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Oppenheimer Holdings Inc. Message Board

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  • So how was the article from 1994 shared 3 months ago relevant today? If you took the time to read the entire article..(it was actually titled: “STOCKS ARE STILL YOUR BEST BUY Yes, they look expensive -- but a strengthening economy offers plenty of opportunity. A look at the business cycle will help you pick the right sectors.”)

    So the question in this article wasn’t whether the stock market will perform well or not but that if you pick the right industries to invest in, then stocks are still your best buy.

    As the article reads: “The road to riches requires looking at the parts of the stock market that are not aging and worn out but merely primed to take off as the economy's engines roar on. BUYING STOCKS that perform best in an economic upswing will involve a few decisions: Do you want a stock that has already performed well, or do you want to go with stocks just starting to turn?”

    So how relevant were those industry picks in 1994 to their performance in 2014? Let’s take a closer look at those industries’ YTD performance. With only one industry in the red (steel) the rest of the picks were among the highest performing so far in 2014. On aggregate if one had picked these sectors he/she would have outperformed the S&P 500 by many % points even as the market as a whole is pretty much flat:

    Aluminum +20%
    Gold +12%
    Airlines +10%
    Silver +9%
    Trucking +6%
    Railroads +2%
    Chemicals +2%

    http://money.cnn.com/magazines/fortune/fortune_archive/1994/03/21/79081/

  • This article was published on March 21st, 1994!!! Yes, almost 20 years ago!!! I selected the most relevant points....

    (FORTUNE Magazine) – IS IT TIME to turn away from stocks? No, not yet, though your nervousness is understandable. Τhe Dow Jones industrial average seems dangerously high. After 40 months without a 5% to 10% correction, vs. an average bullish run of 27 months, the market is indeed long in the tooth. But the power of investor cash and strong earnings cannot be ignored. Despite this rising market's advanced age, its total return to investors is still subpar. More money can be made. The road to riches requires looking at the parts of the stock market that are not aging and worn out but merely primed to take off as the economy's engines roar on. Rising interest rates means a new chapter for the market. For years declining rates boosted stocks, making them more attractive than fixed-income investments. But the Federal Reserve reversed gears. Investors initially took the news badly..But those who sold may have acted too hastily.....will lower the attractiveness of stocks, represented by the P/E multiple on the market. Stocks in Standard & Poor's 500-stock index recently traded at 23 times trailing earnings. The average historical P/E multiple for stocks is 14. If earnings don't come through fast enough, prices will have to fall to make stocks look more reasonable. But while rising interest rates may eventually slay the bull, that's unlikely to happen soon. One reason is that near-term advances in earnings could pull down those lofty P/Es. When compared with expected earnings the market looks more reasonable, trading at a P/E multiple of 15. Companies have been reporting strong gains through cost cutting and modest price increases in sectors like autos. An economic turnaround in Europe would spell more good news...

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