Recent polls of America's wealthiest people have found they're the most optimistic they've been in months. Of those who said they'll invest more money in the stock market, the majority said they're focused on these three sectors.
This article published with permission from InvestmentU.com.
Politicians, talk show hosts and bureaucrats can debate all day long about whether the U.S. economy is actually improving. But when someone asked America’s millionaires, whose spending could actually make an impact on the economy, the answer was a resounding “yes.”
According to the Spectrem Group, which recently polled the country’s wealthiest people, they’re the most optimistic they’ve been in months. Why is this important? Because there are roughly 5.5 million U.S. households worth at least $1 million, and they control 56% of America’s wealth.
No doubt, some millionaires are nothing but playboys and party girls who are sponging off Daddy’s wealth. And not all rich people are doctors, lawyers and hedge fund managers. As evidenced by the popular book, The Millionaire Next Door, many of them are “ordinary” people who’ve built up their seven-figure net worth by working hard, saving and shrewd investing.
So while we don’t need to take “winning” life tips from millionaires like Charlie Sheen, it makes sense to listen to what successful businessmen think about the economy and investing.
Here’s Where the Millionaires Are InvestingAccording to Fidelity Investments, 83% of millionaires surveyed said the financial crisis did not shake their confidence in investing. Of those who said they’ll invest more money in the stock market, they’re clearly focused on three main sectors:
* Nearly 60% of them plan to buy technology stocks.
* Just under half expect to acquire pharmaceutical and healthcare stocks.
Responders to the Spectrem Group survey also mentioned that they’re more interested in preserving capital than growth. So chances are, they’ll be sticking to large-cap stocks, as they’re typically not as volatile as smaller names.
Let’s take a look at some stocks that millionaires (and aspiring ones) should pay attention to.
Three Stocks and Sectors on The “Millionaire Watchlist”If you’re a regular Investment U reader, you’ll know that we’re bullish on the technology sector. America’s wealthiest people are, too. Question is, what are they buying?
The Technology SectorApple Inc. (NASDAQ: AAPL): Whether it’s Pods, Pads, Phones, or Macs, Apple continues to churn out great products that people absolutely love. That’s a pretty simple recipe for a robust business.
Take the release of the iPad 2, for example. As with most Apple product launches, it blew away expectations. At my local Apple store, several hundred people were lined up all the way out the door of the mall and the store didn’t have enough iPads to meet the demand.
From an investment standpoint, despite Apple’s lofty $340 share price, the stock only trades at 13 times its forward earnings and is still expected to grow its earnings by 20% per year for the next five years. Not only that, the company is sitting on a massive $27 billion in cash and generated $14 billion in free cash flow over the past 12 months.
The Pharmaceutical Sector
Bristol-Myers Squibb Co. (NYSE: BMY): Right off the bat, Bristol-Myers pays a juicy 5% dividend -- something that should appeal to millionaires who want their money to work hard for them.
The bad news — although not breaking news – is that Bristol will lose its patent exclusivity on its bestselling drug, Plavix, next May. That’s going to hurt a bit, but the pharmaceutical patent cliff story is well-known and its effects are baked into big pharma stock prices. However, Bristol is in the midst of transforming itself into a biopharma company, which should make it more nimble than some of its larger peers who are still stuck in the old ways of drug discovery.
Additionally, Bristol has a key event coming up. On March 26, the U.S. Food and Drug Administration will decide whether to approve its metastatic melanoma drug, ipilimumab. Metastatic melanoma is an extremely difficult disease to treat and there’s nothing currently on the market that works effectively. Should ipilimumab get the green light from the FDA, it could be significant for Bristol-Myers.
The Healthcare Sector
Varian Medical Systems Inc. (NYSE: VAR): A member of our Oxford Club Trading Portfolio, Varian’s medical products greatly improve the lives of patients. For example, its radiosurgery technology enables doctors to remove cancerous tumors without invasive surgery. The procedure is practically painless and patients often return to work, shopping, or even playing golf immediately afterward.
Varian’s price-to-earnings ratio is just over one times its growth rate, it boasts nearly $700 million in net cash and generated over $300 million in free cash flow over the past 12 months. It’s a well-run company that should continue to grow earnings and its stock price for years to come.
Don’t Follow the News, Follow the MoneyIt’s very easy to be a Debbie Downer these days. Watch five minutes of television news, or glance at the front page of the newspaper, and all you hear is misery.
Rarely do you hear about the new restaurant that just opened up in town…the new contract that the local flooring contractor landed…or that your neighborhood pediatrician’s office just hired three more staff members. I understand that those stories wouldn’t sell papers or generate ratings, but those things are happening every day.
America’s millionaires seem to notice -- and they’re taking action. Maybe you should, too.