PowerRatings Weekly Outlook

Once again, the stocks we focused on this week at PowerRatings.net came from some of the familiar industry groups that we have come to recognize as having the sort of high Long Term PowerRatings stocks that active investors and long term traders should seek out when building (or rebuilding) a stock portfolio. These are the stocks that have earned high marks for both reliability as well as performance - to key metrics for successful investors.

By reliability, I refer to the likelihood that a stock will be higher in a year's time. This is a basic, threshold type of figure that gives traders a general sense of whether or not the stock is one that investors can count on, or one that is likely to disappoint.

For example, a stock with a Long Term PowerRating of 10 has a very high reliability factor. We found that stocks with Long Term PowerRatings of 10 tended to be higher one year later more than 81% of the time. When you compare that to the average stock, which was higher one year later less than 68% of the time, it is easy to see why the higher Long Term PowerRatings stocks are considered more reliable than the average stock.

In addition to being more reliable, stocks with high Long Term PowerRatings are also better performers. Again, let's look at the best Long Term PowerRatings stocks. Stocks with 10-rating have averaged gains of more than 20% in year's time based on our research. This kind of performance handily trumps that of the average stock, which has tended to gain between 12-13% after one year.

Riding the Rails

We mentioned Burlington Northern Santa Fe (BNI@BNI | Quote | Chart | News | PowerRating) in last week's Weekly Outlook as a railroad stock with high Long Term PowerRatings that was attracting increasing interest from investors and long term traders - including the Sage of Omaha, Warren Buffett.

This week we added another railroad stock to the "Must Watch" list: Union Pacific (UNP@UNP | Quote | Chart | News | PowerRating). Union Pacific sits at the top of the Railroads industry group (along with Burlington Northern) and has a Long Term PowerRating of 8.

Click the link below to read "Railroad Crossing: Top PowerRatings Upgrades for Investors" where we evaluate not only UNP, but also warn investors of one stock in the Railroad industry that they should steer clear of for the time being.

"Railroad Crossing: Top PowerRatings Upgrades for Investors"

Power to the Procter (& Gamble)

It almost came as a bit of a surprise when we noticed that of all the so-called "recession beater" stocks we have been featuring in our weekly Stock Spotlight, we had yet to highlight Procter & Gamble (PG@PG | Quote | Chart | News | PowerRating), a recession beating stock if there ever was one.

As we explained in our Featured Stock Spotlight, recession beating stocks earn that name by providing goods or services that consumers cannot do without. The classic "recession beater" is a utilities stock, because if nothing else, everybody wants to live with electricity, heating, running water ... you get the picture.

But other recession beating stocks can be found in other industries, as well. The Major Drug Manufacturers industry group is one such industry, including high Long Term PowerRatings stocks like Johnson & Johnson (JNJ@JNJ | Quote | Chart | News | PowerRating) which was also featured this week. Another such industry group known for its "recession beating" qualities is the Personal Products industry group, which includes the aforementioned Procter & Gamble.

Click here to read our Featured Stock Spotlight of Procter & Gamble.

Dialing for Dow Stocks

Procter & Gamble was also mentioned this week, along with Johnson & Johnson and a number of other high Long Term PowerRatings blue chips, in our article on the "5 Top PowerRatings Dow Stocks" from earlier this week.

We choose to highlight these Dow stocks not just because of the traditional "recession beaters" among them. Rather we wanted to direct investors and traders to these stocks because money often flows out of smaller capitalization, less well-established stocks in times of economic uncertainty. And the beneficiaries of that money flow out of the smaller stocks are often found in the bigger, well-established blue chip stocks of the Dow.

Click here to read our PowerRatings analysis of the "5 Top PowerRatings Dow Stocks for Investors."

Also covered in our PowerRatings analysis of the Dow were International Business Machines (IBM@IBM | Quote | Chart | News | PowerRating), Walt Disney Company (DIS@DIS | Quote | Chart | News | PowerRating), Coca Cola (KO@KO | Quote | Chart | News | PowerRating), and 3M (MMM@MMM | Quote | Chart | News | PowerRating). Of these four, both Disney and 3M also come from industries with high Industry PowerRatings. Those industries are Diversified Entertainment, with a PowerRating of 10, for Disney and Conglomerates, with a PowerRating of 9, for 3M.

Stocks in the News

Stocks making headlines this week included a successful effort to challenge a Canadian LBO, concerns over worldwide industrial demand as reflected in metals stocks, continued worries over credit and the integrity of bond rating services, and a nifty new gadget that helps consumers watch movies on their televisions that were delivered by way of the Internet.

BCE, Inc. (BCE | Quote | Chart | News | PowerRating) was down by 12% on Thursday as bondholders won the right to challenge a planned leveraged buyout of the company.

Ford Motor Company (F | Quote | Chart | News | PowerRating) admitted that it would likely break even in 2009, later than analysts had expected. The stock was down more than 8% on the news late in the week and was down again on Friday.

Concern over whether or not computer errors at Moody's (MCO | Quote | Chart | News | PowerRating) allowed debt instruments to be mislabelled "AAA" led to a sharp sell-off in the stock late in the week.

Lehman Brothers (LEH | Quote | Chart | News | PowerRating) finished lower by more than 5% earlier this week on criticism of its hedging practices and a lower Q2 EPS estimate by Merrill Lynch.

Expanding its services to allow customers to watch content downloaded from the Internet on their televisions, Netflix (NFLX | Quote | Chart | News | PowerRating) was up by more than 3% in trading on Tuesday.

An analyst report suggesting that Chinese demand for metals lead to lower prices for shares of stocks like Alcoa (AA | Quote | Chart | News | PowerRating), which was down for four consecutive days this week.

Amazon.com (AMZN | Quote | Chart | News | PowerRating) soared on news that Goldman Sachs added the company to its "buy" list, citing the potential for growth in the leading online retailer.

Oracle (ORCL | Quote | Chart | News | PowerRating) found its future and Larry Ellison's leadership endorsed by Barron's magazine last weekend. The stock was up more than 3% on the Monday but finished the week largely flat.

What To Look For Next Week

Monday: Memorial Day Holiday - Markets Closed
Tuesday: New Home Sales / Consumer Confidence
Wednesday: Same Store Sales / Durable Goods
Thursday: Preliminary GDP / Jobless Claims
Friday: Personal Income / Farm Prices

Best Performing Stocks (PR 8-10) of the Last Five Days

Here are some of the best performing, high Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 8 or 9.

NuStar Energy LP (NS@NS | Quote | Chart | News | PowerRating) Long Term PowerRating 9
iShares COMEX Gold Trust ETF (IAU@IAU | Quote | Chart | News | PowerRating) Long Term PowerRating 8
Energen Corp (EGN@EGN | Quote | Chart | News | PowerRating) Long Term PowerRating 8
Chevron Corp (CVX@CVX | Quote | Chart | News | PowerRating) Long Term PowerRating 8
Medtronic Inc. (MDT@MDT | Quote | Chart | News | PowerRating) Long Term PowerRating 8

Worst Performing Stocks (PR 1-3) of the Last Five Days

Here are some of the worst performing, low Long Term PowerRatings stocks of the past five days. This week, all of the listed stocks have PowerRatings of 1 or 2.

NutriSystem Inc. (NTRI@NTRI | Quote | Chart | News | PowerRating) Long Term PowerRating 2
Washington Mutual (WM@WM | Quote | Chart | News | PowerRating) Long Term PowerRating 1
Centex Corp (CTX@CTX | Quote | Chart | News | PowerRating) Long Term PowerRating 1
Usana Health Science Inc. (USNA@USNA | Quote | Chart | News | PowerRating) Long Term PowerRating 1
Lehman Brothers Holdings (LEH@LEH | Quote | Chart | News | PowerRating) Long Term PowerRating 1

David Penn is Senior Editor for PowerRating.net.