Boring Blue Chips Trading at All-Time Highs
by Todd BuntonAugust 07, 2012 | Comments : 5 Recommended this article: (0)
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Have you noticed what's going on with those boring blue chips lately?
Take Wal-Mart (WMT) for example. The retail king had essentially traded within a range of $45-$60 for more than a decade. But suddenly in mid-May the stock broke above $60 and has soared 25% since then to reach a new all-time high. And it's up more than 50% over the last year.
Yes, Wal-Mart has returned to its roots of Everyday Low Prices, and it has seen a modest upward revision in earnings estimates recently. But that's not enough to explain its recent meteoric rise. Check out the company's Price & Consensus chart over the last 5 years:
Although not quite at an all-time high, The Coca-Cola Company (KO) is trading at its highest level since the late 1990's.
So why are these stocks trading at (or near) all-time highs while the S&P 500 is still 11% below its all-time high? I see two reasons for this: (1) a search for yield and (2) a flight to safety.
With cash and bonds yielding next to nothing, income-oriented investors are looking to stocks for yield. And within the stock market, there's a flight to safety because of a slowing global economy and sovereign debt crisis in Europe. In fact, according to CNBC, the average S&P 500 stock gained 0.2% in July. However those that pay dividends increased 1.2%.
But as valuations rise, have these "boring" blue chips become overbought? Or will a continued search for yield and flight to safety keep them afloat?
They're hand-picked from the list of Zacks Rank #1 Strong Buys. Our experts predict that their prices will jump the soonest. Today, you can see them free.
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