Thursday, July 28, 2005


I have been listening to Jim Cramer shout about oil stocks. He suggest that XON and Royal Dutch be sold. These are perfect stocks for the person who wants solid returns with relatively low risk. Cramer wants investors to replace them with oil drillers; very speculative businesses.

I have no problem buying oil drillers but speculators should consider buying tech stocks. The sector cycle typically rotates as follows: consumer discretion, technology, industrials, materials, energy, consumer staples, health care utilities and financials. We have been through the cycles since the recession, experienced a mid recovery slow down and are now working our way back through the cycle.

Note the recent move in GM, Best Buy and other consumer discretion stocks and the huge recent moves in telecom equipment stocks. These stocks typically do well immediately after a recession. The expansion is under way. Companies are buying equipment again.

The truth is that now is not a great time to focus on S&P sectors as it is to recognize that large growth stocks will do well. MSFT is finally going to grow rapidly again. The upgrade cycle is upon us. Businesses will need to raise wages and benefits to attract employees. Cramer was onto a nice trade a couple of nights ago when he talked about laser eye surgery stocks. Companies will add eye surgery at little net cost. Eye surgery is a one time absence from work where as eye glasses consume hours of time year after year.

The bottom line is that in a BULL MARKET almost every thing works. However, one should move away from international and small stocks and invest in big US growth companies. The big companies will continue to buy out the small companies so you may get lucky buying certain small fries but the big companies will gain share and make big money in the expansion.

Betting on the price of oil is a 50/50 guess. The strong economy may keep the price high but will it drive the price higher still? Will supply start to catch up? The passage of the energy bill says yes! The passage says give companies time and they will replace natural gas and oil with electricity in many situations.

Betting on growth stocks is better than 50/50. The infrastructure is being put in place to save consumers and business much time. The new computers will require new software. There are many good plays that are not being talked about on the TV shows. Run a few screens and you can find many good stocks selling at low prices.



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