2009 US Stock Market Outlook: Cautious Optimism

Happy Holidays! I’ve been receiving an avalanche of emails from readers wondering if there are any opportunities or anything good that will result from the current crisis on Wall Street.

Call me a perma-bull, but I am cautiously optimistic on the stock market for 2009.

For starters, my wife is Chinese, so every December she tells me the prediction for the upcoming Chinese New Year. (Even if it’s superstitious, it helps my standing with the in-laws.)

So here we go…

2009 is the year of the ox, also known as the bull. So there’s a good sign!

According to the Year of the Ox forecast for 2009:

“The global economy will begin to recover from the financial meltdown. 2009 is a year of opportunities with the emergence of many new global empires following the collapse of big names like Lehman Brothers. Under the new administration of Barack Obama (self element earth person), the Wall Street stock market will recover faster than expected as Barack Obama enters his peak luck cycle. We will see world major economies put aside their differences to overcome the financial crisis. The full impact of the unison can be seen in the second half of 2009.

The property market of United States will continue to recover as 2009 is the year of earth. Employment statistics will improve as United States’ job market bounce back from the financial meltdown. This will in turn lead to an improvement of the world’s stock market. However, many major corporations will also undergo restructuring or even a change in leadership.”

Okay, so it’s not exactly market analysis worthy of Jim Rogers or Warren Buffett. But after the year we’ve had, I’ll take any glimmer of hope.

With regard to the financial markets, I still believe we will see continued volatility as hedge funds are forced to sell positions to meet redemptions.

However, I consider this to be a buying opportunity to the patient investor.

In fact, I have a “watch list” of about 20 stocks that I am itching to buy once I see the selling pressure decline. Their valuations have been obliterated so badly by the indiscriminate selling, that I think these are guaranteed triples in the next 2 to three years.

For example, GPS device maker Garmin (GRMN) is currently trading at a p/e multiple of 4.75. Its current eps is $4.09!

More importantly, it has ZERO debt!

At the start of ‘08, Garmin’s stock was trading over $100 a share. Today? It trades for less than $20.

I’m buying.

I have also initiated another new position: Argentex Mining (AGXM.OB). This has been a favorite of Greg McCoach. But like all junior mining stocks, it’s been crushed by the systemic de-leveraging by the global economy.

However, for Argentex, I think we’ve witnessed a selling climax. A major fund has been selling the stock the last 2 weeks driving the price all the way down to $0.07.

Why did I buy Argentex?

The junior mining sector is the most despised sector in the world right now. Okay, maybe housing and financials are hated more.

But in the case of the juniors, the quality companies that have real assets are trading at a 99% discount to their potential resource. When the commodity sector recovers (and it could take a couple years), you could be looking at a 100-to-1 return on your investment. Again though, you have to be patient.

In addition to Garmin and Argentex, I still think healthcare is the best-positioned sector for 2009 and beyond.

Right now, cash-rich healthcare companies are on a buying binge, acquiring and striking deals with smaller players.

So even if stock investors are’nt buying stock, healthcare companies are. This speaks volumes. There’s a lot of value out there… and big big pharma companies like Johnson & Johnson are like kids in a candy store in today’s depressed market.

Here’s a small sampling of what has occurred in just the past 2 weeks…

• GlaxoSmithKline and Archemix Corp ink $200 million development deal. -December 23
• Wyeth has acquired the U.K.-based biotech company Thiakis Limited for an upfront payment of $30 million. An additional $120 is on the table for future developmentmilestones. -Dec. 18
• GlaxoSmithKline (GSK) has signed a drug development deal with Dynavax Technologies Corp. (DVAX) that could be worth as much as $800 million. -Dec 18

I continue to own the S&P Biotech ETF (XBI). But I think the best way to position yourself for a major score is to own a tiny biotech company called Anavex (AVXL.OB).

I have talked about Anavex many times before, but recently the company has garnered national attention.

Anavex’s Alzheimer’s compound ANAVEX 1-41 was featured in the Journal of Neuropsychopharmacology. This is huge… and validates Anavex’s unique approach to addressing Alzheimer’s, a disease that is expected to spike in the coming years with the baby boomer generation.

You can read more about it here.

Anavex currently trades for $2.20 a share. I’m a buyer at these levels.

I also like Pfizer (PFE). The company is cash rich with no debt… and pays an 8% dividend. I just collected my first dividend check from Pfizer earlier this month. In this market, dividends are an important and effective way to supplement your income.

One final note. Gold spiked on Friday, moving up $23 an ounce to close at $871. We’ve been big bulls on gold for years. But we’re fanatical bulls now… as the US government prints dollars like mad to save every failing business on the planet.

With all these dollars being pumped into the economy, inflation will eventually rear its head, driving the value of the dollar into the dirt.

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Comment by online drug ratings

2008-12-30 16:38:23

Phizer has always been a pretty safe bet in my eyes.

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Comment by Ray Miles

2009-03-03 01:57:50

should i even put money in the stock market, or should i wait until we are no longer in a money crunch???

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