With the market very near critical support levels, critical earnings reports on the docket, and inflation and employment data set for release, it was more prudent last week to keep the powder dry. But the market surprised to the upside, as key companies reported better than expectations.
With the “not-as-bad-as-expected” news surrounding the economy and the initial government stimulus measures have been priced in to the market, we are moving into a period of profound uncertainty. With the release of Alcoa Inc.’s (NYSE: AA) earnings report, earnings season has officially begun.
It is high time for our political leaders to make some key decisions. And that translates into large uncertainties for investors that have held the market in a range and with low volume. We do not know whether “Cap and Trade” legislation will pass the Senate and we do not know whether and any healthcare bill will pass through Congress, or what that bill might entail. And these two issues are paramount for the future of America.
Last week was a very important one. The U.S. Treasury placed a record level of debt, the Federal Reserve announced it would not expand its monetary easing, and we got many top players opining about the economy. In addition, we are facing the uncertainties about ‘Cap and Trade’ legislation and the healthcare reform.
On Feb. 4, I recommended buying Amazon.com Inc. (Nasdaq: AMZN) stock as a long-term play with very important short-term catalysts that were about to unfold. The basis of the long term recommendation was the fact that I found in Amazon that elusive quality that I was taught to seek in business school a few decades ago: Strong, sustainable competitive advantages.
On Monday March 9, barely three months ago, I strongly recommended buying Diamond Offshore (NYSE: DO) as part of Money Morning’s “Buy, Sell, or Hold” feature. Both the stock and the Standard & Poor’s 500 Index had both hit 52-week lows the Friday before. But oil had already bottomed three weeks prior, and the lax fiscal and monetary policies of governments around the world seemed almost certain to promote reflation.
On April 20, I recommended the iShares SPDR Gold Trust ETF (NYSE:GLD). Since then, it has surged more than 10%. And while the price of gold may experience some short-term pullbacks, the U.S. government’s overly expansive fiscal policy could lead to a sharp inflationary spike that makes this exchange-traded fund a must-have investment.
Campbell Soup Co. (NYSE: CPB) traces its origins back to 1869. This company has been around forever, and it has used its time well. Campbell Soup has survived and thrived through the Great Depression of the 1930s, both World Wars, and every single one of the challenges and setbacks that the U.S. economy has suffered since. The magnitude of this accomplishment is almost unthinkable.
At this point, it is good to look for the defensive plays that have been neglected in this upturn and for safe havens for investors taking profits from the recent run. After looking long and hard, I came to General Mills Inc. (NYSE: GIS).
In last week’s Buy, Sell or Hold I recommended Corning Inc. (NYSE: GLW), based on three factors: