If you are looking for the best investments for 2011, you should look at the stock market. There are a lot of bargains out there still. Investors have been antsy about getting back in to the equities market after the 2008 recession. Even as the economy is recovering, there are still trepidations about going back into stocks. Here is how to invest in stocks for 2011.
That means there are investment opportunities for the savvy investor. Here are some of those potential opportunities. Remember that investing is risky and you should get investment advice from a licensed professional before risking any money.
Stocks To Buy
I like just about any major stock in the Pharmaceutical industry except Merk & Co (MRK). It looks like the entire industry is undervalued, again, except for Merk. Their multiples are extremely high in the 120’s compared to other stocks in this industry but I still haven’t figured out why.
I like Johnson & Johnson (JNJ) as well as Bristol-Myers Squibb Co. Their P/E ratio is in the 12 range. The best investments will have a low P/E relative to the industry.
I especially like Johnson & Johnson because they aren’t a popular stock right now due to their major recalls last year. But I believe this is still a strong company, and being a bit of a contrarian, I think this stock is undervalued.
Here are some of the individual stocks I like for 2011. I like Wal-Mart (WMT). Yes, they took huge hits during the recession as dollar stores took their market share, but I believe they will recover in force. I like them because I believe the current concerns about Wal-Mart causing their stock to be undervalued.
Index Funds
The US economy is in recovery mode. That generally means that the stock market has hit it’s floor when it comes to prices. I really believe the the economy is recovering ahead of the US stock market, which means there are some good bargains for value investors.
In fact, I believe that there are so many bargains that I think a play on the entire stock market would actually be a good idea. That generally means investing in an index fund.
As I am doing my stock research, I am not only seeing company after company that may potentially be undervalued, but I’m also seeing entire industries that are undervalued.
You can start with an S&P 500 index fund. Many investment firms offer this as a fund, including the iShares S&P 500 Fund by BlackRock (IVV) and the Vanguard 500 index fund. These funds track the companies in the S&P 500, where you can invest in the best of the stock market.
You can also go all out and invest in the entire stock market as a whole. The Vanguard Total Stock Market fund is one that does just that. This fund invests in 3,000 companies in the US stock market to mimic returns for the entire market.
One sector index fund I like is the natural gas ETF equities fund. It’s actually pretty sensitive to the price of the actual commodity. Regardless, I think this is a great industry to be in and a good long term investment.
Stock Picking
If you are into picking individual stocks, I would go for large cap companies that are in the emerging markets. Developing economies are set to grow at a faster pace than the developed world. The best investments for the average Main Street investor who does not know how to invest in oversees stocks, investing in large companies trading on the US stock market with heavy interests in the developing world would be a good play.
Financial Analysis
I do my financial analysis using Sagework’s Profitcents Public. It translates financial statements into plain language. It also does a valuation of stocks and industries using the discounted cash flow method.
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