Apple, Sony and Taking Advantage of the Improving Economy
Nate is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The world economy is getting better. It's improving in surprising ways. The recent U.S. employment figures are good, with non-government payrolls growing enough to offset the loss of government jobs. The markets are hitting record highs again, even if I'm on record that investors shouldn't be too involved in that. Heck, even housing is looking good again.
Lots to celebrate. It's a good feeling being on the right side of the business cycle for a while after a long time on the wrong one.
Still, what's an investor to do? It's not that hard to find out. I used to tell my brokerage clients one simple thing. Try to think about how people are reacting to the news and invest appropriately. Simple, but real truths often are.
In this case, with a great many people coming out of the worst economic hard times since the 1930s, my advice is to look for growth in consumer electronics and other higher-end items. It's not like Ferrari is suddenly going to explode all over the place, but with better news and a bit more financial security people are going to feel better about spending money on toys and other distractions that might have seemed risky just a year or two ago. So think about some of these companies as investable as we see things really pick up.
Apple (NASDAQ: AAPL)
I won't dodge the fact that Apple's shares have dropped recently. But that makes it a prime buying opportunity for people who are interested in making some return on their investments sooner rather than later. I expect that the sales of Apple's consumer electronics, the iPhones and iPads and the other products that the company has in the pipeline, will do pretty well over the next few years. Even with stiffening competition, Apple is still the king of the hill.
The company's shares have taken a beating, but I think they're undervalued now. Combine the potential for strong growth with a solid 2.46% dividend and that's someplace you want some money.
Sony Corporation (NYSE: SNE)
Sony is a classic toymaker. The company makes electronics, cameras and video equipment as well as the upcoming PlayStation 4 that your kids are probably already bothering you about. With the growing economy loosing the purse strings around the world, you can be pretty certain that some of those newly spendable dollars will go into Sony's coffers as people start buying new televisions and such to enjoy their new security.
The firm's shares trended downward most of last year until December. Then they started a run that saw them go up in value 61% in three months. The renaissance for Sony shares is already under way so get some. The dividend of 1.98% is just the icing on the cake.
Nordstrom (NYSE: JWN)
Another easy-to-figure-out play is that higher-end retailers will do well as people spend more. We're already seeing the lower-end players complaining that sales aren't trending the way they want. But I don't hear any complaints from Nordstrom. In fact, what you hear is an announcement of a stock buyback and an increase in dividend. That's a sign of a firm that's walking like a winner.
Shares in Nordstrom have been flattish over the last year but that masks a drop in the first half of 2012 and a recovery of more than 10% since then. Combine that with the 2.20% dividend and things look good.
Ford (NYSE: F)
Another large purchase that people put off when they're feeling insecure is new cars. As things feel better they make the leap and commit (most of them) to five year's worth of payments. That should start happening with automakers in 2013. Ford has already been seeing some good news on the sales front and that should continue, especially overseas.
The firm's stock has grown in price 42.3% since last August and the board has doubled the dividend to 3.09%. There's a lot to like in Ford and it's something you should look at carefully. People are still a bit gunshy of American carmakers so take advantage of that.
JPMorgan Chase (NYSE: JPM)
Lastly, the biggest ticket item most consumers will ever buy in their lives … their homes. An uptick in consumer confidence and security means that home sales are already moving upward and the mortgages are beginning to be written. It's time to start looking at some major backs (OK, not Bank of America) as solid investment plays for the mortgage loans they write. Chase is the one you want.
Shares of Chase have grown more than 60% since last summer and there's little reason to think that the bank will suddenly fall on its face. Watch for it to continue to grow as times get better. It got through the hardship well, it won't suffer when times are better.
Follow Nate on Twitter: @natewooley
More columns from Nate Wooley:
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Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Apple and Ford. The Motley Fool owns shares of Apple, Ford, and JPMorgan Chase & Co.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!