|Written by GSCR Staff|
|Wednesday, 07 November 2012 08:07|
Now that the election is over, and life goes on, institutional and retail investors must align or in some cases re-align their portfolios. After all, the expectation of certain policies will have an impact on both the stock market direction and specific sectors. Generally speaking, we believe that a deal of some sort will come on the fiscal cliff. However, we would avoid big cap dividend stocks as we are leaning toward the notion that part of the compromise will still include a hefty dividend tax increase.
We believe that in the near term, we will see much of what we have seen with the economy and unemployment, which could be a drag on stocks for quarters to come, but still believe that seasonality favors the market for the next few months. Here are sectors to accumulate and sectors to avoid:
Gold: With the current budget crisis and fiscal cliff looming, and the expectation of continued monetary easing by the Federal Reserve, gold will surely rise. When the dollar falls, gold rises. Moreover, some investors, who are concerned as to how the market will react in the near to intermediate term will seek a safe haven. When there is a fear of inflation, gold is the first stop. One gold ETF that attempts to mirror gold bullion prices is (NYSE – IAU). Other gold ETFs and small miners make sense as well.
Health Care: Obamacare is here to stay. There will be no repeal now. To borrow a phrase regarding Chicago elections, buy early and buy often. There are a number of stocks which should do well. A rising tide lifts all boats. We would avoid medical device players but like pharmaceutical plays and even medical insurers. ETF fans should consider (NYSE – IHE) which is a proxy for big pharma, and (NYSE – IHF) which tracks insurers.
Clean Energy: Despite all of the bad press on the subject and the Administration’s missteps, this space will still be a good one. The demographics of the electorate lean in this direction and even though it may not be at the top of agenda policies, the space has legs. We have covered a number of small stocks here and ideas abound.
Gaming: Expanded gambling won out in some states and the sentiment among voters appears to favor broad-based access to gambling as a means of meeting budget deficits. Much like Obamacare, it is here to stay, even if the economy continues to be sluggish.
Limited Tech: There aren’t a lot of segments that appear to be under accumulation in tech, but the insatiable desire for gadgets, mobile technology, mobile apps, and productivity tools may be the best plays. The stocks that are working will still work, and we believe buying March 2013 calls on Apple may be a very attractive strategy. Other individual stocks are too numerous to mention.
Energy: For the near term we would avoid oil and gas. Still, long term, it is a good place to be, even in a shrinking economy. We will likely be in a trading range on oil anyway but we will highlight some excellent plays in the very near future. Coal? Run away.
Financial: With no debt reduction in the offing, and no pressure on banks to assist in lending increases, large banks may still have difficulty making real inroads in revenue and profit growth. Ditto for investment firms that are behaving sluggishly.
Industrials: Too much regulation, slow economic growth (aside from some homebuilders) mean this group is in the not ready for prime time players category.
Defense: Expect cuts in spending. Not a good thing for this space.
Tech (Guts): We would avoid some of the hardware providers and those that provide product to in the component or servicing sectors. The weak economy does not bode well.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com