Since hindsight is 20/20, we can look back at predictions to check how reliable they have been. In his 1998 book Roaring 2000s, best-selling financial author Harry S. Dent Jr. wrote: “We should see a Dow of at least 21,500 and as high as 35,000, as the baby boomers and recent wave of immigrants move into their peak spending years around 2009.” Years ago the inimitable financial television host Jim Cramer wrote: “Housing bubble? What housing bubble? The signs are in place for a further run-up in real estate.”

Then a half-decade later—with the housing bubble rapidly deflating—Federal Reserve Chairman Ben Bernanke announced: “I don’t anticipate any serious problems . . . among the large internationally active banks that make up a very substantial part of our banking system.” Ouch! The point is not to pick on Dent, Cramer, and Bernanke, but rather to note that even smart, well-informed people doing their best can be off the mark since the future is far less predictable than we would like. To steer clear of potentially problematic advice, I have a few rules of thumb.

When looking for information about the road ahead, try to uncover the “how,” not the “what.” In other words, rather than latch on to a specific market call, figure out what data supports the thesis. For instance, how will U.S. stocks fare going forward? I don’t have one number. Rather, I think a two-pronged approach will help uncover the likely direction: What is the long-term return of the asset class, and what do recent returns suggest? Over the past 85 years, stocks have gained, on average, 10% annually. While stocks have gained 9% annually for the past quarter century, the last decade has produced poor performance: stocks have averaged only 3%. Many simply assume that the pain will continue, but reversion to the mean—which holds that after periods of extremity markets tend to go back toward trend—says the opposite. The market is more likely to see double-digit returns over the next decade or so rather than single-digit growth or especially a negative return.

(Continued on next page)

Another mental tool that can be very helpful is considering the potentially negative repercussions of being wrong.  For instance, houses cost less than they have in recent history—likely close to a bottom—and borrowing burdens are lower than they have  been for decades.  So, I would argue it is a good time to buy a house if you can afford a 20% payment, and expect to stay in  the home for five years or more.  Even if prices do keep falling, there is no damage so long as you stay in the house and keep current on mortgage payments.

Finally, the long term trumps the short term, especially when financial assets are volatile. If you have read a magazine or watched television in the last couple of years, you know gold prices have shot to the moon. Specifically, over the last three years, gold has increased at a remarkable 29% per year. Many are suggesting you should hop on the bullion express. But wait: Over the past 25 years, the annual return for gold is just 6%, well below the 9% return on stocks for the same timeframe. And the price of gold can just sit there for very long periods without moving upward (which, coincidentally, is what gold itself does—it just sits there). Indeed, from March 1987 to May 2005 the return on gold was 0%.

These are just examples; they’re not meant to serve as the three key recommendations for the year. Rather they are meant to show how low-key, rational, well-informed thinking can help guide you on your path to financial independence. Ultimately the time-tested truisms of finance should serve as starting points no matter what year it is: spend less than you make; maximize your tax-advantaged investments over the long term; stay away from fads; and lean moderately against conventional wisdom rather than following the crowd. If you’re able to do these simple things, chances are you’ll create wealth more dependably than those who just listen to number-tossing experts at the beginning of the year.

Morningstar analyst Daniel Holland says there may be a long-term investment opportunity in the confusion created by such contradictory information. For one, despite the signs of an economic slowdown in Europe and the U.S., many industrials are still reporting strong order growth. A second positive sign: stock buybacks and merger activity in the sector, which have both been on the upswing. “There are definitely indications that when it comes to the best run industrials, current worries are more headlines than fundamental concerns,” says Holland.

It’s clear that the best managed companies in the group took away some important lessons from the 2008 recession. Many have pared down debt and streamlined operations. Industrials also have a trump card to the effects of the European economic troubles by having some of their business in emerging markets where infrastructure spending is helping to boost revenues. “China and Brazil are particularly compelling stories right now,” says Holland. Finally, stock market volatility has brought down some share prices of the best stocks in the group to bargain levels.

“We look for companies with a wide moat, or in other words, barriers, to keep competitors from encroaching on their markets,” says Holland. “That can include expertise, service, or technology. The bottom line is that in a cyclical industry like this, moats make it possible to maintain operating margins and, in turn, profits.” Holland talked to black enterprise about three of his industrial picks.

—James A. Anderson

1 GENERAL ELECTRIC CO. (GE) It’s a company that ranks as one of our best ideas right now. The stock trades at about 11 times our current-year earnings estimate, which is quite cheap compared with other industrial companies and the historical price-to-earnings ratio that GE has carried in the past. The company is placing more focus on equipment for power generation, which positions it well for emerging market growth. Management currently aims for the GE energy business to grow earnings by more than 10% a year. GE Capital, the company’s finance arm, has bounced back from concerns that clouded its outlook during the 2008 economic crisis. We think GE can reach a fair value of $25 a share.
PRICE AT REC.: $16.48  •  P/E: 12.58

2 PARKER HANNIFIN CORP. (PH) is a maker of engineering and manufacturing equipment—motion and control components as they are called. They include automation and flight control systems, hydraulics, filtration systems, and engines, which are used by companies from McDonald’s to Caterpillar. Parker Hannifin is managed well and has a reputation for engineering expertise. Since the 2008 financial crisis, it has focused on controlling costs and expanding operating margins above 10%. The company also trimmed its debt from roughly 30% of capital on average to a current 20%. It has put 60 years’ worth of effort into setting up a global distribution network. We think fair value for the stock is $97.
PRICE AT REC.: $83.74  •  P/E: 12.39

3 UNITED TECHNOLOGIES CORP. (UTX) United Technologies Corp. has a focus in aerospace and construction. You probably know some of its higher-profile products: Otis elevators, Carrier air conditioners, Sikorsky helicopters, or Pratt & Whitney engines. Like other peers, United Technologies has emphasized cost cutting. Management expects to extract $350 million to $400 million of annual cost reductions. We think the company can attain compound annual earnings growth of 10.9% over the next five years and reach a fair value of $94. One tailwind is its 20% exposure to emerging market growth; another is its recent acquisition of Goodrich Corp., a leading supplier of services and systems to the aerospace and defense industry.
PRICE AT REC.: $78.87  •  P/E: 14.80

“The area is a very strong performer over the long term,” says McKissack, whose firm manages approximately $800 million in institutional funds. “The group has underperformed this year, but when you look further out, we feel midcaps will retain their performance advantage and are one of the best places in the market.” The numbers support McKissack’s outlook. Over a 10-year-period ending Aug. 31, the Russell 1000 index of large company shares returned 3.16%. The Russell MidCap index—the types of undervalued shares McKissack selects for his portfolios—were up 7.16%.

McKissack doesn’t foresee a double-dip recession but he does expect “more stresses and pressures” from Europe and a weak U.S. job market. As such, the volatile stock market will continue to bounce up and down. “General sentiment is worse than what we see for the economy, and as a result, we think there are attractive opportunities,” he says. “It’s a good time for investors to add selectively to their positions rather than to switch money to fixed income or cash, which yield practically nothing right now.”

On top of that, dividend payers are particularly valuable in a shaky economy (see “How You Can Profit from Market Volatility,” this issue). That’s because they require a hefty commitment on the part of corporate management. Think of it this way: A company has to be pretty confident about its business in order to share a slice of its profits with shareholders. Dividend payers tend to be large, blue-chip companies with a proven track record of results. It’s that sort of dependability that helps to steady the performance of dividend-paying stocks in turbulent markets.

Then there’s the fact that interest rates on Treasury bonds have been quite low. Abercrombie says dependable companies that pay an above-average yield (the ratio of a company’s annual dividend payout to its stock price) are an attractive substitute.
A Texas native, Abercrombie works in the investment firm’s Dallas office, where he manages money for high-net worth clients. Named a top financial all-star by Black Enterprise in 2010, Abercrombie talked to BE about three of his stock picks.

1) Johnson & Johnson (JNJ) is one of just four companies that carry a AAA grade on its debt. The company offers a 3.6% yield and has been very reliable—it’s made steady payments since 1944 and has increased its dividend annually for the last 49 years. I think the company can accelerate its earnings growth over the next few years thanks to breakthroughs from its biopharmaceutical businesses. The company’s pipeline includes potential new treatments for Alzheimer’s disease, prostate cancer, hepatitis C, and a stroke prevention medicine. In our view, shares do not fully reflect the value of J&J’s pipeline potential, and as a result we believe shares are attractively valued. Meanwhile, J&J should be affected less and less by major patent expirations on earlier products.
STOCK PRICE: $64.36   •   DIVIDEND YIELD: 3.6%

(Continued on Next Page)

2) AT&T (T) pays a 5.8% dividend. The telecommunications giant has made payouts since 1984 and has increased dividends steadily over the last 26 years. If completed, AT&T’s merger with T-Mobile USA will make it the No. 1 wireless operator in the U.S. (At press time, the U.S. Justice Department filed an antitrust lawsuit to block the proposed acquisition.) The union should bring about operating savings that will fully offset the purchase price. Over the past five years, AT&T has grown its dividend about 5% per year on average. We expect a 2% growth rate in the next five years. We expect revenue growth in a stabilizing economy thanks to AT&T’s wireless and television businesses.
STOCK PRICE: $28.79   •   DIVIDEND YIELD: 5.8%

3) Kinder Morgan Energy Partners (KMP) which operates oil and gas pipelines and storage facilities, pays a 6.6% dividend yield. Kinder Morgan has some 28,000 miles of pipelines used to transport natural gas and refined oil. The company has paid a dividend since 1992 and has increased its payout to investors the last 14 years running. We think Kinder Morgan can generate low double-digit income earnings growth this year, reflecting acquisitions and increased demand for storage capacity. For the past decade this dividend stock has delivered annualized total returns of 19.5%. What’s more: A $10,000 investment in Kinder Morgan 20 years ago would be worth $190,000 today. In the next year, the company plans to build up its energy transportation and storage assets—one reason we think it is insulated from any decrease in oil or gas prices.
Stock Price: $70.56   •   DIVIDEND YIELD: 6.6%

Mayor Bloomberg invests $30 million of his money to aid young black and Latino men (Image: Thinkstock)

• NYC Mayor Bloomberg Invests $30 Million of His Money to Aid Minority Youth

Mayor Bloomberg has announced plans for a far-reaching program in New York City that will address persistent poverty, incarceration and unemployment among young black and Latino men. The programs, which will target this group starting in middle school, will be funded in part by $30 million from Bloomberg’s foundation and a matching grant from billionaire hedge fund manager George Soros. The remainder of the $130 million budget will be derived from city revenues.

Read more at The Atlanta Post…

• Stocks Down Over 4% in Global Sell-Off

Stocks around the world fell sharply Thursday on intensifying investor fears about a slowdown in global economic growth and worries about Europe’s ongoing debt crisis, which is centered now on Italy and Spain.

Stock market indexes in the United States and Europe dropped more than 4 percent as Japan intervened to weaken its currency and the European Central Bank began buying bonds to try to calm markets.

At the close, the Standard & Poor’s 500-stock index was down 60.27 points, or 4.78 percent, to 1,200.07. The Dow Jones industrial average was off 512.76 points, or 4.31 percent, to 11,383.68, and the Nasdaq was down 136.68, or 5.08 percent, to 2,556.39.

Read more at the New York Times…

• Tuskegee Mark 70^th Anniversary in Washington, D.C.

America’s first black military pilots are celebrating their 70th anniversary, as nearly 100 veterans of the Tuskegee Air Corps have reunited in Washington, D.C., for their national convention this week.

Read more at NPR…

• FAA Reopens

Senate Majority Leader Harry Reid has announced an agreement to reopen the Federal Aviation Administration, clearing the way for 74,000 government and private-sector workers to return to their jobs.

Read more at USA Today…

“When I bought ConocoPhillips, I didn’t feel it was as good of a value as I would have liked it to have been,” says Murphy, who bought the stock at around $66 per share in December of 2010. He sold at about $77 a share. “I believe my other exposures to oil and gas will provide a better risk-return.” About 18% of his portfolio is in the energy sector.

Knowing when to part with an asset is essential to any successful investing strategy. In the last few months, natural disasters and political unrest have caused a surge in market volatility. These ups and downs may cause even the most confident investor to act out of emotion. Indeed, those nervous impulses were evident leading up to the March 2009 bottoming of the Dow. Investors withdrew a total of $225 billion from U.S. based mutual funds in 2008, according to TrimTabs Investment Research. Considering that the market has risen some 80% since spring of 2009, many investors may have pulled out too soon.

A sound plan of attack can help stem emotional waves and grow returns. Clear understanding of your present financial picture and future goals should determine how you manage your options, says Imari Love, equity research analyst at Morningstar.

Building the Foundation
Murphy began building his nest egg while he was in college. With a significant time horizon, and an aggressive agenda, he opted for a portfolio comprised solely of equities. He says the portfolio yields an 8% to 10% return annually. While Murphy may have a greater risk tolerance than the average investor, given his longer time horizon, he still likes to be strategic about managing his risk.

“When you find an investment option that meets your needs, research it, evaluate it relative to all your other investment options, and invest in the one that gives you the most attractive profile,” says Love. The same process holds for developing an exit strategy. “One of the reasons someone would sell is because the company-specific reasons you bought the stock either have changed or never materialized,” he explains.

No Sudden Moves
With escalating unrest in the Middle East, Japan recovering from the deadly tsunami and earthquake, high U.S. unemployment, and a housing crisis, investors are skittish. While broader market events can have a tremendous impact on a stock’s price point, Love says you need to determine whether the stock’s price is falling because it’s moving in sympathy with the rest of the market or because the company’s business has fundamentally changed in some way. Research all the factors that made you believe it was attractive in the first place—revenue structure, market positioning, innovation, management team, target returns, etc.—and take note of any changes. To guard against major surprises and disappointments, diversification is key, says Jesse Abercrombie, financial adviser at Edward Jones Investments. “Keep each stock to less than 5% of your equity portfolio. When it exceeds 5% it may be time to sell it,” he adds.

A shift in competitive landscape or a flaw in the key themes you built your investment case around can all be causes for concern and a reason to sell your stake. But sometimes, your relationship has matured and reached its maximum potential. “Ultimately, whenever you enter into a stock with a long position, you should be doing so because you believe it to be priced lower than what it’s worth,” says Love. “Once it reaches [a level of appropriate value], never be ashamed of taking a profit.”

Douglas Coe Managing Partner and Chief Investment Strategist Investment Banking/
Capital Markets, Moody Reid Financial Advisors Kansas City, MO
“We’ve just entered into the second phase of one of the strongest bull markets in U.S. history. Interest rates will remain low. Stocks still remain the dominant asset class of choice for wise investors who are seeking to keep pace with inflation. Again, U.S. stocks are still undervalued.”

Jacquette Timmons President and CEOSterling Investment Management | New York
“It’s important to remember that any market rally or boom is a reflection of either our collective fear or optimism. So, yes, the current rally will continue provided the United States government doesn’t shut down or become engaged in another war, oil prices stabilize, and private industry job growth continues unabated.”

Arnett Lanse Waters Principal
A.L. Waters Capital L.L.C. | Braintree, MA
“Oil will trade above $150 per barrel. Gold will trade above $1,600 an ounce. Unrest in the Middle East will spread. Unrest will take hold in China, too. U.S. corporate earnings will decline.”

Larry Seruma Managing Principal
Nile Capital Management L.L.C. | New York
“We at Nile Capital believe that the market rally is going to continue over the next year. In the next 12 months we do not see the Federal Reserve raising rates, which means the cost of capital will remain low, and earnings will continue to surprise to the upside. Unemployment will also continue to fall, and that will increase consumption and encourage growth. In fact, we have already seen capital flows returning from abroad as investors’ allocations to U.S. markets continue to increase. In our view the biggest risk remains a less accommodative stance by the Fed; however, we believe that such a policy is unlikely in the short term.”

Joe A. Gilbert CFA, Portfolio Manager
Integrity Asset Management L.L.C. | Cleveland
“I’m still positive on the market at current valuations. Earnings will grow because of growing sales. We are in a maturing bull market, which requires investors to be more selective. But opportunities remain. Economic expansions typically last seven years and we are only in the second year of this expansion. There is continued positive business momentum and the economy is still operating substantially below potential output levels. Bull markets historically die on optimism and grow on skepticism, and there is plenty of skepticism surrounding this market now.”

Ivory Johnson Director of Financial Planning
The Scarborough Capital Management | Annapolis, MD
“In response to the financial crisis of 2008, the Federal Reserve electronically created $2 trillion of new money that wasn’t backed by anything of value, and purchased Treasury bonds from the banks. The Fed presumed that once the large banks received this money, they would lend the additional currency to consumers so they could buy more goods and services, thereby boosting economic activity. The banks instead used the money to buy stocks. Once quantitative easing and the stimulus handouts to the states end in June, the rally may be tested.”

Lee Baker CFP
Apex Financial Services Inc. | Tucker, GA
“I expect the market rally to continue over the next year for a number of reasons. First, the Federal Reserve will continue to do everything in its power to create fertile ground for the market to adhere to its upward trend. In addition, we will see dollars that had been sitting on the sideline last year continue getting into the game. Currently, the bond market is an unappealing place to put new money due to inflation fears. As a result, that leaves stocks as the most likely landing place for those dollars. The U.S.’s position in the global economy isn’t what it used to be, but all paths still lead to, or perhaps through, America. The ongoing global economic expansion will ultimately benefit our domestic markets. One cautionary note: Sustained upheaval in the oil-producing regions could eventually put the brakes on consumer spending. This would be a result of higher prices at the pump and the grocery store.”

J. Michael Salley Registered Principal
Salley Wealth Advisors Group L.L.C. | Summerville, SC
“Several important factors point to higher stock market valuations: We are fully entrenched in an economic recovery in the U.S. Gone are the sentiments and opinions about the possibility of a double-dip recession. The health of corporate America is very strong and will continue to improve. The majority of companies are reporting earnings above Wall Street’s estimates. I believe this trend of improving earnings will persist. Consumer confidence and sentiment are growing stronger. I recently read in a news article that this improvement is more evident in the African American community, based on several survey results. Lastly, there are trillions of dollars still sitting on the sidelines in a near-zero interest rate environment. These assets will soon be forced to move into equities as the picture continues to brighten.”

Ilyas Akbar, a retirement planning specialist for AXA Advisors, says it’s good for young professionals just starting out to think of their money as three buckets; short, mid, and long-term. BLACK ENTERPRISE and Akbar created a plan to help you identify your financial goals and some possible investment options for achieving those ambitions.

• Short-term

Short-term goals are generally defined as those goals you want to achieve within two years. Akbar says these can include building an emergency savings fund, saving for a down payment on a home, purchasing a car, or going back to school etc. In the event of an unexpected expense “you want to have liquid cash available that’s not tied up in the market,” he adds.

Savings Vehicles:

1. Savings account: Although interest rates are lower, your money is liquid and your deposits are FDIC-insured up to at least $250,000 per insured bank. You can easily transfer or withdraw your money from savings accounts.

2. Checking accounts: Although most are non-interest bearing, some banks and credit unions offer higher interest rates. These accounts are FDIC-insured and can be easily accessed. Banks may impose minimum balances, limit the number of transactions that can be made within a time period or may require direct deposit to qualify for the high-interest rate.

3. Money Market Accounts: The rate of return is typically higher on MMA’s since they are based on the current market rate of interest. They are generally FDIC-insured. Banks may impose minimum balances, or limit the number of transactions that can be made within a time period.

4. Certificates of Deposit: CDs generally receive a higher interest rate, especially on longer terms, which range from one month to five years. They are fairly liquid, but there is a penalty if you withdraw the funds before its maturity date.

Rate of Return: The average rate of return that one might target is 1-2%. “You won’t earn a lot on your money, but the benefit is liquidity and stability,” says Akbar.

• Mid-term

Mid-term goals are generally those goals that you want to accomplish in the next 5-15 years, such as early retirement, business, education, a second home or a large purchase. “This bucket provides financial flexibility, freedom and allows people to enhance their abilities in their lives,” says Akbar.

Where to Invest:

1. Mutual Funds: By investing in a pool of stocks, bonds, and other instruments with multiple investors, gives you holdings in several different companies (diversification). Like stocks, they can also be converted into cash.

2. Stocks: Ownership of a corporation represented by shares that are a claim on the corporation’s earnings and assets.

3. Real Estate: A publicly traded company that invests in a specific type of property, from shopping centers and office buildings, to apartment complexes and hotels.

4. Exchange Traded Funds: ETFs are similar to mutual funds in that they represent a collection of investments. Unlike mutual funds, ETFs trade on an exchange (hence the name). Some investors prefer ETFs to mutual funds because they have low expense ratios and generate lower capital gains taxes than similar mutual funds.

Rate of Return: The average rate of return that one might target is 6-10%.

• Long-term goals

“This is probably this biggest thing you’ll ever save for,” says Akbar. This savings for your retirement. Social Security won’t be able to fund your retirement. Here are other investment vehicles you may want to consider to help you start investing for your golden years.

Where to Invest:

1. 401(k)-Tax deferred retirement account that an employee elects automatic contributions from their paycheck to the plan on a pretax basis. Distributions received before age 59 1/2 are subject to an early distribution penalty of 10% additional tax unless an exception applies.

2. Individual Retirement Account: An IRA is a fund earmarked for retirement savings (There are several types of IRAs: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.)

3. Cash Value Life Insurance: An insurance policy that covers you for the duration of your life. It builds cash value

Rate of Return: The average rate of return that one might target is 8-10%.

• Douglas Coe
• Managing partner and chief investment strategist
• Investment Banking/ Capital Markets, Moody Reid Financial Advisors
• Kansas City, MO
• YES.
• “We’ve just entered into the second phase of one of the strongest bull markets in U.S. history. Interest rates will remain low. Stocks still remain the dominant asset class of choice for wise investors who are seeking to keep pace with inflation. Again, U.S. stocks still are undervalued.”

• Jacquette Timmons
• President, CEO
• Sterling Investment Management
• New York, NY
  YES.
• “It is important to remember that any market rally or boom is a reflection of either our collective fear or optimism. So yes, the current rally will continue provided the United States government doesn’t shut down or become engaged in another war; oil prices stabilize; and private industry job growth continues unabated. But even if unforeseen political or economic factors interrupt the current market rally, there’s every reason your “personal market rally” can continue.
• How? By making a commitment to five practices frequently abandoned at the first sign of market duress: a) Choose your investment selections based on best available information, not your feelings, b) Continue to invest in your taxable and tax-deferred portfolios using the discipline of dollar-cost-averaging, c) Match your investment strategy and products to your short- and long-term goals, d) Rebalance to take advantage of the inherent benefit of buying low and selling high, and e) Create stop-gap procedures to help you resist the temptation to let your feelings rather than your goals and what you want your money to do for you–drive your financial choices.

• Arnett Waters, Principal
• A.L. Waters Capital, LLC
• Braintree, MA
• NO.
• “Oil will trade above $150 per barrel. Gold will trade above $1,600 an ounce. Unrest in Middle East will spread. Unrest will take hold in China too. U.S. corporate earnings will decline.”

• Larry Seruma
• Managing Principal
• Nile Capital Management LLC
• New York, NY
• YES.
• “We at Nile Capital believe that the market rally is going to continue over the next year. In the next twelve months we do not see the Federal Reserve raising rates, which means the cost of capital will remain low, and earnings will continue to surprise to the upside. Unemployment will also continue to fall, which will increase consumption and encourage growth. In fact, we have already seen capital flows returning from abroad as investors’ allocation to US markets continues to increase. The biggest risk in our view remains a less accommodative stance by the Fed, however we believe that such a policy is unlikely in the short term.”

• Joe A. Gilbert, CFA, portfolio manager,
  Integrity Asset Management, LLC
• Cleveland, OH
• YES.
• “I’m still positive on the market at current valuations. Earnings will grow because of growing sales. Admittedly, most of the ‘easy’ money has already been made and the returns from here will be more modest but this does not portend to a declining stock market. We are in a maturing bull market, which requires investors to be more selective. But opportunities remain. The outcomes from geopolitical events are more binary but oil at $105 is untenable hence I believe that once oil corrects the market will go higher. Economic expansions typically last seven years and we are only in the second year of this expansion. The Federal Reserve is continuing to provide liquidity and the Obama administration has introduced more simulative policies (i.e. payroll tax cuts, accelerated depreciation). Additionally, the NFIB Small Business index has increased and the unemployment rate has just started to recede. Businesses have started to hire again and reinvest in capital equipment after a period of under-investment. There is continued positive business momentum and the economy is still operating substantially below potential output levels. Bull markets historically die on optimism and grow on skepticism and there is plenty of skepticism surrounding this market now.”

• Lee Baker, CFP
• Apex Financial Services
• Tucker, GA
• YES.
• “I expect the market rally to continue over the next year for a number of reasons. First, the Federal Reserve will continue to do everything in its power to create fertile ground for the market to continue its upward trend. In addition, we will see dollars that had been sitting on the sideline last year continue getting into the game. Currently the bond market is an unappealing place to put new money due to inflation fears. As a result that leaves stocks as the most likely landing place for those dollars. The United States’ position in the global economy isn’t what it used to be but all paths still lead to (or perhaps through) America. The continuing global economic expansion will ultimately benefit domestic markets. One cautionary note: sustained upheaval in the oil producing regions could eventually put the brakes on consumer spending. This would be a result of higher prices at the pump and the grocery store.”

• J. Michael Salley
• Registered Principal
• Salley Wealth Advisors Group, LLC
• Summerville, SC
• YES.
• “There are several important factors that point to higher stock market valuations:
• A. We are fully entrenched in an economic recovery in the US, gone are the sentiments and opinions about the possibility of a double-dip recession. As this recovery advances, albeit slowly, the stock market will continue to forecast this improving growth of the economy.B. The health of corporate America is very strong and will continue to improve. The deleveraging and strengthening of balance sheets has had a dramatic positive impact upon corporate earnings. The majority of companies continue to report earnings that are above Wall Street’s estimates. At the end of the day, it is earnings, or the lack thereof that mostly influences stock prices. I believe this trend of improving earnings will continue.C. Consumer confidence and sentiment continues to improve. In fact, a week ago I read a news article that pointed out that this improvement was more evident in the African American community, based on several surveys that were taken D. Lastly, there are trillions of dollars still sitting on the sidelines in a near zero interest rate environment, because of the fear and anxiety generated by this latest severe economic downturn. These assets will be forced to move into equities as the picture continues to brighten.”

• J. Dennis Jean-Jacques
• Author
• Five Keys to Value Investing
• NO.
• “The market rally cannot continue at the current pace over the next year. Increased government involvement in the general market makes this a very delicate time period, thereby making a continued stock market rally more unlikely. Needless to say, it is hard to ascertain whether the level of froth in the market is born from sustained economic growth or artificial stimuli. Indeed, the government has always played a role in the markets such as changing tax policies or lowering interest rates at the first sign of unwelcome economic news. Such interventions often “prop up” equity markets until sustained economic growth is restored. It can be tricky for investors to navigate as the economy becomes less dependent on artificial injections because this period produces very difficult, and often volatile, stock market environments. The time at which such transformation begins and how long the purgatory will last are the unknowns; but after TARP, tax relief, mortgage relief, QE1, and QE2, a transition must happen at this stage of the government’s prolonged intervention—which will most likely have a negative impact on the market. This is why investors should be extremely cautious during this time as this market rally is expected to take a much needed pause.”

• Ed Fulbright, CEO
• Fulbright Financial Consulting
• Durham, NC
• YES.
• I have five reasons to be positive: The economy is improving; banks are starting to lend–but slowly; more people are becoming optimistic and are starting to spend; CEOs and CFOs are starting to loosen the purse strings and are launching big projects; and commercial building projects are starting up.

1956 Chevrolet Belair

Now that the dust has settled around the General Motors public offering, average investors who didn’t have access to the IPO shares are probably wondering how they can take advantage of the resurgence in global auto demand.

To be clear, General Motors’s recovery is a reflection of a broader trend. As the automotive industry rebounds from the devastating slump in sales it saw in 2008 and 2009, car manufacturers (and those who supply them with raw materials and other components) are expected to rally too.

According to a recent report from San Jose market research firm, Global Industry Analysts Inc., the world auto supply market “is projected to regain sufficient poise… to reach $329.8 billion by the year 2015.” The report projects a healthy annual sales growth rate of 5% over the same period. “Growth during this period will be driven by resurgence in new car purchases, reappearance of consumer preferences for sport utility vehicles and pickup trucks, and strong demand for alternative vehicles. Increase in automotive production and sales across Asian countries also augurs well for the market.”

BLACK ENTERPRISE talked to a handful market-watchers to get some investment ideas that play on this trend. What we found are four overlooked stocks with promise.

1) Tenneco Inc. (ticker: TEN, $36) Tenneco is a $2.15 billion (market cap)  manufacturer of supplies auto emission control products and ride control systems for car manufacturers around the world. “They benefitting from the whole global expansion of reduced global emissions—here in the U.S. and internationally,” says Joe A. Gilbert, portfolio manager of the Veracity Small-Cap Value Fund (VSCVX) at Integrity Asset Management. “Tennaco makes mufflers, and everything from the tailpipe back up through the car. With this stock, you’re taking part in the green theme—but you’re also getting in on global demand for cars, trucks. The stock has had a great run this year, but there’s more to come.”

2) American Axle & Manufacturing Holdings Inc. (ticker: AXL, $11) Simply put, this $767 million (market cap) company makes car axles, drivetrain systems, chassis modules, and other major components for all types of autos, from cars and SUVs to light trucks. Says Gilbert: “70% of their business is GM. If GM does well , these guys will do well.” Gilbert says an investment in AXL means you’re “getting in on GM’s coattails and riding the GM wave.”

3) Molycorp Inc. (ticker: MCP, $30) Molycorp Inc., a $2.5 billion (market cap) rare materials supplier, is the only producer of rare earth oxide in the Western Hemisphere. It also produces metals, alloys and magnets used in the making of many consumer and industrial products.  They also produce a mineral called molybdenum. What does all this have to do with cars? Arnett Waters, principal at A.L. Waters Capital, LLC, says “molybdenum, is a key element used to strengthen steel for car production and many other things.” Waters likes Molycorp’s prospects as a global supplier. “Outside of the U.S., China and India are building cars for their own countries. More and more of the materials they need are hard to find. If you’re looking for ways to invest in autos you need to be buying into companies that produce basic elements.”

4) Impala Platinum Holdings Ltd. (ticker: IMPUY, $30) This $18.4 billion (market cap) South African company mines one of the Earth’s most precious metals: platinum. One of the many reasons Arnett Waters likes IMPUY: “Platinum’s demand has been affected by the worldwide demand for cars. All cars will have catalytic converters going forward, and a key element used to make those converters is platinum.”

Related Links:

• Do the REIT Thing: Why some advisers suggest you invest in real estate investment trusts
• Smart Money Moves for Every Stage of Life
• PHOTO GALLERY: Black Enterprise and Porsche go for a spin