|
With all the talk of recession, doom and gloom in global markets and a diabolical credit situation, one could be forgiven for thinking the world was about to end…
Despite the dramatic Australian media’s bearish headlines, quality companies continue to reveal impressive results and indices creep steadily higher, netting impressive gains for risk-savvy traders and investors.
Take today’s earnings result from Coca-Cola for example. The Atlanta-based soft-drink maker posted a full year profit well above analysts’ expectations. Its share price has risen a ‘refreshing’ 82% from the post-GFC market low of 2009. Both weekly and daily Elliott Wave analysis point to further gains ahead.
click to enlarge
Coca-Cola isn’t the only Dow heavyweight to be making significant ground. Other major Dow components have also seen significant gains and the Dow Jones Industrial Average itself has gained impressive 20% since 2011.
click to enlarge
Is there more pain ahead for global indices? Absolutely. Eurozone issues are not resolved and the Greek debt problems remain. But that’s not to say that markets, particularly the U.S., haven’t already factored-in a worse-case scenario. While many stocks remain at risk with highly leveraged debt and cyclical market exposure, other companies remain undeniable value, backed up by balance sheets that display a lean operating structure. Coca-Cola is one such company - well capitalised with a diverse market exposure and global branding.
Further underpinning the confident investor sentiment is the oversubscription of major IPOs by sophisticated investors. The launch of Facebook has been well-publicised and today we saw Casino operator Caesars also move to go public, valuing shares at $9 in what is just the latest in a string of IPOs in industries that continue to see demand despite the soft economy. Institutional activity is rampant and the retail side of the market may actually be missing out on the early stages of a major move in global equities.
This may not be the time for taking risks but well-funded, proven companies are offering undeniable value in a market that is, in my opinion, priced for a situation that is worse than today’s reality. There are plenty of excellent Australian companies on offer at prices that will likely one day be remembered as a historical low point for global equities.
Stay Ahead of The Game,
Lachlan McPherson
|