'Midyear is as good a time as any to pause and re?ect,' says Richard Moroney in Dow Theory Forecasts -- a newsletter that has been published for over 50 years.
Here, he reviews the state of the market and offers a look at trio of favorite stocks which he considers 'fundamentally superior' companies: Biogen Idec (NASDAQ: BIIB), Comcast (NASDAQ: CMCSA), and Oceaneering International (NYSE: OII).
'The Dow Theory indicator remains in the bearish camp, as the last con?rmed signal was the move to new lows in March.
'But both the Industrials and Transports have staged signi?cant rallies since March, so the pathway to a bull-market signal has been established.
'If at least one average can hold above a March low on a signi? cant market correction and then both averages rebound above the closing highs established in the current rally, the Dow Theory will return to the bullish camp.
'While the average U.S. stock is no longer particularly cheap, many attractive values are available. Among S&P 500 stocks, more than 100 have trailing P/E ratios below 10 — down from 230 in March but well above the 18-year norm of 42. Some 77 stocks in the S&P 500 have P/Es between 10 and 12 — more than double the 18-year norm.
'While bulls and bears appear sharply divided, we see no reason to make an all-or-nothing decision on be found among the fundamentally superior companies favored by Dow Theory Forecasts.
'Fortunes at Biogen Idec are leveraged to three drugs: Rituxan (rheumatoid arthritis and non-Hodgkin’s lymphoma), Avonex (multiple sclerosis), and Tysabri (Crohn’s disease and MS). Over the next 12 months, Biogen will rely on these drugs to sustain its operating momentum.
'Biogen plows its strong cash ?ow into research and development, spending an average of 32% of sales on R&D for the past ?ve years. The pipeline includes 20 drug candidates in the late stages of clinical trials that could broaden Biogen’s portfolio.
'In May, a Tysabri patient fell ill with progressive multifocal leukoencephalopathy (PML), a rare but often fatal brain infection.
