These stocks look the most promising for January
Read More Why stocks ‘more vulnerable’ in 2015: Paulsen
It might be tempting to try something new altogether, but Sam Stovall of S&P Capital IQ says in a report that one of the best sectors of 2014 is looking good again. The health-care sector has jumped more than 23% during 2014 — making it one of the best places for stocks.
And it’s not just an Obamacare bump. The health-care sector has posted five-year compound average annual growth of 17%, which trails only consumer discretionary sector’s gains at 18.7% and tops the 12.4% growth of the Standard & Poor’s 500, Stovall says.
But the momentum in health care looks like it can stay alive, Stovall says. For one thing, the health-care sector’s price performance continues to trend above its 26-week moving average, which means “the trend is our friend,” Stovall says. And it’s not just trading trends that make health care appealing for 2015. Analysts forecast the health-care sector to post 11.8% operating profit growth in 2015, topping the 8.2% growth of the market.
More from USA Today:
Honda, Nissan set sales records in 2014
Track your dog (or kid) with Belkin’s app-paired sensor
GM to announce new connected-car features
And while health-care stocks fared well in 2014, they’re still attractively priced. The S&P 500 health-care sector is trading for a 12% premium to the P-E of the market, but that’s the premium the industry has had since 1995, Stovall says.
Biotech continues to be the growth engine of the industry. Biotech companies reported 80% earnings growth in 2014 and are expected to put up another 42% growth in 2015, Stovall says. That’s even higher than the 23.5% health-care earnings growth of 2014 and expected 11.8% growth in 2015.
There are also seasonal factors at play in January, especially for one very well-known biotech stock: Gilead Sciences. The company, which is working on treatments for hypertension and other dangerous conditions, is one of the five stocks in the S&P 500 that have beaten the market in each and every of the past five Januaries and posted an average gain during the periods of 10% or more. Analysts rate Gilead an “outperform” and have an 18-month price target on the stock of $126 a share, says S&P Capital IQ. That’s more than 30% upside from the stock’s current price of about $95 a share.
Read More Wall Street’s cautious stock calls for the year
Investors might be hoping for yet another repeat performance in January — and that would be Netflix. The video-streaming company has dominated during the past five Januaries. Not only did it top the market in each and every of the past five Januaries, but it turned in an average annual gain of 39.6% during the month on average, ranking it tops among the S&P 500. Netflix, too, is rated “outperform” and analysts are holding out an average 18-month price target of $412.43, which if correct, would be almost 20% upside from current levels.
But no matter which stocks investors go for, the importance of January is critical. Not only do investors look for small stocks to outperform in the first few days, but they look to the month for cues on how the rest of the year might go.
“January is critical,” says Jack Ablin of BMO Private Bank. “To me, it determines whether or not we play offense or defense for the year.”
Taken from –
These stocks look the most promising for January
