Just
a few months ago, stocks were down about 5% and everyone under the sun was
calling for a market correction.
Since the February lows, the S&P is up about 12%, putting it up 7%
for the year. Despite this strong
rally, there are still too many analysts calling for a 10% pullback, but my
advice to you is to stay the course and continue to build on positions that you
have nice gains in, and look for stocks that have sold off sharply because of
temporary bad news.
I
think the technology sector will continue to outperform in the second half of
the year. If you’ve missed the
moves in the chipmakers like Intel, Qualcomm, and Micron Technologies, move
on. My favorite tech stock right
now is Google, which is the ultimate diversified technology investment. With Google, you have search, drones,
mobile, driverless cars, home automation, and whatever other technological
advances they will think of next.
Google looks as if it wants to rally back to new all-time highs, but if
you can get a pullback to $550, which is the 50-day moving average and looks to
be strong support over the last month, you need to be a buyer. My 12-month price target on Google is
$688, which represents a 17.5% gain from Friday’s close.
One
sector that has not performed very well this year has been retail. Macy’s, Michael Kors, Tiffany and Kate
Spade have led the way this year, but stocks like Amazon, Coach, and Costco
have all underperformed. I still
like the leaders and continue to hold Macy’s as a core position, but I think
you can look at adding a small position to your portfolio with a name like the
last three that I mentioned. I
like Amazon at these prices but would rather wait for a move back down to
$312. Amazon is still the biggest
and best retailer in the US and with a move into tv, mobile and most recently
groceries, they are setting up for long-term success. I would look for a move back to $375, which is about a 16%
gain from Friday’s close.
I
also think its time to start looking at Coach. Just last week, management lowered their full year outlook,
so lower expectations are now already priced into the stock. Coach bottomed out on Wednesday at
$33.60, which is the lowest it has traded since February 2010. I believe all the negative news is
already baked into the stock price and the sentiment is so overwhelmingly
negative, that it’s actually a strong buy for a trade only. Coach sports a 3.9% dividend and trades
at about 16x forward earnings, cheaper than competitors like Kors, Tiffany and
Kate Spade. Coach has traded down
at these levels before which led to 73% gain over the next 5 months. While I don’t think that you’ll get a
73% gain this time around, I can see Coach trading back up to $40 in the next 3
months, giving you about a 20% gain in that time frame. If you are buying Coach, don’t risk a
whole lot; use $32.80 as your stop.
Retail
stocks are the best gauges for the overall economy. If the economy and consumer sentiment are strong, these
stocks will rally the most. I
think everything from job growth to GDP, will come in better than most analysts
expect over the next 6 months, and retailers like Macys and Michael Kors will
hit new all-time highs. But I also
see beaten down stocks like Coach and Amazon staging a comeback. Tech names like Facebook, Tesla, and
Apple should continue to outperform, but look for Google to actually lead the
way.
My current positions: Long
Ford (F), Toll Brothers (TOL), Gilead Sciences (GILD), SunPower Corporation
(SPWR), Starbucks (SBUX), Macy’s (M), Boeing (BA), Disney (DIS), Google (GOOGL),
Facebook (FB).
Jeff Lewison
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