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Rising oil prices, higher interest rates, and the continued threat of terrorism will not stop the stock market from enjoying a greater infusion of capital for the rest of the year, says an enthusiastic Ty Burroughs, president of Burroughs Financial Group Inc. in Atlanta. “I am optimistically bullish for the remainder of 2005,” he says. “Market participation will steadily increase as investors regain a renewed awareness that momentum is heating up for the equities market.”
Burroughs says momentum is building due to continued buying activity by U.S. corporations. And while current estimates of equity mutual fund inflows are at their lowest levels since the early 1990s, the steady decline of corporations floating their shares might trigger a significant market shift. “I believe that a paradigm shift will occur by the end of the year, transferring capital from interest bearing accounts into equity-based investments,” predicts Burroughs. “This new infusion of capital should catapult the Dow and S&P 500 past 11,000 and 1,300, respectively.”
Burroughs Financial helps more than 200 clients manage $60 million worth of equity investments, and watching the ebb and flow of stock purchasing is one of the ways it determines which way the market may be headed. Other indicators are corporate management buying and selling patterns, and the market capitalization of individual stocks and their price-to-earnings ratios. “I have to identify whether or not the insiders are net buyers or net sellers of their own common stock,” says Burroughs. “I’m also a strong proponent of value investing — stocks that trade at low multiples relative to their earnings per share,” he adds.
One company Burroughs is bullish on is Motorola Inc. (NYSE: MOT), which provides communication and electronic solutions. “Motorola has been manufacturing a wide range of excellent products that are competitively priced,” he says. “I’m expecting the company to do well this Christmas season.”
Another tech company Burroughs thinks has excellent potential is Apple Computer Corp. (NASDAQ: AAPL). Apple designs, manufactures, and markets personal computers and related software and peripherals, as well as personal computing and communicating solutions. The big drawing card for Apple has been the iPod and its accessories. “The iPod customer base is expected to double within the next 18 to 24 months, and that will further entrench Apple’s market share over its competitors,” says Burroughs.
Comtech Telecommunications Corp. (NASDAQ: CMTL) manufactures and markets sophisticated wireless telecommunications transmission products and solid-state high-power broadband amplifiers for commercial and government market segments. “Comtech was just awarded a $1 million satellite modem contract from U.S. Satellite, in addition to a $2.8 million satellite contract in Latin America. Momentum is building for them to gain greater market share and market capitalization,” says Burroughs.
Shifting to real estate, Burroughs likes D.R. Horton Inc. (NYSE: DHI), a company that designs, constructs, and sells single-family homes. “D.R. Horton is one of the best-positioned companies in the housing sector due to its core management focus and positive fundamentals” says Burroughs.
And Burroughs’ final selection is TALX Corp. (NASDAQ: TALX), a provider of automated employment and income verification, and unemployment