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Watch Hilary Kramer’s CNBC Interview on the Fiscal Cliff

September 28, 2012, 9:35 am

The impending “fiscal cliff” is in a bit of limbo right now as Congress and the nation turn their attention to the upcoming election. Some behind-the-scenes talks and ideas are reportedly taking place, and they have to result in something. The government’s own Congressional Budget Office has warned of the economic consequences of the going over the fiscal cliff, and new research from Citi is also causing a commotion on Wall Street.

Citi expects a severe 20% selloff in the market that could have the S&P 500 tumbling as much as 300 points in early January and the Dow sliding more than 2,000 points. But the fiscal cliff could impact more than just stocks; the research suggests that oil prices could drop by $20 a barrel, unemployment would surge to at least 9.5% through 2014, we could see a 5% appreciation in the dollar, and GDP could shrink to -1%.

Another number that we don’t want to ignore is $450 billion. That’s the approximate hit to the U.S. budget when taxes that were rolled back by President Bush come back into effect in 2013. It’s a pretty scary number, one which I discussed on CNBC’s Kudlow Report last week, and you can watch my full analysis by clicking on the video below. Then, continue reading for my exclusive advice on investing in this uncertain environment, including three stocks that are great buys despite potential volatility.

The message is clear: If lawmakers are not able to find common ground in the debate over taxes and spending cuts, the damage to the market and the economy could be severe.

Now, for those of you who know me and my investment strategy, you know that I’m bullish on stocks and optimistic that the U.S. is on track for a slow but eventually full economic recovery. And while I’m confident in the resiliency of American companies and hopeful that Washington’s decision-makers will patch together an agreement before year-end, there’s no sugar-coating the fact that conditions in the U.S. could worsen if lawmakers sit on their hands this fall.

But even if the solution isn’t in place by December 31, I do expect something to get done early in the New Year, which could set the stage for a pretty good 2013 as the global economy regains some momentum and Europe’s debt crisis gets closer to resolution. As you know, my focus here in Kramer Capital Researchis on the longer-term potential, which remains good. Yet, I’m still mindful of the crosscurrents, so I’m focusing on companies that are growing even amid all of the uncertainties.

So, now, I’d like to tell you about three such companies. All have great growth potential and opportunities despite, and even because of, the uncertain economic climate. Let’s take a look:

1. Vascular Solutions (VASC) is a little-known medical device company that is leading the fight against the #1 killer in America–heart disease. Even a global economic slowdown won’t stop people from getting–and treating–heart disease. VASC has a strong history of developing products that meet unmet needs (such as next-generation catheters), and stands to benefit from the growth of the entire industry.

Vascular Solutions is a quality, growing company that has been a real innovator in its field. Its new products should help keep results strong, with annual earnings growth expected to be in the 15% range. There is also a chance VASC could get acquired with all the M&A going on in health and biotech stocks right now. Its strong cash flow, solid balance sheet and high gross margins would all be very attractive to a potential suitor.

2. AutoNation (AN) is the largest U.S. retailer of new vehicles, with 315 dealerships across the country and 32 different manufacturer brands under its belt. AutoNation sells used cars, but it derives more than half of its revenue from the sale of new cars. And unlike industry competitors like General Motors (GM), AutoNation’s share price has steadily increased from its 2009 low of $4, to the $40 range where it trades today, climbing11% this year alone.

But it is AutoNation’s position in the market that has me watching this stock as it closes out the year. AN reported second-quarter earnings that beat analysts’ expectations, and shares soared to their highest levels since September 2009. Sales were up 17%, to $3.9 billion, and profits from continuing operations beat 13 analysts’ expectations of $0.59, coming in at $0.66 per share.

3. Jack Henry & Associates (JKHY) is a dominant player in processing transactions and managing information for financial institutions and corporations. Today, the company serves almost 11,000 clients and generates almost $1 billion in sales. 

JKHY has a strong market position, and solid financials. In the most recent quarter, revenues were up 9%, operating income was up 18% and earnings increased by 20% to $0.42 a share from $0.35 the previous year.

Electronic payments are the future of money, and we are well on our way to being a cashless society. Debit cards now rule the day–outpacing credit card use for the first time ever. But now Jack Henry & Associates is bursting onto the scene with a new payment method that could make both debit AND credit cards obsolete. This is just one of the reasons I’m excited about JKHY, and the stock is already proving to be a winner for my GameChangers readers.

Despite the uncertainty, now is still a great time to take advantage of select opportunities in the market as we close out the year. While I am keeping a close eye on the political and economic developments that could move stocks in the last quarter of the year, there are still plenty of worthwhile investments to take advantage of, and my strategy puts us in the right place to make the most of all the market has to offer.


  1. You failed to point out that after the Bush tax cuts business boomed. This resulted in the largest tax receipts in HISTORY! In any event Romney will win and this cliff will be filled with prosperity.

    Comment by Lee Spencer on September 28, 2012 at 3:33 pm
  2. In response to Lee Spencer: True the Tax cuts of the ‘previous era’ were done to spur spending and create boom. However, if you ask any scholar he or she will agree at that time there was no impending “Fiscal Cliff”.
    Taxation is not written in stone; its flexible and changes with needs. Sometimes there is tax cuts and other times those tax cuts expire.

    Comment by Anonymous on September 28, 2012 at 4:16 pm
  3. You look beautiful talking with Joe K. And of course enjoy hearing your comments.

    Comment by Tony Carriera on September 28, 2012 at 6:44 pm
  4. I belong to your High Octane stocks and Hilary your picks lately have been dismal. All of these ads on the side promoting and listing your great high yielding winners may be just simply leaving off all the losers.

    Comment by High Octane Stock Investor on September 29, 2012 at 5:50 am
  5. As Hilary stated if law makers let Bush era tax cut expire, the tax increase along with increased taxes/penalties on the business due to Obama Care legislation wll cause fiscal cliff. After listening to both democratic and republican law makers, democrats and our president are misleading and misinforming the public by saying that Republicans want to cut taxes on rich and increase taxes on middle class. But the Republicans are only asking to keep the tax rate low on everyone by not letting the Bush Tax cuts expire. I am really worried about the state of the economy if Obama get reelected.

    Comment by Mike K on September 29, 2012 at 6:45 pm
  6. I took her recommendation on JPM back in late May, and early June of this year when they were bottoming out and haven’t regretted it yet. I still think they’re undervalued.

    Comment by Mr. Crutchfield on September 29, 2012 at 8:37 pm
  7. The “fiscal cliff” will not happen.
    The Republicans are not really interested in deficit reduction, they just want to defeat Obama by making his future look bad.
    So if Obama wins, they will make a deal to avoid the cliff.
    If Romney wins, same deal, no cliff.

    Comment by robert on September 30, 2012 at 12:12 am
  8. The cliff, wont happen, if the Euro didnt fail, after what seemed the end of the world, with Greece , Spain, ireland , almost all but Germany, struggle.. but seem to be stable somewhat.
    The americans cannot blame former politicians for everything, thou they contribute plenty .. if it is known it can change, anything, interest rates super low, positive,, heaps of volitility there is safty in Gold usally
    The market has climbed the last 3 yrs, caution always needs to be in play

    Comment by steve R on September 30, 2012 at 9:25 am

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