This bull market has been a long-running one, almost a record. But the challenges are mounting, making for a volatile market. Normally at this stage, investors might think about raising their bond holdings, or choosing more defensive stocks, such as utilities. That's probably not the right call this time, as bonds and high-yielding "bond proxies" in the stock market are sinking as rates rise.
We see potential in the energy sector, technology and financials. Small-company stocks have momentum, too, and we've included one in our list of five stocks with potential for 2018.
Data is as of May 18, 2018.
Think of Accenture PLC (symbol ACN (opens in new tab), $155), the giant management consulting firm, as a play on the hottest tech trends of the day, says Mike Bailey, director of research at FBB Capital Partners.
Accenture "sends the smart tech minds out to solve problems in artificial intelligence, cloud computing, cybersecurity—fill in the blank," he says. The company's reach extends to 50 countries and 19 industries, many of which will benefit from an expected uptick in IT spending this year.
Arch Capital Group
- Arch Capital Group (ACGL (opens in new tab), $79) is a Bermuda-based insurer. Catastrophic earthquakes, hurricanes and wildfires made 2017 a costly year for the company, but earnings should rebound in 2018. CFRA analyst Cathy Seifert recently upgraded her recommendation on Arch from "hold" to "buy." The shares trade at just 12 times her estimated earnings of $6.30 per share this year, up from $1.34 in 2017. Seifert likes Arch's "opportunistic" underwriting strategy, which allocates the most capital to areas of the market where premium rates are most attractive.
Credit Suisse analysts think they've found an Amazon-proof retailer in Five Below (FIVE (opens in new tab), $75), which sells trendy merchandise favored by millennials and Generation Z at $5 or less. The discount retailer is a recent top pick for the brokerage. With more than 630 stores in 32 states, Five Below is in the early innings of a national rollout. Credit Suisse forecasts 20% growth in sales and revenue through 2020, with earnings growth buoyed in part by a share-repurchase plan.
Royal Dutch Shell
Oil prices are on a tear, but Marvin Kline, managing director of Logan Capital Management, looks for companies that can operate profitably and cover their dividend even if oil prices fall back. Royal Dutch Shell (RDS.A (opens in new tab), $73), the Netherlands-based oil-and-natural-gas behemoth, is "gushing cash," says Kline. Although the company for a time gave shareholders the option of receiving dividends in Royal Dutch shares, it restored all-cash payouts in 2017. It has paid dividends since World War II. The shares yield 5.2%.
KIPLINGER's ECONOMIC OUTLOOK: Energy Prices
TrustCo Bank Corp NY
- TrustCo Bank Corp NY (TRST (opens in new tab), $9) opened for business in 1902 as the Schenectady Trust Co., in the midst of America's industrial revolution. It now operates 145 branches in five states, including New York and Florida. The company's primary mortgage-lending business should prosper in a strong economy, and TrustCo is well positioned to take advantage of rising interest rates, says Jay Kaplan, a portfolio manager at Royce Funds who specializes in bargain-priced small-company shares. The shares yield 3%.
Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
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