Leadership – the capacity to lead, or the act/instance of leading.
Where will we find the companies leading markets in 2012? That is the million dollar question. Your recent leaders of today may not be your leaders of tomorrow. PCLN? LULU? CMG? NFLX? CRM? Nah, there are new kids on the block. Depending on where we may be in the business cycle, the news events of the world and the political realm can give us clues to where the leaders may exist. For 2011 we saw leaders thrive and then falter. Groups were taken apart by the uncertainties of the day. Quite often we see new leaders emerge and attract funds.
The political landscape may blur the vision somewhat in 2012. While it is difficult to predict the results of the big election in November we can see how a new landscape may shape the markets. For the new year, all eyes will be on the financials. Can they finally pick up the pieces after a wretched 2011? Regulations, fees, fine and settlements have been strangling the banks and threaten to keep them down, but a change in Washington may curtail some of the headwinds banks are facing. Charts look in disarray but perhaps a turn of the calendar might attract some attention. Make no mistake, right now would be far too premature for my sake but this group should be looked at closely in 2012.
Big caps dominated the action last year – numerous Dow stocks hit all time highs at one point (CAT, MCD, IBM, others). When there is uncertainty investors flock to safety, so this makes sense. With less uncertainty to snag markets we could see a broadening out of leaders. A group that I favor with excellent fundamental prospects and cheap valuation are the fertilizers (CF, POT, MOS, AGU). Other commodity groups (copper, steel, silver) could return to their former glory if the growth countries (BRICs, US, Australia) move ahead. Energy is an area of interest especially those associated with the red-hot growth of shale and natural gas. Names in this area include EOG, CLR, PXD and PXP.
Strong markets garner support from technology and if we are to see a higher move in 2012 this group would need to be a leader. I like the largest most dominant names that continue to gain share – AAPL, GOOG, AMZN, EBAY, BRCM, BIDU and IBM. While these have been recent leaders they should also attract new money if the markets are poised for a higher move.
