Hello TipRanks Members,
(Please remember that after today’s market commentary I share my “Stock of the Week”.)
By far the most common complaint amongst investors is that they suffer from “Information Overload”. Certainly, you know what I am talking about giving a 24/7 deluge of investment data and opinions coming from three dedicated investment TV networks plus countless websites, newspapers, radio shows, magazines and newsletters (but not this newsletter 😉 )
On top of that, you have a media bias towards more scary/bearish information than is truly needed. Unfortunately fear = more viewership = more ad dollars. That is why they are so skewed in that negative direction even in the most bullish of times.
So what is an investor to do?
First, admit to yourself that even if you stayed on top of ALL this information, that your odds of perfectly timing every move of the market was little better than a coin flip. (It’s not a matter of intelligence. Rather it is because short-term market timing is the toughest game in town).
Second, allow yourself to just stay focused on the primary long-term trend. 83% of the time it is bullish and 17% it is bearish. And when you are in either cycle it is quite obvious. So just align your portfolio with those primary long-term trends.
Third, know the data that really moves the markets and keep close tabs on them. The rest is mostly noise. Here is that list of the 4 key indicators:
- GDP: As long as economic growth is +1.5% or more, it is hard to get bearish.
- Corporate Earnings: Do review sources like Zacks or FactSet during each quarterly earnings season. As long as companies continue to mostly surprise to the upside, and future estimates are stable to higher…then hard to put on the bear suit.
- ISM Manufacturing: Yes, it is true that manufacturing is only 15% of the US economy at this time, but many consider it the “canary in the coal mine” for the economy. When it heads down towards 50 or less, then its time to consider getting more defensive. (Right now it is sporting a very robust 61.3).
- Inflation: When it heats up too much the Fed raises rates which often foreshadows the end of the economic expansion and future contraction. This is not currently a problem…but one that you should watch closely from this stage forward.
Yes, I could add a few others in ISM Services, Retail Sales, Consumer Confidence, Employment etc. But the more we go down this road of reviewing additional reports, the closer we get back to information overload. So for now, consider just staying focused on the 4 key indicators noted above.
Stock of the Week: Avery Dennison (AVY)
Recently I have shared more exciting growth stocks with you like BABA, EA, MTZ, and RCL. However, today I am going to put you to sleep…in a good way.
Even the most aggressive investors should still have a few stable stocks in their portfolio. The kind that allow you to go sleep at night without worrying about what comes next. Avery Dennison is a leading labels maker that fits the bill.
I know a labels manufacturer sounds boring…but tell me what products you buy that don’t have labels? Somebody has to make them, and AVY is the best in the business. That operational excellence is quite apparent by their string of 17 straight quarterly earnings beats. Not surprisingly shares have increased 129% over that stretch while the S&P is only up 51%.
Yet for as good as that sounds, shares did get a bit overpriced for a while. I am referring back to the beginning of the year when AVY was pushing a new all-time high of $123. That was too rich a valuation at that stage giving investors ample reason to take some profits off the table. Now it is time for us value players to come in and snap up shares under $110. Especially true when the average target stands at $129.50 with some analysts looking for as much as $135.
That is the target price now. However, if they keep up with their tradition of producing quarterly beat after beat, then earnings estimates and fair value will only trend higher.
Here are the other positive labels affixed to AVY from a TipRanks perspective:
- Investor Sentiment across all investors is barely on the right side of Neutral. But when we isolate to just the top 20% of investors based on performance than the sentiment rockets up to very positive. More details.
- Financial Bloggers continue to talk up the merits of AVY. More details.
- News Sentiment this past week is 100% bullish. More details.
Most value guys, like myself, are contrarians by nature. So it is perfectly fine by me that there is not a lot of media buzz about this stock. That shortage of information and coverage is part of the reason why shares are languishing at such a low price. The perfect point to strike before shares rise again and the buzz picks up.
Start your research on AVY here.
Wishing you a world of investment success!
Steve Reitmeister
Editor in Chief
www.TipRanks.com
Disclaimer: In general, I own the stocks that I highlight in the commentary. When you think about it…why would you ever take advice from an investment professional who wasn’t willing to put his money where his mouth is?
