Stock of the Week
NYSE Symbol: Hes
Industry: Oil & Gas
Price as of 3/23: $59.86
The quarter will end next week and what a start to 2012. A 4% rally for the S&P 500 in January, a 4% rally in S&P 500 for February, and a 2% rally in S&P 500 for March so far has made it pretty easy for investors. The Dow has underperformed trading up only 6% for the year, but only one down day of more than 100 points has eased investors' fears. The Nasdaq is the standout up 15% for the year. The mutual fund industry is performing well with many out performing the indexes. A number of small cap funds are up in the mid teens already this year while the Russell 2000 is up 10%. Sectors outperforming this year were the dogs last year. The financials are up 20% this year after getting pummeled last year. Bank of America is up a mere 70% for the year. The blue chip, JP Morgan Chase is up 32% not including their dividend. Besides the financials, the technology and consumer discretionary sectors are trading up roughly 15% for the year. In the Apple space, I mean tech space, Apple is leading the charge up a mere 50%. The old blue chip techs like IBM, Intel, and Microsoft have all performed well trading at new highs this year. The consumer discretionary or retailers have also been on fire this year even with oil above $100 a barrel. The only sector trading lower this year was the best performing sector last year, utilities.
So with the market up so much to start the year with very few down days, what are investors to do? Good question. The obvious answer is take some profits and wait for a better opportunity. April has been a very good month the last several years. This year may be different. The global economies are slowing particularly China. That's actually a good thing, but whether the country can manage a soft landing and not a hard landing is the big question. Oil being stubbornly high is also not good for global growth. We'll find out the answers to these questions next month when earnings and corporate guidance starts coming in.
In the mean time, defense may be the best option. If we see weakness in the next several months, the utilities will perk up. The energy space has underperformed and may hold up in a correction. Schlumberger and the rest of the oil drillers have been under pressure, but this blue chip should hold up better than the rest. The company also recently hiked their dividend. Hess is another interesting stock to watch. Hess is trading for 9 times earnings, 7 times next year's earnings, and 0.5 times sales, and 1.08 times book value of $55 a share. Coincidently, the CEO bought $5 million worth of stock at $55 back in January. That purchase should provide good support level for investors going forward. The stock also provides a modest dividend. Things to watch.