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Top-seeded stocks for a mad market
Shares of strong companies in beaten down sectors that have gained ground in spite of recession fears might be worth a look.
NEW YORK (CNNMoney.com) -- It has not been an easy year for investors.
Particularly hard hit have been stocks in key sectors, such as financials, retail, healthcare and tech.
But surprisingly, there are a handful of companies in beaten-down sectors that have bucked the bearish trend.
For investors looking for some stability, these stocks might be worth exploring. If they have held up during one of the roughest market stretches in recent memory, they must be doing something right.
So in the spirit of the NCAA Men's Basketball Tournament, which begins today, here's my Final Four - brand-name stocks in the benchmark S&P 500 that probably won't bust your financial bracket, as well as four sleepers worth keeping an eye on.
Hey, momentum is as big a part of Investing as it is in college hoops, after all.
Big Blue is a top seed
IBM (IBM, Fortune 500) is one of the top-performing techs this year. Unlike last year's market darlings in the sector, such as Apple, Research in Motion and Google, Big Blue has not been hurt by fears of slowing consumer spending.
Shares of IBM have gained 8% this year and are up nearly 25% in the past 12 months. The company has benefited from the weak dollar since it has massive exposure overseas. And the weakening economy in the United States does not seem to be impacting IBM's outlook for corporate spending on its software, hardware and consulting services - the company raised its earnings guidance for 2008 last month.
If it walks like a duck...
Health and life insurer Aflac (AFL, Fortune 500) has also held up nicely even as many other insurers have taken their lumps due to concerns about credit quality in their portfolios. Aflac is widely regarded by many insurance analysts as having the least exposure to high-risk assets. And that shows in how the company has performed as of late: the stock is up 2% this year and 37% over the past 12 months.
Analysts expect Aflac, most well-known for its ubiquitous duck corporate sponsor, to report sales growth of more than 11% in 2008 and earnings growth of nearly 20%. The company also boosted its dividend earlier this year and increased its share buyback plan. Both are signs that the company has ample cash to reward shareholders.
The revolution will be televised in HD
While the big cable companies and telecoms engage in a brutal price war over so-called "triple play" packages of phone, Internet access and video offerings, DirecTV (DTV, Fortune 500) has been able to escape the carnage by simply sticking to video.
The satellite-television provider has taken the lead in offering high-definition (HD) channels to subscribers and the company has been able to use that to its advantage in its marketing against the likes of Comcast, Verizon and others. DirecTV is expected to post sales growth of 11% in 2008 and earnings growth of 23%. Shares of DirecTV are up 5% so far this year.
Profits to the Maxx
Retail stocks have been major dogs this year for obvious reasons. If we're heading into a recession, or already in one, consumers are likely to tighten their purse strings. But an economic slowdown might help some retailers that specialize in bargain goods.
TJX, the parent company of discount chains T.J. Maxx and Marshall's, has enjoyed decent growth this far. Same-store sales, sales at stores open at least a year, rose 3% in February (many retailers reported sales declines that month). And analysts are confident that TJX (TJX, Fortune 500) can continue to hold up well even if consumers grow more cautious. Wall Street expects TJX's total sales to increase 8% this year and that profits will rise 17%. The stock is up 12.5% so far this year.
Cinderella stocks
IBM, Aflac, DirecTV and TJX are four companies you've probably heard of. But here are four more that are less well-known but also look appealing.
Gilead Sciences (GILD), a biotech that has developed avian flu vaccine Tamiflu with Roche AG and also has developed treatments for HIV and hepatitis B, is expected to report earnings growth of 13% this year. The stock has gained 3%.
Medical equipment company St. Jude (STJ) (it makes defibrillators and other cardiovascular devices) has gained 4% this year and analysts expect profits to rise 15%.
Yet another healthcare stock that looks intriguing is Watson Pharmaceuticals (WPI), a maker of generic drugs, i.e. cheaper versions of brand-name medications, that is expected to report an earnings increase of more than 40% this year.
Finally, there's even a bank (yes, you read that right) that looks like a safe bet. Regional bank Hudson City Bancorp (HCBK), based in Paramus, N.J., has soared 18% this year and is up 30% in the past 12 months.
We profiled Hudson City last year and dubbed it the anti-Countrywide because the bank has extremely strict credit standards for mortgages and other loans. So it's not a surprise to see that this well-managed, conservative bank has thrived since it avoided the subprime mess. Analysts expect earnings to surge more than 40% this year.
So there you have it. An Elite Eight of stocks for an unpredictable market. (And in case you were interested, my Final Four basketball picks are Tennessee, Kansas, Texas and UCLA - with the Bruins beating the Jayhawks to win it all and make John Wooden proud. Let the Madness begin!
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