3 Best Sectors for an Economic Recovery
by Houghton and Atkeson 06/22/09
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Recovery Beneficiary #2: Consumer Staples
The second strongest group as measured by relative strength is consumer staples.
Within this group, small-cap soft drink bottlers and agriculture additives were the two standouts.
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Another stock that stands out as a winner from an economic recovery whereby by the resumption in consumption is muted is Perrigo Company (PRGO).
Perrigo is the nation's largest manufacturer of store-brand, over-the-counter, non-prescription pharmaceutical products, and it also manufactures store-brand nutritional products.
The company has 70% market share and gaining. Its products sell for 30% less than brand-name products.
Earnings are growing at a 15% rate, and the stock is trading for 13 time 2010 earnings. There are no financing concerns, and the company could easily become an acquisition target.
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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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