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Should You Buy or Sell Stocks and Real Estate?

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NOTE: This is an excerpt from John Blank’s full April Market Strategy 2017 report. To access the full document, click here.

First, Let’s Talk Real Estate

April means spring. Let’s look into the U.S. real estate market this month. This is where there could be a property “bubble” lurking.

To start, Real Capital Analytics tells us U.S. commercial property transaction volume fell -11% in 2016. The level of activity was still elevated historically and marked 2016 as the 3rd strongest year on record.

The apartment sector led transaction activity in 2016, both for total volume and growth. No property type saw more deal volume.

That suggests this: investors need to focus on apartments for a sign of a bubble.

Second, Is It Time to Buy U.S. Stocks?

Think about 2,300 to 2,400 as an S&P 500 range this summer.

Stocks are likely 20% overvalued. The April 2017 index trades at 17.6x forward earnings. The Feb 2016 index low traded at 15.2x. The S&P 500 has a 10-yr average of 14.3x forward earnings.

The S&P 500 at 2,300 should provide support. That’s a 17 P/E.

Finally, Here’s the Latest Zacks Sector/Industry/Company Telescope

The April spring season is here. And in sector terms, the Consumer is back in the driver’s seat. Discretionary is back to a HOT sector. Staples got upgraded.

The Info Tech space remains HOT too, as it gets back to an Attractive sector, with Semis leading again. The other HOT spots are in the Financials, with a rate hike in hand, and 2 or 3 more on the way this year.

Despite the good news on U.S. and European manufacturing from the latest ISM print, Industrials stay a Market Weight.

The downshifted sectors in April are clearly Energy and Materials vis-à-vis early in the year.

(1) Consumer Discretionary rises from Attractive to Very Attractive. The Big Leader is Publishing, Autos/Tires/Trucks, and Other Consumer Disc.

My Top Pick: SP Plus Corporation (SP - Free Report) has a Zacks #1 Rank (STRONG BUY) and a Zacks VGM score of A.

This $750 million small cap stock is the ticker for a company that provides professional parking, ground transportation, facility maintenance, security and event logistics services to property owners and managers in all markets of the real estate industry.

(2) Info Tech gets back to Attractive. The leader (again) is Semiconductors.  The Misc. Tech space looks HOT too.

My Top Pick: FLIR Systems, Inc. is a Zacks #2 Rank (BUY) stock with a good Zacks VGM score of B.

The market cap is $4.87 billion. The company designs, manufactures and markets thermal imaging and broadcast camera systems for applications in the commercial and government markets.

(3) Financials move up to Attractive from Market Weight. Banks & Thrifts and Banks-Major are leading the way. Insurance is looking better, at this late stage in the cycle.

My Top Pick: BGC Partners is a Zacks #1 Rank (STRONG BUY) stock with a great Zacks VGM score of A.

This $3.1 billion market cap stock has a ticker tied to a leading global full-service inter-dealer broker, specializing in the trading of financial instruments and related derivatives products.

(4) Consumer Staples rises to a Market Weight. Leaders are Tobacco and Agri-business now. The loser is clearly Beverages. Not sure the story there.

(5) Materials fall from Attractive to Market Weight. The leaders (again) are Steel and their supplier, Metals Non-Ferrous. All other industries look flat.

(6) Energy is now a Market Weight. The top industry remains Oil E&P. Drillers were deeply downgraded.

(7) Industrials stay a Market Weight. Big leaders are Machinery and Pollution Control. Conglomerates and Construction-Building Services also look good.

(8) Utilities stay a Market Weight. The leader is Utilities-Gas Distribution, as summer cooling season approaches.

(9) Telco Services are a Market Weight. The winner is Utility-Telephone.

(10) Health Care continues to be stale. It remains Unattractive. There is no obviously thriving industry niche.

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NOTE: This is an excerpt from John Blank’s full April Market Strategy 2017 report. To access the full document, click here.


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