The Case For North American Cyclical Stocks

Introduction: accentuating the positive again

As some of you know, since April I have written, and Seeking Alpha has been kind enough to publish, a number of articles that were not too positive on the subject matter. These have included articles, on icons such as IBM around $160, GE (GE) in the $29-30 range and AT&T (T) around $40.40, all following Q1 earning reports. Last month, I analyzed the Fed’s strategic perspective, first on July 10 with New Data Show The Fed’s Reverse QE Plans Are Risky and the next day with what amounted to Part 2, Reverse QE Is Very Different From Rate Hikes; How It Matters.

Recently, I have had negative things to say about Valeant (VRX) around $16, Teva (TEVA) in the $20-21 range, and (AMZN) around $1020 on July 31 with Amazon’s Stock Looks Headed For A Waterfall. (Full disclosure: I had been bearish and wrong on AMZN before that.) I also reiterated negative views of IBM and GE right after their Q2 earnings. Yet, I’m a long-only investor.

With all that caution or outright bearishness, I do own stocks (SPY) though with extra cash reserves. Now, following the flight to gold (GLD) and Treasuries, with sharp sell-offs in a number of stocks and entire sectors, I’m taking a more positive view of prospects for a number of different stocks, with different earnings patterns and different foci than the ones named above, and discuss them later.

The basic rationale for the current investment focus:

  • good and possibly strengthening economy
  • some panic in the air
  • bifurcated market producing reasonable values in many individual names.

This trifecta of situations has generally been a good time to deploy cash into reasonably valued stocks that are in tune with the apparent and evolving economic trends.

First, a positive thesis on the economy.

The US and world are doing better economically

New claims for unemployment benefits continue to run near peacetime lows, adjusted for population growth. That could be blamed on labor hoarding, but…

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