4 Stocks for a Sluggish Economy - Investment Ideas
2012年9月18日 - 9:00AM
Zacks
Since the Great Recession officially ended in mid-2009, the
economic recovery has been far from robust.
Not only has the unemployment rate stayed above 8%
for 43 straight months, the labor force participation rate is at a
31-year low. And since the beginning of 2010, GDP growth has
averaged just +2.1%:
It's because of this sluggish growth that the
Federal Reserve recently announced its third round of quantitative
easing. But don't expect QE3 to suddenly spark 3%+ GDP growth. The
first two (and a half) rounds certainly didn't.
So how should an investor position his or her
portfolio in an economy that continues to just limp along? There
are a few places to be:
- Value-oriented Retailers: Sluggish economic
growth means the unemployment rate likely won't come down by any
meaningful amount for a painfully long time. This means stagnant
wages and tight household budgets for the middle class. As a
result, people will hunt for bargains at stores that provide the
lowest prices. This is really a continuation of a trend since
consumers traded down to value-oriented retailers en masse during
the Great Recession and never seemed to leave.
- Companies with Wide Moats: Just like a moat would
protect a castle from invasions, an economic moat protects a
company from competitors who try to steal market share and shrink
profits. Companies who can sustain their competitive advantages
over time should provide their shareholders with above-average
returns, even if the economy is just sputtering along.
- Dividend Stocks: The yields on bonds and cash are
ridiculously low right now and will remain that way for the
foreseeable future as the Fed maintains its historically
accommodative monetary policy. This makes the yields on some
dividend stocks look very attractive. Companies with solid balance
sheets, strong cash flows and a history of dividend hikes are the
ones to watch for.
- Emerging Markets: Growth opportunities may be
muted in the developed economies, but a burgeoning middle class in
some emerging markets presents tremendous opportunities. Many
U.S.-based companies have seen this trend coming for years and have
already established a significant presence overseas that will
continue driving their profits forward at a healthy clip.
Here are 4 companies to own in a slow-growth
economy:
Value-oriented Retailer:
The TJX Companies (TJX)
The TJX Companies is an off-price retailer which
operates the Marmaxx Group (T.J. Maxx and Marshalls) and HomeGoods
in the U.S.; TJX Canada (Winners, HomeSense, and Marshalls) and TJX
Europe (T.K. Maxx and HomeSense). Even though the U.S. has
technically been out of a recession for more than 3 years, this
discount retailer continues to deliver to positive solid same-store
sales increases and double-digit earnings growth. It is a Zacks #2
Rank (Buy) stock.
Wide Moat Business:
CBOE Holdings, Inc. (CBOE)
The Chicago Board Options Exchange (CBOE) is the
oldest and one of the largest U.S.-based exchanges for options on
equities, indexes and ETFs. The company consistently generates
returns on invested capital (ROIC) north of 40%, and through the
first six months of 2012 it earned 28 cents for every dollar in
revenue it took in. That's the sign of a wide moat. It is a Zacks
#3 Rank (Hold) stock.
Dividend Stock:
Omega Healthcare Investors (OHI)
America is growing older, and the unfortunate fact
is that more and more people are going to end up in nursing homes
over the next decade. Omega Healthcare is a REIT with a portfolio
of over 400 health care facilities, 370 of which are Skilled
Nursing Facilities, otherwise known as nursing homes. Omega pays a
dividend that yields a juicy 7.0%, nearly 4x what you'd get on a
10-year Treasury note. And since 2004, its dividend has grown at a
compound annual rate of 11%. Look for more dividend hikes in the
future. Omega is a Zacks #2 Rank (Buy) stock.
Emerging Markets Exposure:
Yum! Brands (YUM)
Yum!, which operates the KFC, Pizza Hut and Taco
Bell restaurant chains, has been struggling with stagnant growth in
the United States...but not in the emerging markets. The company's
China division has been surging and now accounts for 47% of total
revenues. This is expected to drive double-digit earnings growth
for the company over the next several years. Yum! has also beat
earnings estimates in 26 out of the last 28 quarters. It is a Zacks
#3 Rank (Hold) stock.
The Bottom Line
While economic growth in the U.S. appears to be
sluggish at best, there are still opportunities to earn strong
returns with stocks. These 4 companies are each well-positioned to
do just that.
Todd Bunton is the Growth & Income Stock
Strategist for Zacks Investment Research and Editor of the Income
Plus Investor service.
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Learn More>>
CBOE HOLDINGS (CBOE): Free Stock Analysis Report
CBOE HOLDINGS (CBOE): Free Stock Analysis Report
CBOE HOLDINGS (CBOE): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
OMEGA HLTHCARE (OHI): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
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