Benzinga - by Cory Mitchell, Benzinga Contributor.
Following a nearly 11% decline in the S&P 500 between July 27 and October 27, buying pressure is coming back into the market and several Market Health Indicators are signaling that a bottoming is likely in place.
When those indicators—which include Lowry Upside Days, Follow Through Days, percentage of stocks above their 50-day moving average, rate of change, and the NYSE advance-decline line—turn favorable, consider taking long positions in strong stocks as a rally is underway.
Marsh & McLennan Companies Inc. (NYSE: MMC) is an example of a strong stock with a long history of solid performance.
- It is up 146% over the last five years, which is more than double the 73% return over the same time frame of the SPDR S&P 500 ETF (ARCA: SPY).
- It has grown earnings by an average of 18% per year over the last five years, versus the 9% median growth of S&P 500 stocks.
- Analysts expect the company to grow earnings by 11% per year going forward, outpacing the 9% median expected growth for S&P 500 stocks.
- It has a 1.5% dividend with the dividend amount growing an average of 11% per year over the last five years.
- The company is buying back shares, with a buyback yield of 1%.
The bottoming pattern is a rounded bottom. It occurs when price makes a transition from making lower swing lows and lower swing highs to higher swing highs and higher swing lows.
The pattern is still forming. Following a new swing high, which has already occurred, there is generally a pullback followed by a rising price (creating a higher swing low). Since MMC is a relatively stable stock, the pullback is likely to be in the vicinity of 2% to 4%.
Long-term investors could enter anywhere between the current price of $194.60 and $188 (on a pullback).
Consider holding the stock in the portfolio as long as it maintains attractive characteristics like those mentioned above. This is what makes it one of the best buy and hold stocks in the stock market right now based on a combination of historic and expected performance.
As an added bonus, MMC is trading at one of its lowest P/E ratios in the last five years. The current P/E is 28 and forward P/E is 22.5. P/E values have ranged between 22.5 and 40.6 over the last five years. Due to the quality of the stock, this is about as cheap as it generally gets.
MMC is a risk and insurance services and consulting firm.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.