Sunday, July 22, 2012

Time to Raise Cash (at Least)

In hindsight, it is obvious why particular sectors and individual stocks have risen or declined over the last year.  Amid sluggish economic activity in the U.S., the debt crisis in Europe, and slowing Chinese growth, defensive sectors such as consumer staples and drugs have produced both excellent relative and absolute returns.  Conversely, investment banking, materials and natural gas stocks have been among major losers, along with companies with particular problems, such as Dell, Hewlett-Packard, and Walgreen.

But perhaps it is time at least to take some profits, if not reinvest in some of the laggards.  The performance differential in just the last year in a number of cases is fifty to seventy percentage points.

Note the large gains and losses among prominent companies listed in the following table:


Amgen +43%, Apple +66%, Comcast +34%, CVS +31%, Home Depot +41%, Mastercard +42%, News Corp. +42%, Starbucks +35%, US Bancorp +33%, Verizon +24%, Visa +44%, Wal-Mart +36%, Disney +25%, Wells-Fargo +25%


Baker-Hughes -45%, Caterpillar -25%, Citigroup -28%, Devon Energy -28%, Ford -29%, Freeport-McMoran -40%, Goldman Sachs -24%, Halliburton -44%, Hewlett-Packard -46%, Morgan Stanley -32%, Walgreen -26%

The companies among the gainers are clearly great companies, and the share-price gains over the past year reflect that.  I'd raise some cash from that list.  I haven't bought shares of any companies among the decliners list, but could they really be that bad?

Steve Lehman

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