We at CAIM LLC hope you enjoy hearing our views about the markets and dividend paying stocks. Our first blog starts with our overall view of the economy, markets and investing. We look forward to hearing your comments!
We believe the worst of the recession is behind us and we have started to move into a recovery phase. Throughout the year we expect to get conflicting data causing us to question whether we double dip or move into the expansion phase. Just last week we had great retail sales numbers , up .3% (up >8% ex autos) and unemployment claims dropped 6,000. This week the trend continued for another drop in unemployment claims, marking 3 weeks in a row of improving numbers. So, what’s the flip side? Consumer sentiment and confidence numbers continue to lag.
Can the markets continue to go up without the participation of the individual investor? Our expectations are for a choppy market in 2010. This will be caused by conflicting economic data, risk in overseas markets (like Greece) and the outcomes of political reform in Washington. Our target for the S&P 500 is 1280 based on an eps estimate $77.50 (First Call) and a p/e of 16.5x. This earnings estimate is 20% higher than last year. We expect corporate profits to do well and believe the individual investor will start to slowly move into the market this year due to the lack of returns in bonds and cash.
At Caim LLC, we favor dividend paying stocks that also have growth potential. Our discipline is based on companies that have low levels of debt and positive free cash flow. For example, we like companies such as Intel (INTC) and Coca-Cola (KO). Both companies pay dividends 50% higher than that of the S&P 500 and almost 300% more than money market funds!
More on stocks in our next blog!