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Jeff Reeves
Feb. 17, 2011, 12:01 a.m. EST
View all Jeff Reeves "º
"¹ Previous Column
The bull market is here to stay
First Take "º
Dodd-Frank may be too fragile to succeed
By Jeff Reeves
ROCKVILLE, Md. (MarketWatch) "” The stock market has really been humming along lately.
The Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (DJIA 12,313, +25.09, +0.20%) is up 22% since Sept. 1, the S&P 500 /quotes/comstock/21z!i1:in\x (SPX 1,340, +3.37, +0.25%) is up 27% in the same period, and the tech-heavy Nasdaq /quotes/comstock/10y!i:comp (COMP 2,831, +5.03, +0.18%) is up 33%. Since Jan. 1, all three indexes are up about 6% in about six weeks.
But the best news of all is that this is a broad-based rally that isn't just for sophisticated traders and hedge funds. This is a real rally for real folks, for hardworking Americans with 401(k) plans and buy-and-hold retail investors who actively manage their own small portfolios.
Take Dow components. McDonald's Corp. /quotes/comstock/13*!mcd/quotes/nls/mcd (MCD 76.05, +0.03, +0.04%) , IBM /quotes/comstock/13*!ibm/quotes/nls/ibm (IBM 164.39, +0.99, +0.61%) , Caterpillar Inc. /quotes/comstock/13*!cat/quotes/nls/cat (CAT 103.27, -0.28, -0.27%) and Wal-Mart Stores Inc. /quotes/comstock/13*!wmt/quotes/nls/wmt (WMT 54.66, +0.11, +0.20%) All are up more than 30% since Oct. 9, 2007. That's an annualized gain well over 10% for the group when you add in dividends "” great returns in any market, and even more impressive considering it's based on buying at "peak" valuations as the stock market hit its pre-recession high in fall 2007.
And who says buying and holding blue chips is an extinct investment strategy for the timid or naive?
Certainly, there are some dogs of the Dow too. As of this writing, Cisco Systems Inc. /quotes/comstock/15*!csco/quotes/nls/csco (CSCO 18.70, +0.12, +0.65%) is off 42% since Oct. 9, 2007, Alcoa Inc. /quotes/comstock/13*!aa/quotes/nls/aa (AA 17.54, -0.06, -0.31%) is off 52% and Bank of America Corp. /quotes/comstock/13*!bac/quotes/nls/bac (BAC 14.87, +0.03, +0.17%) is off 68%. And General Motors /quotes/comstock/13*!gm/quotes/nls/gm (GM 36.36, -0.39, -1.06%) and AIG /quotes/comstock/13*!aig/quotes/nls/aig (AIG 42.10, +0.82, +1.99%) completely wiped out investors who didn't bail out in the death spiral of the financial crisis.
But that's my point "” it's a stock picker's market, and just buying the indexes gives you a share of the worst duds and the soaring successes. For a long-term investor with an IRA or a few thousand dollars in a brokerage account, all you have to do is focus your cash on fewer losers and more winners to beat the market.
Donald Trump has asked Mets owner Fred Wilpon for a meeting to discuss buying a majority stake of the franchise.
Easier for me to say, right? Well hopefully with these five tips you'll see that it's not quite as daunting as some think to pick the right stocks, even in a challenging market like this one.
Warren Buffett jokes that he isn't smart enough to understand how many companies make their money. Whether you believe him or not, you should certainly have faith in his message "” don't buy a stock if it doesn't seem like a good business model. Read 10 Warren Buffett quotes for any market on InvestorPlace.com.
Take everybody's darling tech stock, Apple Inc. /quotes/comstock/15*!aapl/quotes/nls/aapl (AAPL 358.03, -5.10, -1.40%) How does the company succeed? By creating innovative products consumers can't live without. Unless you've been living under a rock you know how the iPad is a runaway success, that the iPhone remains a dominant smartphone and that the iPod and iTunes are the standard when it comes to digital music. Apple is up 115% since Oct. 9, 2007, when the Dow Jones "peaked" before the financial crisis.
It's no wonder that 71% of Apple stock is in the hand of mutual fund managers and institutional investors "” including over 16 million shares alone in the portfolio of Fidelity Contrafund /quotes/comstock/10r!fcntx (FCNTX 71.55, +0.37, +0.52%) . Owning Apple just makes sense.
One of my personal favorite stocks right now is Bank of America. Why? Well, partly because I see improving metrics that appeal to me "” more borrowers making payments on mortgages and credit cards, primarily "” but also because sentiment on the stock remains overly negative.
Yes, I suppose we could see a surprise glut of foreclosures or a shocking revelation from Wikileaks about corrupt executives and cooked books. But come on, BofA just posted a $1.2 billion loss due to bad housing loans, and by its own estimation will be on the hook for $7 billion to $10 billion to settle lawsuits over defunct mortgages securities. You're telling me there's something uglier than that lurking on the books?
Oh yeah, and despite a brief drawback around earnings at the end of January, the stock is up a hefty 11% so far in 2011.
Republicans are seeking to slow the pace of new regulations enacted by Dodd-Frank. The endgame may be a full repeal, depending on the outcome of elections in 2012.
1:42 p.m. Today1:42 p.m. Feb. 17, 2011
"Gold futures close at five-week high http://on.mktw.net/gmdjpL" 2:38 p.m. EST, Feb. 17, 2011 from MarketWatch
"U.S. stocks turn positive http://on.mktw.net/e2DaQV" 11:30 a.m. EST, Feb. 17, 2011 from MarketWatch
"U.S. stocks in red after opening half-hour Thursday, but latest data help trim decline http://on.mktw.net/i2b6be" 10:12 a.m. EST, Feb. 17, 2011 from MarketWatch
"Philly Fed's gauge of regional economy surges past consensus forecast http://on.mktw.net/gWPJj0" 10:08 a.m. EST, Feb. 17, 2011 from MarketWatch
"U.S. mortgages in foreclosure tie a record high: Mortgage Bankers Association http://on.mktw.net/ifAazp" 10:06 a.m. EST, Feb. 17, 2011 from MarketWatch
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