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Published 3:00PM, June 10, 2014
Often a picture is worth a thousand words. And when it comes to the U.S. stock market, that little saying couldn’t be truer.
As you can see from this weekly chart of the S&P 500, a good proxy for the U.S. stock market, stocks are on an absolute tear. In fact, from a recent long-term low of 1360 during November 2012, to a recent level of 1924, the S&P 500 is up a mind-boggling 41%. Not bad, no matter how you look at it.
Take a look a bit farther back and the news is even better. In March of 2009, the low for the market’s current bull run, the S&P 500 was at 683. Compared to that same recent level of 1924, U.S. stocks are up a staggering 181%.
Another way to look at the current run: Since 2009, U.S. stocks are up over 2.8 times their original value. That means stocks have nearly tripled in value over the last five years. Talk about a bull market!
And this isn't an isolated rise in stock prices, either. Take a cruise around just about any sector in the economy, from basic materials to consumer goods to energy to technology, and the story is pretty much the same. Stocks are in the midst of a solid upswing.
It's not just the stock market that has me bullish on what lies ahead for investors. Take a pick from your favorite U.S. economic indicators and the outlook is certainly positive. Here are some my favorites:
==> In April, the jobless rate fell to 6.3%, the lowest rate since September 2008. Plus, the number of long-term unemployed fell by 287,000.
==> Consumer sentiment, a measure of how consumers feel about current business conditions, came in at 81.9 in May. That's a solid mark and in line with the near long-term trend.
==> Industrial production increased 3.5% in April. That's a bit down from March's 3.8%, but in line with recent results. All told, a good showing.
==> While GDP shrank by 1% during the first quarter, which contained a particularly brutal winter, domestic demand was up by 1.6% and consumer spending is on the upswing.
Bottom-line: With the market on a tear and the underlying fundamentals of the economy humming along nicely, it's time to drill down into a tech sector ETF (Exchange Traded Fund) you won’t want to live without. And from that ETF, I have my sights on a company that's a must-have for just about any investor.
This ETF Has "Upside" Written All Over It
I don’t have to tell you that our lives nowadays are so tech-driven that it's nearly impossible to imagine life before laptops, smart phones, and instant connectivity.
Well, I'm old enough to remember those pre-technology days and frankly, I sometimes miss them.
But the truth of the matter is, in spite of my occasional nostalgia, I wouldn’t go back to the old days no matter what. And neither would you. We both know that the tech sector continues to innovate, continues to impress, and continues to climb. It's hung in there through massive economic cycles and frightening trading bubbles. It keeps reinventing itself and surviving.
That's why I was hardly surprised when I took a look at a chart of one of the biggest ETFs that tracks the tech sector, the Technology Select Sector SPDR (XLK). See for yourself...
As you can see from this weekly long-term chart of the XLK, the tech sector is in the midst of a massive upswing. The steepness of the dotted green trend line is testament to that.
From a weekly low of $13.53 in March 2009 to a recent price of $37.82, the XLK is up 180%. Not bad considering all the ups and downs the sector has endured over that time frame.
But the XLK has not been without its difficulties. It ran into upside resistance numerous times. In 2010, it had a tough time breaking through the $22 to $24 range. In 2011, it was the $26 to $27 area that gave it fits. And in 2012, resistance between $30 to $32 was difficult to overcome.
But each time, the XLK managed to power higher. And that momentum brought higher share prices to investors. No matter how you slice it, that's a big key to a strong stock.
From a fundamental perspective, the XLK includes companies that develop and market products in a variety of tech industries. These industries include software, semiconductor equipment and products, computers and peripherals, and telecommunication services. The players include some the heaviest hitters in the tech space such as Apple, Microsoft, IBM, and Verizon. And these giants have some of the most impressive fundamental stats around.
Now, you can take a stab at the sector play and buy the XLK outright. Don’t forget, because it's an ETF it behaves and trades like a stock. And that wouldn’t be a bad play at all.
Or better yet, you can read on and take a look at a standout in the XLK that might just outpace its own sector.
SanDisk: Priced For Upside
Take a gander at just about any tech experience you might have throughout the day and chances are you’re going to run into a product made by SanDisk. From USB flash drives, to solid state drives for your PC, to embedded memory solutions, SanDisk stands at the top of the next generation of tech storage leaders.
Fundamentally, the news couldn't be better. SanDisk boasts a whopping $22 billion market cap. And in 2013, it drove top line sales to $6.2 billion, up over 20% from 2012's $5.1 billion. Solid results.
Last year, the company recorded earnings per share (EPS) of $4.34. And this year, estimates are calling for SanDisk to post even better results...
As you can see from this graph, the earnings outlook for SanDisk is bright indeed. In 2014, estimates are calling for SanDisk to bring home EPS of $6.06, up a staggering 40% over 2013's $4.34 EPS. And in 2015, another solid increase is expected.
Still, SanDisk isn't just a fundamental story. The technical outlook couldn't be better...
This weekly chart shows how SanDisk shares have taken off. In fact, from a weekly low of $31.23 in late May 2012, to a recent price of $96.63, the shares have tripled in value and then some!
I could go on, but I think you get the picture. The outlook for SanDisk couldn’t be brighter. And it's worth the time to take a good look at it. In addition, SanDisk's sector, as represented by the XLK ETF, is also looking good.
I hope you enjoyed this report,
Wayne Burritt
Market Research Contributor
INO.com, Inc.
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Wayne has over 29 years of experience in financial writing, investment analysis, and business
development. Before starting Burritt Research, Inc. Wayne was a senior equity research analyst
and editor for Weiss Research, a nationally acclaimed independent research and advisory firm.
He directed all fundamental and editorial aspects of a variety of domestic and international
option and stock services. Prior to his tenure at Weiss, Wayne was an equity analyst, marketing
and trading specialist for Pan-American Financial Advisers, a boutique investment management
firm. He provided security analysis, marketing support, and trading services for a large portfolio
team engaging institutional and high net worth clients. Wayne also produced and starred in the
critically acclaimed stock market radio show Inside the Market while at Pan-American Financial.
Wayne has also held positions as Managing Director, Senior Credit Analyst, and Controller. He
holds an MBA from Golden Gate University and a BA in English and Philosophy from Indiana
University.
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