2013 promises to be another interesting year for stock market investors. Already, some investors are warning that stocks are getting too pricey and may be due for a major correction. Looking at the below chart, we notice that all three major stock indexes are reaching a level where stocks have historically peaked
Jan 2012 to Jan 2013 (1 Year Chart Movement)
S&P 500 (^GSPC), DOW (^DJI) and Nasdaq (^IXIC)
In the event of a major correction in 2013, only the strongest stocks will be able to support their momentum. The below stocks fall into this category:
Discovery Communications (DISCA)
The rise of internet television is causing a major disruption in the television industry. Content providers like Discovery are positioning themselves to optimize this change. With a P/E of 24.88 (as of Jan 29), DISCA is well priced to continue its growth. The firm has an operating cash flow of $1.11B – a cash war chest that supports the company’s balance sheet and allows it to expand strategically. DISCA’s management is very effective in maximizing the firm’s assets. The company uses each $1 of assets to generate a 9.52% return, and earns a 16.84% return on each dollar of invested equity.
Krispy Kreme (KKD)
Krispy Kreme is a name known by many and with good reason. Their doughnuts are fresh and extremely popular, and they trade on a much better P/E ratio than their main competitor, Dunkin Donuts. Krispy Kreme’s store sales have been positive for the past 16 consecutive quarters which is impressive. The company is looking to expand into India (1+ billion population), a move that could prove very profitable – if there is an unsatisfied demand for donuts in India. KKD has a 6.9% quarterly earnings growth and a 38% profit margin.
Western Refining (WNR)
WNR recently hit new highs with news that it is investing $30M in new infrastructure to connect its El Paso refinery to the Permian Basin. The Permian Basin is a major oil field in West Texas. It covers an area approximately 250 miles wide and 300 miles long. For WNR, it is a case of being in the right place at the right time, and the company has the advantage of being one of the first in the area. With revenues already over $9B, profits are set to continue growing in 2013.
Atmos Energy (ATO)
2013 could become a pivotal year for natural gas. After months of oil price increases, the need for a cheaper, cleaner alternative to oil has spurred demand for natural gas. One way to play the boom could be Atmos Energy. With a forward P/E of 14.42, ATO is a cheap investment considering the bright future for gas. ATO has a gross profit of $1.32B and a 13.13% operating margin. However, investors should note that the firm’s annual revenue growth rate (past five years) is -10.23%.
3D Systems (DDD)
As a provider of 3D printers and materials, investing in 3D Systems is a good way to gain exposure to this new industry. Earnings soared 87% in the last quarter, and the stock is hitting new highs as of the writing of this article. 3D printing is a new and innovative industry with a huge potential to take off. DDD has a 5 year revenue growth rate of 11.32%. It has a 70% Earnings per Share (EPS) growth rate, compared to the industry average of -30.75%.
The below chart demonstrates DDD’s amazing stock rise.