Are Long Term PowerRatings indicating a weak economy? The top stocks increasingly say "yes."
This weekend for the PowerRatings Weekly Outlook, I asked if the fact that so many of the stocks with the highest Long Term PowerRatings were in so-called "recession stock" groups like drug manufacturers, utilities and personal products suggested that the economy was headed for rough times in 2008.
It is hard to say whether or not the economy will strengthen in the second half of 2008. But the message from our Long Term PowerRatings continues to speak fairly clearly: the smart money bet is on a slower, if not recessionary, economy. And that smart money is also likely looking to accumulate right, recession-beating stocks whenever they are on sale.
The three stocks in today's report are not likely to make headlines any time soon. In fact, they are more likely the kind of stocks that you own by accident or inheritance than the kind of stocks that make the cover of Barron's or BusinessWeek.
But make not mistake. Out of all the stocks on the market, these three are among the few to earn a Long Term PowerRating of 10. And our research, looking at thousands and thousands of stock trades from 1995 to 2007, strongly indicates that stocks with Long Term PowerRatings of 10 will be among the most reliable and best performing stocks on average than any position trader or longer term active investor can own.
Consider this. The average stock, based on our research, tended to be higher one year later less than 68% of the time. By comparison, the 10-rated stock was higher one year later more than 80% of the time. That is a huge edge in reliability in favor of the stock with the Long Term PowerRating of 10.
Not only are our highest-rated stocks in our Long Term PowerRatings system more reliable than the average stock. But also our highest-rated stocks have outperformed the average stock by a sizable margin. We found that while the average stock tended to gain between 12-13% after one year between 1995 and 2007, stocks with Long Term PowerRatings of 10 actually averaged more than 20% after one year and over the same time period.
Not all 10-rated stocks are as obscure as these three. Stocks from many of those industry groups mentioned above--stocks like Coca-Cola (KO | news | PowerRating | PR Charts ) back in January of this year or Sara Lee (SLE | news | PowerRating | PR Charts ) back in February--have seen their Long Term PowerRatings reach our highest level in recent months. And in the wake of some of those more well-known, top-10 stocks, this next group has been somewhat less familiar.
But in a market that has been as difficult for longer term traders and active investors as this one has, those "10" Long Term PowerRatings are a sight for sore eyes.
NAVTEQ (NVT | news | PowerRating | PR Charts )
Energy Transfer Equity LP (ETE | news | PowerRating | PR Charts )
Centerpoint Energy (CNP | news | PowerRating | PR Charts )
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David Penn is Senior Editor at PowerRatings.net.
