You want a rally that includes everything and everyone. You don't want a rally that just has the semiconductors or the banks or the oils or the financials.
Today's the day for the interest-rate-sensitives to go up, and that's just fine with me. The declines in stocks like American Electric Power (AEP) and PepsiCo (PEP) and Clorox (CLX) are pretty darned steep vs. the rest of the market, and even though their yields don't offer the protection someone might want, I just don't think a move like the stock of Clorox from $140 to $116 after a terrific quarter can be justified, even as I know the stock peaked the same time as interest rates troughed. (PepsiCo is part of TheStreet's Action Alerts PLUS portfolio.)
I want to make a strong case for the stock of PepsiCo, too. Lots of stuff in the papers about city taxes on soda, and if you believe that's going to have an impact, then short Coca-Cola (KO) with a 3%-and-change yield and go long PepsiCo with a 2.94% yield. Sure, you don't have perfect coverage on the dividend, but KO is much more vulnerable than PEP any day because of the fabulous Frito-Lay exposure. Speaking of yields over there, how can you not like Procter & Gamble (PG) here? Remember, PG had a terrific quarter but got caught up in the great post-Trump bond slaughter.
The company's P/E isn't cheap, but the organic growth is the best in years and the company has really hacked through the underperforming business lines.
I don't want to go overloaded on these. The dollar will go higher when the Fed hikes. But these companies don't report for a long time and all we would be doing are buying them because they have fallen behind and are doing better than people think. They are simply reacting to the decline in the stocks as opposed to the decline in their businesses, of which there is none.
I am not as sanguine about the real estate investment trusts. A lot of them got involved with health care and there's a lot of uncertainty there. Others are involved with bricks-and-mortar retailers and while Target (TGT) CEO Brian Cornell is right, 90% of the people still like to shop bricks-and-mortar, I also don't like the agnostic talk -- that they are impartial about where customers shop. Not a great setup for retail. Let them continue to come in.
But utilities? I think people don't understand the trade-off between EPA demands and the rate payers. Many of the utilities I deal with spend fortunes trying to keep their coal plants in compliance only to find the rules keep changing and they have to sink even more to make them agreeable to the EPA.
What happens if Trump, instead of abolishing it, just staffs it with people of like-minded opinions? Then I think Action Alerts PLUS club member name AEP has a ton it could return to shareholders. Don't overlook the very well-run Dominion Resources (D) , the growth utility that can rest easy on coal, too.
These stocks have been trashed. I think it's their turn to participate in the Trump rally. Why not? Everyone else has.