Using the latest news and information to pick stocks is a widely used method for Hedge Fund managers. Warren Buffett and the Hathaway Berkshire Group have shown the amazing possibilities of sound investment practices. Interpreting news and events when making investment decisions can lead to the areas of greatest growth, and away from weakness or difficulty. The news and trends identified here are the Fed’s Open Committee policy change on interest rates, consumer spending following low gasoline prices, the solar boom in the U.S., and forecasts for European economic growth.
Consumer Spending in the U.S., India and China
Globally, consumer spending could lead advances in major economies based on consumer revenues freed from oil prices. The U.S. consumer saves money from gasoline prices which go significantly to discretionary spending. The increased spending occurs to a lesser extent in China and India where individuals and families save more than Americans on average. In the U.S., retailer stocks are an excellent place to focus, and Wal-Mart and Home Depot make two leading candidates. Wal-Mart is already significant investment for Berkshire. Home Depot also has a retail position that can take advantage of increased consumer spending in 2015. A world allocation fund like MainStay Income Builder Fund (MTRAX) will provide a broad exposure to gains from consumer spending both in the U.S., overseas, and in exports.
Automakers Set records In February
Led by Chrysler-Fiat, the U.S. automakers set year-to-year comparable sales records for February, 2015. The significance is that February is often the worst sales month of the year with snow and bitter cold affecting much of North America and Europe. Ford showed a two percent decrease due to F-150 truck production roll out problems while GM and Chrysler gained four percent and six percent respectively. Analysts suggest a chance to set a record for sales at above 17.5 million units. Broad-based investment vehicles like Vanguard PrimeCap Core Fund and Wells Fargo Advantage Index Asset Allocation Fund would capture the growth in the auto sector, and its broad commercial and industrial base.
Surge in Solar Energy Installations
The recent news about solar energy systems reveals new strength. Residential installations have set new highs, and most important, have set new highs for areas outside of California. Solar power is a leader among alternatives to oil and natural gas. Solar energy has support from many leading national governments including the U.S., Western Europe, and China. Guinness Atkinson Global Energy (GAGEX) and Putnam Global Energy A (PGEAX) have shown strong returns in the past year plus. They have global strategies that mesh with China’s solar panel production and joint ventures outside China. The U.S. is a hotspot for residential and commercial installations.
Change in Fed Policy on Interest Rates
The Federal Reserve revised its approach to interest rates as the dollar becomes too strong for favorable exports. The latest news from the Open Market Committee dropped the keyword “patient” from the guidance on rates. The consensus concludes that rates may rise as early as the mid-year meetings because employment has improved, and world conditions have pushed the dollar to disadvantageous strength. The T. Rowe Price Floating Rate (PRFRX) captures instruments that benefit from increased interest rates. Vanguard Financials ETF (VFH) tracks the MSCI US Investable Market Financials 25/50 Index. Both would be excellent positions to take advantage of growth in the commercial banking sector in 2015. Vanguard Wellesley Income Fund is a bond biased fund that may prosper despite rising rates because as many experts anticipate, the rate increases will be both small and gradual.
Europe’s Signs of Growth
Forecasts suggest U.S. stocks will remain strong but that European stocks will show more growth over the next two years. Hedge Fund managers may shift or lean towards European stocks to capture Eurozone growth. With greater stimulus, EU governments may increase spending and coordinate effort to spur growth. Leading mutual funds that can move with equity growth in European markets include Dodge & Cox International Stock (DODFX). They have shown a Buffet-like dedication to long-term growth and regular dividends, and it hedges for currency fluctuation.