Photo: Denis Doyle / Getty Images
Last December, Citi’s Chief U.S. Equity Strategist Tobias Levkovich introduced us to The Raging Bull Thesis on America (see highlights of the report here). His epic report included six secular trends that were expected to boost the U.S. economy. They included an improving U.S. fiscal situation, a nascent housing recovery, a domestic manufacturing renaissance, increasing energy independence, a favourable ageing demographic, and growth in mobile technology.
He notes that a lot of the recent data is reinforcing his thesis:
Recent news accounts of a plausible bottoming in the housing market, rising American oil and gas production and resurgent manufacturing activity especially as facilities relocate to the US are giving a boost to the credibility of the December report. Indeed, even news accounts of 22% wage inflation last year in China has added to the allure of producing products locally versus doing so in Asia.
However, he notes that there are some near term risks relating to the fiscal situation and demographics:
…Underlying index price strength has stimulated discussion in the face of fiscal issues that need to be overcome which would then provide another crucial leg to the long-term story; though improbable before the November 2012 elections…
The demographic boost from the baby boom echo’s future retirement savings tends to run into resistance. Investors often cannot fathom the census data on the baby boomers’ kids entering their savings years beginning in 2013, preferring to worry about the exit of the baby boom generation from stocks after the poor equity performance of the 2000s.
Regarding demographics, Levkovich continues to believe that relatively attractive income opportunities will have investors preferring stocks over bonds.
Nonetheless, low cash yields (possibly through 2014) relative to dividend yields are retaining income-starved boomer investors.
In this update, Levkovich provides a list of stocks that should benefit from his thesis over the next decade.
In order to allow investors a clearer method of partaking in the next secular bull run beyond just buying the overall indices, we have scoured our US equity research analysts to compile a list of likely beneficiaries of the growth trends we perceive.
Photo: Citi Investment Research & Analysis
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