|Written by Rob Goldman|
For all intents and purposes, today is the true first trading day of 2015 and we believe it will be a good one. More important, there are seasonal events that lead us to believe that January could be a great month for small cap and opportunistic investors.
The January Effect appear ready to rock small cap tech stocks this month with the aid of the trends, products, and announcements coming out of the annual International Consumer Electronics Show, which begins today. It may have been a dud in years past but it has a huge buzz this year. See which segments stand to be the biggest gainers in the near term for small, publicly traded tech stocks.
For investors with a longer term horizon, we provide an overview of The Dogs of the Dow (DoD) strategy, along with info on buying the DoD ETN. Plus, we provide our top Dow Jones Industrial Average pick, which may even outperform the DoD ETN.
Finally, Apple (NASDAQ – AAPL) is flashing sell. See what we have to say about it.
BEST BETS FOR EARLY 2015
The tallies for the 2014 year are in and we all know that it was a pretty darn good year, even if small caps lagged behind by a considerable percentage. Today, we enter a trader’s delight period with specific historical and seasonal strategies and trends ready to kick off.
Arguably the most famous of these strategies is known as The Dogs of the Dow. This approach, which traces its roots to 1991, purports that the best performing Dow Jones Industrial Average stocks for a given year tend to be the 10 highest dividend yielding stocks as of the last trading day of the year prior.
There are trading vehicles like closed end funds and a Dogs of the Dow ETF ELEMENTS Dogs of the Dow DJ HY Sel 10 TR ETN (NYSE—DOD—$15.35), for those interested in playing this strategy. It rose by more than 10% last year.
Wondering what these dogs are? For 2015, AT&T (NYSE—T—$33.87), Verizon (NYSE—VZ—$46.96) and Chevron (NYSE—CVX—$112.58) are the top 3 dividend yielding stocks, currently. Their respective yields are 5.43%, 4.68%, and 3.8%. These yields compare very favorably with the yield on the 10-Year Note of 2.17%.
While buying a basket like the ETN above may make the most sense, if we had to choose just one of the 10 stocks, VZ seems to be the best play. It is projected to enjoy the second-highest EPS growth rate while some of these stocks are forecasted to endure lower EPS (such as CVX and ExxonMobil (NYSE—XOM). With a yield of 4.68% and trading at a PEG ratio of 1, we could see a total return of 15% this year, with little volatility.
Strategies and Trends
The January Effect, as outlined in recent editions, appears poised to deliver once again this year. In fact, the roughly 0.5% drop in the Russell 2000 Index on a light trading day on Friday means that small cap and microcaps, particularly those sold off late last year, are even more attractive. We recommend establishing trading positions in “tech”, be they technology or biotechnology, given the big sell-offs in so many small names in these sectors, despite strength in the bigger names.
One of the drivers of tech stocks and tech trends is the annual International Consumer Electronics Show in Las Vegas, which begins today. In years past, the CES show would showcase, highlight, and foreshadow the latest and upcoming trends in technology for the consumer and small business world. This year, the CES buzz has not only started earlier, but after a couple of years of only so-so attendance and exhibition numbers, the 2015 show seems hot, hot, hot!
Apple (NASDAQ—AAPL—$109.33) broke through a support level and technically, the stock looks like a sell. History teaches us that buying AAPL on dips is a wise move. Keep it on your watch list and consider it closer to $103. With a current yield of 1.7% and trading 12x this year’s EPS, we target $125-130.
Happy New Year!
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