Quote: (12-30-2013 10:59 PM)Flavius Aetius Wrote:
If you have to buy a stock now (late stage in the economic cycle) it would be best to buy consumer staples/defensive stocks because a recession is imminent (the only variable is timing it). Sysco would fit the bill in that regard. If you wanted to juice you returns you could buy the stock and write OTM call options against your position for a little more income.
The general consensus is that about 1/3 of a stock's movement is related to the individual company itself, 1/3 to the industry, and the remainder to the overall direction of the stock market.
If you are buying stock--any stock for that matter you would be wise to acknowledge that you are not buying a cheap market. The market was cheap in 2009-2010.
The average duration of a US economic expansion since 1945 has been 59 months. According to the NBER (the people who officially decide the dates of recessions) the US exited our latest recession in June 2009 so we are about 52 months into our current economic expansion by Jan 2014. Also known as the late cycle (end) of an economic expansion. Of course with QE, the business cycle has been destroyed so that is another unknown variable that will impact future stock market and economic performance.
I own tobacco stocks and know that they too will fall if there is a recession and the market falls. However, they should decline much less than the overall market because of their recession proof business model and pricing power.
I'm not going to buy into Sysco just yet. Not while their P/E ratio is so high. They're about to take on a massive amount of debt which will launch their debt/equity ratio higher than I consider acceptable for an investment.
However, based on what I know about the company and my own industry, I can foresee Sysco nosediving and then making an excellent long term recovery.