The market has always been unpredictable – but this is ridiculous.
Aside from the long-term factors that could rock the market (ie. the European debt crisis, Middle East mayhem, the United States going broke), is seems that we are always awaiting news that can drive the market strongly up or down – tomorrow. The debt standoff is just the latest example, but there will be more hot spots to come.
The good news is that this uncertainty yields opportunity. Whenever there is panic in different pockets of the market, good companies get oversold. Bargains had been hard to find earlier this year as the market continued to soar, but things are changing.
One bargain stock is a casualty from Europe. Telefonica SA (TEF) is the world's third largest telecom company by number of customers and the largest in Spain and Latin America overall. It is also one of the largest wireless operators in Europe.
The European debt crisis as well as the miserable state of the Spanish economy (with 20 percent unemployment) has weighed heavily on the stock price recently. The stock plunged about 18 percent to $22.30 just since May when it was over $27.
This is an example of the market throwing out the baby with the bathwater. While the Spanish economy is indeed pathetic, Telefonica is geographically diverse and only generates about 28 percent of revenues from Spain. It is also the largest telecom operator in fast growing Latin America. By combining steady cash flows from Europe and growth in Latin America, Telefonica one of the only telecom players that offers both a high dividend and growth potential.
The recent selloff in the stock has made the dividend amazing as it currently yields a whopping 7.7 percent. The stock is also selling at a compelling valuation. TEF trades at less than seven times earnings, compared to its five year average is 11.5 and the current S&P 500 ratio of 15.2.
Telefonica is a good buy now by there are also stocks worth targeting in the event the market goes south.
Johnson and Johnson (JNJ) is the world's largest and most diverse health care company. It engages in the research and development, manufacture and sale of healthcare products through more than 250 operating companies located in some 60 countries.
JNJ is one of the best stocks to own in any market. Here are some good reasons why.
• 26 consecutive years of earnings increases;
• 47 consecutive years of dividend increases;
• 70 percent of sales are from product with a No. 1 or No. 2 global market share;
• "AAA" rated by both Moody's and Standard and Poor's;
• Approximately 25 percent of products sold in 2009 were introduced in the last five years.
In addition to those things, a huge worldwide trend should play right into the company's wheelhouse. People are living longer. Older people consume more healthcare than any other segment of the population by far and the fastest-growing segment of the world's population is 65 and older. In addition, as developing nations become wealthier, their large populations will demand more and better healthcare.
JNJ also pays a solid 3.5 percent yield — not too shabby considering a ten year treasury is paying just 2.8 percent. The stock also provides diversification from the U.S. dollar as the company earns half of its revenues overseas.
There is really no bad time to buy JNJ. But, the best time would be during a panic sell-off in the market.
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