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Zacks Market Strategy: Shifting Sands - Analyst Blog

Posted: 11/11/2013 1:47:00 PM
Referenced Stocks: F;RBGLY;VALE

The following is an excerpt from the most recent Zacks Market Strategy . To view the full PDF report, please click here .

"Recent economic data suggest that, before the government shutdown, economic growth had lost a bit of momentum. The partial shutdown of the U.S. government since the beginning of October took even more wind out of the current quarter's sails. Assuming the shutdown lasts through mid-October, we now expect real GDP to grow at about a +2% pace over the second half of 2013."

Given strong October jobs data and +2.8% Q3 growth, they may be proved wrong.

It is a Full-Year 2014 Earnings World Now

At 15 times the forward consensus on earnings estimates, stocks look fairly valued.  Consider the average stock market P/E is 15 to 16. Apply 15 to $118 per share optimists expect for the S&P 500 in 2014. That computes to fair value at 1770. Stocks are pricing near that level now. December is on its way.  

If you say those earnings projections are too high, trim back to a conservative $109 per share for 2013.  That gives the S&P 500 a fair value of 1635, seen as a very low number now.  This number's arrival would reflect deep pessimism on ongoing Federal budget negotiations, or a non-U.S. blow-up.

Raging bulls use a $121 number for 2014.  They say 1815 is fair value now.  

Zacks Sector/Industry/Company Telescope for November

Losers became winners and vice versa in October.  What happened?  The shutdown ended, and QE flattened the 10-year to 2.5%. China showed up stronger.  The U.S. consumer is well.  Housing is not there at the moment.

Company to Check Out:  Ford Motor Company ( F ) is a Zacks Rank #1 stock.

Company to Check Out: Reckitt Benckiser ( RBGLY ).  This company engages in manufacturing and distributing household, toiletry, pharma and food products.  It is based in the United Kingdom.

Company to Check Out: Vale SA ( VALE ).  This company is engaged in the mining of iron ore and pellets, nickel, manganese and ferro-alloys, gold, nickel, copper, kaolin, bauxite, alumina, aluminum and potash.  It is based in Rio de Janeiro, Brazil.

This is an excerpt from the most recent Zacks Market Strategy . To view the full PDF report, please click here .

FORD MOTOR CO (F): Free Stock Analysis Report


VALE SA (VALE): Free Stock Analysis Report

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