The stock market has enjoyed what is now eight weeks of gains and new highs in just about each of those weeks. Now investors have to be considering how to position their portfolios for year-end and for 2014. If analyst valuations still have merit as they have had in recent years, there may be some serious upside left in selective sectors going into 2014.
24/7 Wall St. has found big upside possibilities in three old economy stocks for investors looking to pick up bargains on the cheap for the next year. Some of these are turnarounds and some are merely value stocks. In fact, two of these are DJIA stocks and one used to be before its restructuring.
One theme that could be a huge win in 2014 is the companies that benefit from high levels of product exports to the developing world. If so, Caterpillar Inc. (NYSE: CAT) could be in a for a surprise gain. It is understandable that this would be an upside winning pick when you consider that it has been among the worst performing of the DJIA stocks in 2014. Caterpillar does have a 2.9% dividend yield to tide over the rough patch. This stock got a bump in the Thanksgiving week, and its 10% upside is now looking to be more like 7.5%, if the analyst community’s targets hold up. We would point out that some analysts still see more than 20% upside over the next year.
Chevron Corp. (NYSE: CVX) may trump Exxon Mobil in upside in 2014. This stock appears to offer the best value for the year ahead out of the integrated oil and gas giants, even if Warren Buffett did choose to buy deep into Exxon. Chevron’s stock has close to 10% in expected upside to the consensus analyst price target, and some expect upside of more than 15%. Chevron also comes with a high yield of about 3.3%, its dividend will almost certainly be raised yet again in 2014, and it trades at only about 10 times expected 2014 earnings.
General Motors Co. (NYSE: GM) appears to have the best position of the auto stocks for 2014. In fact, Barron’s just highlighted it as a turnaround leader to consider for 2014 as well. The government should soon be entirely out of the shares. GM shares have remained relatively subdued since its post-bankruptcy IPO. Does an earnings multiple of only eight times expected earnings in 2014 sound expensive? Analysts are predicting gains of more than 25% gains on average in GM’s share price over the next year, and GM will be buying back stock to bolster that effort.
So, what about the big picture? Goldman Sachs recently issued a call for the S&P 500 to rise up to 1,900 in 2014, although it also gave a warning that there could be a 10% market correction between now and then. Merrill Lynch said for its 2014 global investor and macro outlook that it sees calmer seas ahead in 2014 versus 2013 and 2012. We have also issued dividend hike calls for several key companies before year-end as well.
Stocks have enjoyed huge gains of well over 20% in both the DJIA and S&P 500 Index. It is hard to expect a repeat of that for 2014, but there are still opportunities for those seeking value and companies that are still on the mend.