This story appears in the December 29, 2016 issue of Forbes. Subscribe
Tweet This
With 2017 dawning I still see a superstrong stock market ahead. A President Trump does nothing to change that.
Trump haters say otherwise. So did Obama haters in 2009. I am reminded of Sir John Templeton's famous statement that the four most dangerous words in investing are: It's different this time.
I also love that stocks have been blah-ish since May 2015. Blah is beautiful--in the S&P 500's history I find only eight similarly long trudges where stocks sidewinded. After those, the average 24-month return was 39%, with the lowest being -2.2% in 825 days ending in 1935 (not much downside) and the highest 75% over 429 days across 1953 and 1954 (huge upside). Six of the eight were up more than 20%. I'll take that anytime in 2017.
Averaging all bull markets, you'll see that the last third of their duration usually accounts for about half the total gain. I'll take that, too.
As I've previously said, I expect overall 2017 earnings growth of about 13%-plus, which will surprise most. It's simple math. With the energy earnings decline in the past no longer detracting, everything else is more robust than long-glazed-over eyes envision.
Reminder: Global diversification is vital to stock market success. In the past 20 years no country has been the top global performer more than two years in a row. So to kick off the Trump Administration right, here are five stocks from five countries I think are primed for a beautiful market in a beautiful year:
France's BNP Paribas (BNPQY, 30) has been doggy for years. I think it's turning now. Through years of ECB hell, it slogged sideways. Now the euro zone's biggest bank is beating forecasts, strongly capitalized, and thriving in an unpopular realm (Italian banking). Unpopularity is bullish. It sells at 60% of book value, nine times my 2017 earnings estimate with a 4.4% dividend yield.
A long-proven logic-defying truth: More electronics leads to more paper shipped. Convention sees UPS (UPS, 114), a great firm for sure, as the leading deliverer. But slightly bigger, faster-growing, a bit cheaper and also global is Germany's Deutsche Post (DPSTF, 31). In America you see it as DHL. I see it as underfollowed and getting more appreciated fast. Buy it at 60% of annual revenue, 16 times my 2017 earnings estimate and with a 3.1% dividend yield.
Quick: What's the biggest Muslim country, gets along great with America, spouts peaceful diversity, is natural resource rich and grows faster than India? Try Indonesia, which I predict gets a pass from any Trumpian targeting. Its second-largest bank and leading microlender is Bank Rakyat Indonesia (BKRKY, 16), which grows fast and is cheap at 12 times my 2017 earnings estimate with a 2.9% dividend yield.
My 2016 drug stocks haven't worked well, but hang tough. Before ObamaCare gasps its last they'll shine. Improving in that realm is British giant GlaxoSmithKline (GSK, 37), as its new respiratory drugs breathe life into a stock selling at 14 times my 2017 earnings estimate with a 5% dividend yield.
Yelp (YELP, 36) to me is a culturally weird product, but great as a stock with strong, manageable growth. It plays on self-obsession--sort of like selfies do--by letting people mouth off about local businesses they like and dislike. These days folks love mouthing off--and advertisers love the accompanying eyeballs. Don't expect earnings soon. Expect rising revenue almost breaking even. Still that's cheap at 3.4 times my 2017 revenue estimate.
-----
