Saturday, July 24, 2010

"Not too large, Not too small, Just right" a Goldilocks and the Three Bears variation and why Mid-Cap stocks are just right to add growth to your IRA

Dow Jones 10424.62 (UP) Week ending July 23rd, 2010

Just like Goldilocks is conflicted about what decisions to make when she strays into the foreign place of the Three bears house in the woods, many people are not sure what decisions to make with their allocations in 401K or IRA accounts for retirement. One thing I would make sure is that you have a good dose of Mid-Cap mutual funds or stocks. Mid-Cap stocks are companies with a market capitalization generally between $2 and $10 billion dollars. I would say as much as 30-35% of the stock allocation in your IRA should be devoted to Mid-Cap. (I would not even have bonds in your portfolio until you are 50 years old, you need capital growth to retire!).

So unless you are like Winnie the Pooh and have an endless Honey Pot out in Hundred Acre Wood to keep you going in retirement, (don't get stuck in the rabbit's door), then you should probably jot down some of these names. I would look to buy into these stocks as they have small corrections, since they are all doing pretty well here, so buy them with a margin of safety built in.

Roper Industries Inc. (symbol ROP, $62.01)
is a good steady growing company. 5 year revenue growth of 12.67% and earnings growth of 14.05%. Well managed and well liked on Wall Street, it has a 12 month Total Return of 30.4%.

The second Mid-Cap to bolster your IRA growth is Mead Johnson Nutrition Co.(Symbol MJN, $54.55). This spin-off from Bristol-Myers Squibb has had quite a year with a 12 month Total return of 52.2% and is digesting a little of that here. Earnings for 2011 are projecting $2.72 per share. Long term earnings growth is projected at 9.3%. People will continue to buy their baby formula with their great brand recognition with the product Enfamil.

Dr Pepper Snapple Group Inc. (Symbol DPS, $39.82) is another familiar brand to most people. This company has a 12 month total return of 64%. A bonus 2.5% dividend yield adds to the pot. $2.79 a share earnings for 2011 and 9% long term earnings growth makes this pick probably the one to buy first.

Fidelity National Information Services Inc. (Symbol FIS, $28.10) is projecting 2011 earnings per share of $2.37. This Jacksonville, Florida company has earnings growth projected at 13.17% FIS Inc.'s (FIS) second-quarter earnings jumped 52% following last year's acquisition of Metavante. The provider of payment-and bank-processing services closed the $2.9 billion deal in October. It gave FIS a bigger presence in the financial information-technology market. This company has a solid balance sheet and should do well going forward.

So have a Goldilocks retirement and "Be a Pepper" and deploy some quality Mid-Cap stocks or mutual funds in your 401K.

Stay Cool (99 degrees today)


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