Many amateur investors — including college students — have been watching the stock market plummet during the last five months with increasing dismay. For those of us looking to make quick profits (or even faster losses), however, late 2009 may be the year to buy a few shares of some well-known blue chip companies.
Before reading further, readers should know that most financial models for stock prices are no longer accurate predictors of future price trends. Furthermore, students should undertake any stock-trading strategies for 2009 with the knowledge that any broad-based recovery in equity markets will most likely not take place until 2010, at the earliest. Thus, any trading strategies should focus on buying and selling stocks within a matter of days or weeks. Classic “buy and hold” strategies are inappropriate for the current market.
After taking into account these adverse market conditions, the amateur analyst should then focus on a small basket of stocks to buy and sell during the next few months. The following are several company stocks that have exhibited very mild price swings during the last four months.
Intel Corporation (INTC): Intel Corporation is the world’s largest producer of semiconductors and microprocessors, the microchips that power the operations of personal computer systems. Intel controls nearly 80 percent of the market for microprocessors and had over $12 billion in cash and cash equivalents on hand at the end of 2008. Thus, there is little chance of the company suffering from the credit crunch. With the company’s steady source of revenue and little debt, Intel’s stock price should stay in a narrow range during the next few months. Investors should not see the value of their investment drop precipitously or increase very quickly — a fair outcome in this market environment.
Proctor & Gamble (PG): The maker of everything from Ivory Soap to Pringles chips has very stable sources of revenue. The company’s stock price continues to gradually fall, but investors have confidence in the company’s leadership. Given its blue chip status, P&G stock should be among the first to rebound into recovery. Also, the company has a very large dividend, and each investor will earn 40 cents per share invested every three months. Given the company’s long-term stability and growth, the downsides to holding Proctor & Gamble’s stock are few.
JPMorgan Chase (JPM): JPMorgan Chase was one of the few U.S. banks to improve its market position as a result of the financial crisis. At the end of 2008, JPMorgan emerged as the number one Mergers & Acquisitions adviser in Europe for the first time. At home, the company acquired rival Bear Stearns and took over the bank deposits of Washington Mutual. In addition, it received funds from the U.S. government to help cover potential loan losses. Although many analysts forecast a difficult year for banks in 2009, JPMorgan may be among the best situated to weather the storm. Buying a few shares of this company might make a worthy investment.
Kroger Co. (KR): At a time when many food and retail companies are struggling, Kroger is working to perfect its customer loyalty program. Charlottesville’s local grocery store is in fact well positioned to expand beyond its Southern niche as rivals falter in light of slowing sales and too much debt. For those of us looking to make an investment in the local economy and in a well-run grocery store chain, Kroger seems like a perfect fit.
Students who buy and sell stocks should have a broad understanding of both economic trends and the financial make-up of the companies in which they invest. For those of us willing to take risks in 2009 or who trade stocks as a hobby, however, buying shares in companies with relatively stable cash flows such as Intel, Proctor and Gamble, JPMorgan Chase and Kroger may turn out to be a worthy investment.
Please note: the author does not own any stock in any of the companies mentioned in this article. The Cavalier Daily does not take responsibility for readers’ investment gains or losses. Please invest wisely.
Andrew’s column runs biweekly Thursdays. He can be reached at a.golden@cavalierdaily.com.
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