Welcome to Episode #40 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
In this episode, Tracey is joined by Kevin Cook, Zacks Senior Stock Strategist and Editor of the Tactical Trader portfolio service.
Kevin was on the podcast in January 2016 as stocks sold off, discussing what investors should do, and now he’s back just 6 months later with stocks at new all time highs.
But the questions remain the same as in January:
1. What should investors do now?
2. Where are there values or opportunities?
In June, Kevin discussed in a video how the S&P 500 could actually get to 2200 despite market valuations and sluggish growth.
His conclusions then were that the Central Banks were making US equities the “stars” of investing. Basically, with bond yields so low, or negative, there is no other alternative.
Additionally, the dividend yield on the S&P 500 is around 2%, which is much higher than the yield on the US 10-year.
You can watch his video here.
A lot of investors also have questions about valuations.
Neither Tracey nor Kevin think that the S&P 500 is overvalued here. But, investors have to be picky. Many large cap stocks, even those with great fundamentals, have expensive valuations.
Lockheed Martin (LMT - Analyst Report) , which just had a great second quarter earnings report, has a forward P/E of about 22. Johnson & Johnson (JNJ - Analyst Report) , which just guided higher for the year, has a forward P/E of 18. Neither is cheap.
IBM (IBM - Analyst Report) is one of the few large caps that seems to have value. It trades with a forward P/E of just 12.
Where else should investors be looking for stock ideas?
1. The small caps haven’t yet reached new highs but do your homework.
2. Tracey and Kevin like the medical sector and there are opportunities outside of biotechs such as with the medical staffing companies like AMN Healthcare Services (AHS - Snapshot Report) .
3. There are also some opportunities in technology with companies like Ambarella (AMBA - Snapshot Report) .
During market pullbacks, and during bull runs, Tracey and Kevin agree that there are always stock opportunities.
What other tips do they have about buying at market tops?
Tune into this week’s podcast to find out.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.