7.6 billion, an increase of 8
percent compared to the previous year, while earnings hit $2.3
billion, a year-over-year increase of 5 percent.
Health care is another sector that's positioned to prosper, as
an estimated 32 million previously uninsured Americans receive
coverage under the Patient Protection and Affordable Care Act, aka
Health care costs are expected to comprise one-fifth of US GDP
by 2021, providing long-term growth prospects for health sector
Drug makers with deep pockets and robust product pipelines will
profit handsomely from Obamacare, as millions of newly insured
patients are able to purchase previously unaffordable
A notable winner will be
), which provides drug treatments for hemophilia, kidney disease
and other medical conditions.
In December, Baxter announced it would purchase Swedish dialysis
company Gambro AB for $4 billion. Gambro generated sales in 2011 of
$1.6 billion. Baxter intends to finance the acquisition with $1
billion in cash and $3 billion in debt. Management has assured
investors that the pending deal would not adversely affect the
company's current dividend payout ratio of 40 percent.
Roughly 2 million people in the world today are on dialysis, a
process for removing toxins from a patient's blood. The acquisition
of Gambro will enhance Baxter's dialysis products portfolio, to
help the company meet rapidly expanding dialysis demand.
Obamacare also puts
) in a particularly sweet spot, as the drug giant launches new
treatments in the booming field of ophthalmology.
During the next 15 years in the US, the graying of the
population is expected to boost the number of cataract patients by
60 percent and glaucoma patients by 50 percent. These secular
trends will receive impetus from Obamacare's expansion of coverage,
benefiting Novartis for years to come. For another angle on how
investors could play Obamacare, read Jim Fink's article
Staffing Companies: How to Profit from Obamacare's Job
This article was written by John Persinos of Investing