Nine Winning Trades For 2009
Houghton and Atkeson, March 22, 2009
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Trade #4: The Strong Will Get Stronger
Look to buy companies that will take share during the downturn. Examples may include Toyota and Honda as the U.S. automakers sort through their troubles but certainly emerge with less market share. Another example is the migration of consumer electronics from stores like Best Buy (BBY) to Wal-Mart (WMT) and Costco (COST). Google (GOOG) appears to be taking share from a variety of competitors.
Again, looking at the balance sheet will help determine who might take share. Positive cash flow, no debt and a solid position in their respective industry is a good starting point to find future winners.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
Watching the Treasury's Actions
In the short-term, the government's bond auction is likely to be a key driver of stocks.
Treasury Auction Boosts Market
The Treasury's auction of two-year notes brought an upside surprise which should alleviate fears of a lack of demand for U.S. paper.
Credit Markets Point to Upturn
The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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