Place Your Bets on Consumer Staples & Tech Stocks: Yamada

Jeff Macke

In a year characterized by rotation and flavor of the month stocks gone bad (Priceline (PCLN), anyone?) catching the right sectors has been the key to keeping up with, let alone beating the broader stock market.

In the attached clip Louise Yamada, founder of Louise Yamada Technical Research Advisors, runs through the best looking groups of the market now and her favorite names within the sectors.

Technology (QQQ)

Yamada's top group has and continues to be technology. Long ago left for dead, the tech names have finally come to life this year. Yamada says the group has "come out of an eight-year base" -- the penalty box, if you will, for the abuse the tech stocks dished out to investors over the last decade.

"The concept is the bigger the drop, the longer the need for repair," she says. Think of it as learning to love again after a breakup. The more devastating the separation, the more time is required to reopen your heart. At long last it's time to play the tech field.

Consumer Staples (XLP)

Call them offensive, defensive or yield plays, consumer staple stocks have been remarkably strong for the bulk of 2012. Yamada says the relative strength of the sector has come out of a 16-year base even as the group pushes all-time highs.

Whether staples or discretionary (XLY), the consumer names share the trait for being the most popular shorts in the market. Bearish plays have paid off selectively but those placing blanket bets against the consumer have had a rough go of it.

Other groups are okay, but Yamada stresses the need to be selective. Among her favorites in the market as a whole are Verizon (VZ) in the telecom space (IYZ), Apple (AAPL) and IBM in tech, and a shopping cart full of staples like Coke (KO), Pepsi (PEP), Kimberly Clark (KMB) and Proctor & Gamble (PG).

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