There is a role for resource stocks as part of a portfolio. Oil and gas seem to be a much more burgeoning sector, both operationally and in capital markets. A lot of junior energy producers, particularly those stocks associated with Bakken oil, have seen their earnings catch up with share prices. It’s a positive development and many of these positions can do well this year.
The proof is always in the numbers and so far this earnings season, they’ve been a little soft. Within the context of a secular bull market, the economy can experience a recession and stocks can correct significantly.
I think 2013 was a breakout year from the stock market’s previous long-term trend, which was a long recovery period after the technology bubble burst.
In terms of investment themes going forward, I think dividend income and are key as a strategy for those not requiring income. I still like energy and natural gas, in particular, as well as energy pipelines and storage related to the sector.
Industrials have good economies of scale to expand their earnings through a combination of higher volumes and prices, and blue chip balance sheets remain in excellent shape. (See “The Dividend-Paying Blue Chips That Also Deliver Significant Capital Gains.”)
Stocks look poised for a meaningful break after first-quarter earnings season, still within the context of a secular bull market and a new business cycle.
This article is brought to you courtesy of Mitchell Clark from Profit Confidential.