Where will the financial markets take the small investor this year? With worries of the “fiscal cliff” abated, things have already begun looking up on Wall Street. Of course, American investors are not out of the woods yet. There is the sagging unemployment rate, the still-to-be reconciled debt ceiling, and the omnipresent national debt (and corresponding budget cuts) to deal with.
Yet, any successful financial planning for the small investor needs to include more participation in the Stock Market again in 2013. Much like the previous year, bonds are not the answer to keeping up with inflation (and those ever-depressed wages). To truly make money in 2013, Americans need to keep an eye out for good investment opportunities in stocks.
If last year is any indication of the fruitfulness of using stock to prop up a portfolio, one need look only to the increase in the overall S&P. On average, stocks in the S&P increased some 12 percent, according to Andrew Bary of “Barron’s,” and 2013 promises to be even better.
Must-watch stocks for the coming year
Just what are the must-watch stocks for the coming year? Experts suggest that among some of the stocks worth keeping an eye on in 2013 are the following: Apple (ticker: AAPL), Amazon (AMZN), Google (GOOG), JPMorgan Chase (JPM), and Starbucks (SBUX).
Perhaps just as important as which stocks to watch are which to stay away from. If 2012 was any indication of things to come, 2013 will not be a good year for raw materials (such as copper or aluminum). Despite the inclusion of Apple and Google on the list, this is also probably not the year to go heavy into tech stocks. Although there are some areas in which technology is strong (for example, the cloud market), there are many more that find themselves on shaky ground (such as disk drives and microchips).
For those hoping to ride the wave of ever-increasing profits, it is important to consider the fundamentals first. Back to basics needs to be the siren song of the small investor.
Although Apple has come off its September 2012 high of $700 plus to around $525 in January 2013, that doesn’t mean it’s a losing stock. Instead wise investors are suggesting that this stock price pull-back may be the perfect time to add Apple to one’s portfolio. Says Rob Cihra of Evercore Partners, “We think Apple continues to represent one of the best investments in technology.” Among the reasons Cihra cites are its leadership in developing technology. Not only is Apple creating the products consumers want, they are leading the charge, while other technology companies lay in wait.
This is another company with a strong brand name. The years of development and the widening of their product range has made Amazon a wildly successful online retailer and an indispensable stock to own. One need only look at their burgeoning Kindle market (in which they foresaw the media sales that would follow) to see the key to their success.
While Yahoo (YHOO) may be the “dark horse” to watch for the coming year, Google is the best of breed when it comes to search engines. According to Paul Larson of Morningstar, “Not only do they have the best search algorithm, but they also benefit from a network effect with their ad platform. The more users on the platform, consumer and business, the better the platform becomes.”
JPMorgan Chase (JPM)
While investors may have a natural inclination to stay away from JPMorgan Chase in 2013 after its “London Whale” fiasco in 2012, that would be the wrong move. This bank is best in show for many reasons, “including trading and investment banking, asset management, private and consumer banking, credit cards, and processing services,” according to “Barron’s.” It should also benefit in the coming year from the weakness in European banks.
Although many have said this Seattle-based wunderkind’s best days are behind it, Starbucks has proven them wrong every time. Its recent purchase of Teavana is just one example of its forward-thinking growth. It also plans to expand into the juice business, and recently offered its own home-use coffee maker. It’s certain that 2013 will see more innovation and consumer desire for Starbucks, which is a good reason to hop on the SBUX stock bandwagon.
Of course, this is but a small sampling of the type of stock ownership that can make the small investor money over the course of 2013. This may be a risky year for speculative stock purchases, but these solid five best-of-breed stocks have a better than average chance of bringing their owners real profits in the coming year.