With the stock market near record highs, everyone wants to be in the market, but a lot of investors are worried about a possible sell off and have opted to sit on the sidelines in anticipation of the expected profit taking.
It would be wrong to assume that just because the market is strong today it will continue to show strength moving forward, but the overall economic landscape remains positive, which should keep equities moving in the right direction.
While the economy is doing good, and unemployment is low, it is important to note that there are a lot of potential pitfalls for the market in the months ahead. Among the risks are rising interest rates, the potential for decaying trade talks between the U.S. and China, worsening relations between the U.S. and North Korea, and the mounting legal troubles for President Trump as more of his top aides are found guilty of a variety of felonies.
Any of the above could spiral out of control and bring bears back into the market, but the overall strength of the U.S. economy should be enough to keep the markets trending higher, albeit cautiously.
If you have some extra cash you need to invest, you have to be careful, but here are five picks that you may want to consider before making your next stock purchase.
In case you missed it, athletic footwear and apparel leader Nike (NKE) has been crushing it in 2018. The stock is up 33% year to date, and shares are currently sitting just shy of their all-time high. Business is good for Nike, with the company expected to grow earnings by 11.3% for the full year, and by an average 12.2 a year over the next five years. Nike has strung together five consecutive quarterly reports that topped estimates on both the top and bottom line, with the most recent beats coming in late June. Profits were up 15% year over year, with sales climbing 12.7%.
I find myself recommending Amazon.com (AMZN) fairly frequently, but the company is so dominant in online retail it is hard to find a better play at this time. Not only is Amazon a leader in e-commerce, it has carved out a big piece of the cloud computing market, has a solid hardware division, and is aggressively moving into the grocery and pharmaceutical sectors. Amazon has proven an unmatched ability through the years to spot a need in the market and fill it, and the company’s management rarely misfires on its moves. The company has grown profits by 66% per annum over the last five years, and is expected to enjoy average annual earnings growth of 46% each of the next five years. The stock has a high valuation, with a forward P/E of 76, but the market has always been willing to pay up for the stock based on the company’s stellar growth estimates. E-commerce will only grow in importance moving forward, and as the clear leader in the sector, and one with little competition, Amazon will remain a market favorite down the road.
I like the credit card sector as more retail is being handled online. Credit card companies like Mastercard (MA) are great options at this time, and while MA has already enjoyed big stock gains over the last five years, there is still plenty of upside. The company has grown earnings by an impressive 16.4% a year over the last five years, but growth is expected to be even more robust moving forward, with analysts’ forecasts per annum earnings growth of 22.6% over the next five years. The company’s most recent quarterly report showed big year over year gains, with earnings up 51% year over year and revenues climbing 15.6%. These are the exact type of numbers Wall Street is looking for, and if the company is able to continue posting profit growth as expected, the stock will build on its recent gains and continue to reward its investors.
Oil and gas giant Exxon Mobil (XOM) has definitely not been a top stock in recent years, but at this point I believe the stock to be a very nice value play. XOM trades at a very low multiple, with a forward P/E of just 14.7. Management is very bullish on the future of the company, and predicts that profits could double by 2025. Earnings have been dismal in recent years, falling 17% per annum over the last five years, but analysts believe the company has turned the corner, and forecast profits will rise 26% this year, and by an average 21.5% over the next five years. The stock has already started to regain strength on the back of improved oil prices, and with such a low valuation it looks very attractive for investors looking to make a value play at this time.
Home goods retailer Conn’s (CONN) has been a top performer in recent years, fueled by a strong housing market that has both new and current homeowners shopping. The company is expected to grow its profits by 133% during the current year and looking ahead analysts expect average annual earnings growth of 25% for the next five years. Rising interest will eventually have an impact on the housing market, but rates remain incredibly low on an historic basis, and it will take several more rate hikes before we see any meaningful impact on the sector. With overall economic conditions favorable, and unemployment incredibly low, the future remains upbeat for the housing market, which should in turn lead to ongoing strength in home goods retailers such as Conn’s.