Top Value Stocks – Coal Stocks and Steel Stocks
The Momentum Rider investor series continues as we take a look at the coming week’s action and also more areas to look for to find top value stocks. This week is going to be focusing on the coal stocks and also in steel stocks. They were sold off in a very big way in 2011 and many of them offer excellent values for longer term investors. As the world economies start to heat up and if China continues its bounce, they should do very well in the next 12 to 18 months from the current price levels.
As for the coming week, it is full of news and market moving events. The Greek government is still trying to work out an important agreement with its private sector creditors in the next few days. This issue is still very important to finalize for short term market stability and it was not resolved during this writing on Sunday night.
The markets finished up flat for last week which was positive for a sustained uptrend. The recent run up needed to rebuild some energy and work off some of its overbought state. The DJIA is consolidating near its 2011 highs and the S&P 500 still has 50+ points left to do an official retest of its May 2011 highs.
The short term technical indicators are still showing a very extended market that needs a pullback. But the buyers are keeping the markets grinding higher and the uptrend intact for now. A finalized Greek agreement would probably give us an early boost. And the Chinese manufacturing data on Wednesday will also be important this week. China needs to continue its move up to keep the other world markets, especially the commodities market, pushing higher.
The Fed’s announcement of keeping low rates through the end of 2014 was viewed as bullish for the markets and positive for precious metals. That is one reason why gold and silver are breaking out of their downtrends. (See our blog posted earlier today on Top Precious Metal Investments to take advantage of this announcement).
The US GDP growth reported late last week was disappointing at a mere 2.8% and some even complained that it was artificially high – making it actually lower. Obviously, this slower growth could fuel more speculation that the Fed still may use a QE3 program later in 2012 if Europe gets measurably worse. There is a jobs’ report coming out on Friday. Without the holiday hires, the number could disappoint. There will also be ISM Manufacturing and monthly auto sales on Wednesday and chain store retail sales on Thursday. Investors are hoping for positively trending numbers.
We are closely watching Exxon Mobil and US Steel earnings on Tuesday and MasterCard and Pulte Group on Thursday. Energy, steel, consumer spending, and housing are key areas to look at going forward. So far, 37% of the S&P 500 companies have reported and only 59% have beaten estimates. That is compared with 70%+ in the most recent quarters. Not as bad as many anticipated but probably a C+ score.
As for Europe, MR has been encouraged by the new lending facility to European banks that was implemented late last year. It has calmed the markets down and is one of the key reasons for the strong move up in the last 45 days. Also, it was positive news this weekend that Christine Lagarde, the head of the IMF (International Monetary Fund) was trying to increase the IMF’s resources by $500 billion. Largarde argued that increasing the size of the IMF’s resources would help improve confidence in the global financial system and we completely agree. The increased funding process will be monitored and no commitments were made. European Union leaders will sign off on a permanent rescue fund for the euro zone at a summit tomorrow and are expected to agree on a balanced budget rule in national legislation.
The markets have come a long way from the end of November and in the last 45 days. The technicals are very extended and a 2 to 3% pullback would be healthy. The question is whether a bigger pullback comes before testing the highs first or not. That is a difficult call at this point. The first important support on the S&P 500 is at 1300 and the next support is at 1285.
Finally, Facebook is expected to do their filing for an IPO this week. It is widely anticipated to be one of the biggest IPO’s ever with close to $100B valuation.
Using the Power Stocks Table:
(1) Risk: Conservative (Cons); Moderate (Mod); Aggressive (Aggr); Speculative (Spec)
(2) Stop: Typically use a 3 to 4% closing stop below the entry price
(3) Trailing Stops: Use the 10 EMA (Swing) or 20 SMA (Short Term Trader) for protecting gains once above it; SMA = Daily Simple Moving Avg; EMA = Daily Exponential Moving Avg.
Top Value Stocks to Buy for 2012 – Coal Stocks and Steel Stocks
Our focus for this week will be beaten down coal and steel stocks. As we have detailed in previous blogs this year, the Chinese market weakness last year significantly hurt commodity stocks. MR believes the selling was overdone and we recommended many of these stocks before the start of the year. And most have had strong moves already in 2012.
However, if China can continue its market uptrend and Europe’s politicians can keep navigating through their minefields safely, many of these stocks could have much higher to go this year.
Keep an eye on China and Europe for traders and look to buy pullbacks. But investors can start scaling in on weakness into these top value stocks near these prices, especially with a longer time horizon of 12 months or more. True valuations are difficult to determine but we have included the forward PE ratios and reported Price-to-Book ratios in our chart. All of these top value stocks are good but our very best stocks are highlighted.
Top Value Stocks – Coal Stocks and Steel Stocks:
Investors should look at our recently posted blogs on top value stocks in energy and precious metal mining stocks. Both areas look ready to rebound after going sideways or finishing up long downtrends. Many of the precious metal mining stocks had big reversal moves recently. The top gold and silver stocks and ETFs were in a blog today on our website. (Click here to read it).
Stay tuned for some blogs to come on China’s market and their top value stocks. Also, look for a very important blog later in the week on US Treasuries. A very safe investment will be revealed and it is not what you think.
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