Three Stocks On Which to Ride the Market’s Momentum
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
So far the Dow Jones Industrial Average has risen over 15% year-to-date. This meteriotic rise has left many investors scratching their heads, wondering what to do next. One school of thought is to continue to look for equity positions that would ride the momentum upward. Another is to buy defensive stocks that would hedge against a market correction. I’ve uncovered three stocks that would cover both schools of thought.
TrustCo Bank (NASDAQ: TRST) is certainly a buy in this marketplace. It isn’t a secret that banks fair well when interest rates rise. Because of higher rates, banks typically can make money on the burgeoning credit spreads on their products. With the rise in the real estate markets, the activity on a bank's commercial and home mortgage portfolios should reflect the new home and commercial purchases.
This particular bank has such growth in mortgage loan activity. They have seen increases in mortgage activity, and welcome over 3% yield spreads, even with these low rates currently in place. As rates rise, variable rate loans issued would be advantageous to the loan holder by demanding higher rates versus an artificially deflated interest rate. With over 70% of its loan portfolio in these assets, rest assured that TrustCo Bank will capitalize on two fronts: real estate and rising interest rates.
TrustCo’s stock has taken quite a leap in the last few trading days, breaking out of a holding pattern its been in to accurately reflect the second quarter EPS surprise the company announced on July 22, 2013. Their $0.201 EPS beat analyst estimates by $0.01 and offered optimistic guidance for the rest of the year.
Maxim Integrated Products (NASDAQ: MXIM) is a favored stock by many, including JP Morgan, which has Maxim on their buy list. There’s no secret as to why we would want to buy this stock--it has a dividend yield of 3.5% and is trading just four points off of its 52-week low.
This integrated circuits manufacturer has a global footprint and is estimated to bring in over $2.5 billion in revenue for 2013, which would be a 50% increase from 2009. Analysts expect this company to continue to expand at a rate of 7%-9% year-over-year, which means your investment should grow along with it. The average analyst has this stock pegged at $33 per share, and if we can add it the rising market premium on interest rate hikes, this stock should trade above $35 by year's end. At the current price of around $27 per share, there is much more upside than downside here.
If you hadn’t already have seen Nokia’s (NYSE: NOK) surge against Apple and Samsung, you probably have been living under a rock. The chief of Nokia, Mr. Stephen Elop, has launched a new phone advertised to directly assault the iconic iPhone and the neuve riche Galaxy.
Nokia also has climbed aboard the redesign of the camera smartphone to meet consumer’s demand for them vis-à-vis digital cameras. According to DS Rawat, a honcho with India’s technology sector, there’s a 92% probability a consumer will search for a better camera in a smartphone rather than a forking over money for a digital camera.
The convergence of technology will fare well for this once-hot, not-hot, now-warm cellular device maker. With BlackBerry still reeling, Apple phones slowing, and Samsung reaching a plateau, my bet is that Nokia reemerges as a leader in the cellular industry in a big way. Its namesake already has taken a cavalier stance against its rivals by using the Windows-based phones as a launching pad through Nokia’s hardware contributions. As a matter of fact, Nokia has tripled year-over-year growth and accounted for approximately 79% of all Windows smartphone sales.
Thankfully, Nokia presents an ample buying opportunity in spite of the major traction the business has. The stock is trading 25% off of its 52-week high and is building a solid trading base at $3.00. Investors in general have not given Nokia its just due, and point to the negatives on the company’s financial statements. This current quarter will surprise many, in my opinion. As big funds and tech-heavy hedge funds continue to take more “risk on” trades, Nokia should be on the A-list of stocks to buy in those funds. My advice: get in before they do.
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Michael Mandala has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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!