{"id":38728,"date":"2013-06-04T02:36:18","date_gmt":"2013-06-04T06:36:18","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38728"},"modified":"2013-06-04T02:36:18","modified_gmt":"2013-06-04T06:36:18","slug":"big-investors-still-buying-big-caps-will-they-be-right","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/06\/04\/big-investors-still-buying-big-caps-will-they-be-right\/","title":{"rendered":"Big Investors Still Buying Big-Caps; Will They Be Right?"},"content":{"rendered":"

\"Big<\/a>When it comes to the equity market<\/a>, the institutional mindset is useful; it\u2019s equally as important as changes in Federal Reserve policy.<\/p>\n

While examining views and portfolios of many large, buy-side institutions, I\u2019ve been reading what could only be described as unscientific cautious optimism for the U.S. economy.<\/p>\n

There is an expectation to further accumulate the equity market\u2019s existing winners based on earnings growth and valuations. The buy-side is paid to play, but I read many views with these intentions.<\/p>\n

This is including corporations<\/a> like Wal-Mart Stores, Inc. (NYSE\/WMT), Johnson & Johnson (NYSE\/JNJ), PepsiCo, Inc. (NYSE\/PEP), The Home Depot, Inc. (NYSE\/HD), International Business Machines Corporation (NYSE\/IBM), and even Berkshire Hathaway, Inc. (NYSE\/BRK-A).<\/p>\n

Sticking with the equity market\u2019s existing winners does make sense for institutional buyers for a number of reasons: liquidity, earnings reliability, growing dividends<\/a>, very strong balance sheets, and window dressing. Big investors don\u2019t want to look like they\u2019ve missed the equity market\u2019s top stocks.<\/p>\n

Everybody knows what can go wrong, but what\u2019s most important for investors is how you structure your portfolio to deal with the investment risk.<\/p>\n

Because of the equity market\u2019s stunning performance since the beginning of the year, I view investment risk as being way up. I am very reticent about buying stocks right now.<\/p>\n

But what is most important is what corporations are saying about their businesses and how the institutional mindset interprets it.<\/p>\n

Last week, Costco Wholesale Corporation (NASDAQ\/COST) reported another solid quarter of growth in sales and earnings. The company said its fiscal third quarter of 2013 (ended May 12, 2013) produced sales growth of eight percent, reaching $23.6 billion.<\/p>\n

Comparable store sales (which black out gasoline and currency changes due to volatility) grew a solid seven percent. (See \u201cRetail Stocks Find Big Success in the Great Outdoors<\/a>.\u201d)<\/p>\n

Earnings rose 18% to $459 million, or $1.04 per diluted share. Membership fees (which are highly profitable) jumped to $531 million from $475 million comparatively.<\/p>\n

All macroeconomic factors matter, but it\u2019s still the value attributed to a corporation\u2019s business conditions by institutions that drives equity market prices.<\/p>\n

Costco\u2019s earnings results were great. As a low-margin, mature corporation, membership fees are an important contributor to Costco\u2019s earnings.<\/p>\n

Like so many other corporations, the company\u2019s cash and short-term investments grew nicely from $5.98 billion in the comparable quarter to $6.51 billion, making it likely that the corporation will offer up another dividend increase this year. April\u2019s sales were up seven percent to $7.98 billion, compared to the same period last year.<\/p>\n

This equity market will still reward the performance of growing corporations, and Costco\u2019s latest numbers were certainly impressive.<\/p>\n

Article by profitconfidential.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

When it comes to the equity market, the institutional mindset is useful; it\u2019s equally as important as changes in Federal Reserve policy. While examining views and portfolios of many large, buy-side institutions, I\u2019ve been reading what could only be described as unscientific cautious optimism for the U.S. economy. There is an expectation to further accumulate … <\/p>\n

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