Saving & Investing: Where to Invest in 2010
By Andrew Tanzer,
Source: Your Money Kiplinger
What's in store for 2010? Clearly, the U.S. faces many long-term structural problems. But the stock market, which began its remarkable leap after investors concluded that economic Armageddon was no longer at hand, will advance as it responds to an improving earnings picture. And treading carefully amid the wreckage in the economy, investors can still find some alluring themes.
One idea is to invest in blue-chip companies with strong foreign sales. Mike Avery, co-manager of Ivy Asset Strategy, a global fund, hunts for "best in class" U.S. companies with strong overseas footprints. His U.S. multinational holdings include Monsanto (symbol MON), Apple (AAPL) and Nike (NKE).
Channing Smith, co-manager of Capital Advisors, says he holds YUM Brands (YUM), which operates KFC and Pizza Hut restaurants, for its large and fast-growing China business. He gravitated toward Procter & Gamble (PG), which sells affordable necessities, such as diapers and razor blades, for similar reasons.
Information technology, an area in which the U.S. leads, also benefits from global economic recovery. Alan Gayle, senior investment strategist of SunTrust's RidgeWorth Investments, says many tech giants have strong balance sheets with little debt and sport impressive profit margins. Stocks he likes include Adobe Systems (ADBE), Hewlett-Packard (HPQ) and Microsoft (MSFT).
Jerry Jordan, manager of Jordan Opportunity Fund, expects another onslaught of commodity-price inflation over the next couple of years. He likes oil-equipment and energy-services companies, including National Oilwell Varco (NOV) and Halliburton (HAL). Jordan is also a bull on agriculture. His main plays on food are through a pork producer in China and through PowerShares DB Agriculture (DBA), an exchange-traded fund that holds futures contracts on grains and sugar.
Rich Howard, co-manager of Prospector Opportunity, favors DuPont (DD). The chemical giant has a large and growing seed-technology business that competes with Monsanto's. Like many others worried about the health of the U.S. dollar and other major currencies, Howard has become a gold bug. He's allocated 10 percent of his portfolio to mining stocks, including Barrick Gold (ABX) and Newmont Mining (NEM).
You can also profit from more domestically oriented stocks. Channing Smith believes that companies such as Wal-Mart Stores (WMT) and PetSmart (PETM) will benefit from the new frugality of U.S. consumers. He recently purchased shares of CarMax (KMX), the largest used-car retailer in the U.S. With just 2 percent of the national market, the company has plenty of room to expand.
Health care is a huge and growing domestic industry. But uncertainty about the direction of health-care reform makes investing tricky. Smith favors companies that will benefit from cost reduction and expanded insurance coverage, such as Quest Diagnostics (DGX), which provides testing services, and McKesson (MCK), a leading drug distributor. He's also bullish on Abbott Laboratories (ABT).
(Andrew Tanzer is a senior associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com. Visit www.kiplinger.com for additional advice and features.)