While few ever believe it, only two things end any bull market. Like that simple straight vector you learned about in high school physics—except that bull markets wiggle wildly—it's either by losing steam or by running up against a newly emergent wall. Keep a lookout for both.
Running out of steam is best seen via legendary investor John Templeton's four-phase quote: "Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria." Upon reaching euphoria bull markets lack energy to propel them further. Bulls climb the legendary "Wall of Worry," and when all worries wane to well-worn whitewashing, you're out of steam.
The wall? Any unexpected, immovable bad force. Markets formally digest and discount all known phenomena. What we know about, despite all varied views, is already priced in. Exhibit A: 2008′s mark-to-market accounting! You should watch for surprises, but not many do. Exhibit B: the inverted yield curve in 2000—when worries vanished—that choked bank lending.
But, no, the wall isn't, by definition, excess debt, congressional action (or inaction), ObamaCare, Iraq, Iran, valuations, on and on. And it isn't Crimea (though it might be if Russia truly goes on an unexpected global rampage).
It's a perpetual problem: Either we can't observe the situation in advance or we just don't pay attention.
Solution: Always expect the unexpected! The key and tricky thing is staying on your toes and endlessly looking for it. You're still unlikely to see it. (Few do, and you're quite skilled if you're one of them.) I certainly don't right now.
So I wait, watch and remain bullish, noting we're still, in Templeton's parlance, straddling skepticism and optimism, and, hence, abundant force propels this bull on. Without a wall we're maybe halfway through. Here are five great stocks for that big back half:
A bit cheaper and better run than peers, but larger, Union Pacific Union Pacific is one of America's oldest publicly traded rail lines–linking 23 states in the West and Midwest via the best routes. Invest in the West. This one's the best. It won't go off track at 15 times my 2015 earnings estimate with a 1.9% dividend yield.
As retailing evolves into macro-oligopolies, one dominator is CVS Caremark CVS Caremark, in drug delivery. It will advance from both the inevitability of insurance-revenue growth and aging baby boomers' propensity for endless, self-obsessed medical spending. It sells at 14 times my 2015 earnings estimate with a 1.5% dividend yield.
It isn't so much that I love Swiss-based UBS UBS, arguably the world's largest wealth management firm, but that I see most competitors hurting themselves in various ways, helping UBS gain share. And, as the bull market endures, UBS' revenues naturally benefit–fitting like a glove–driving the stock. It sells at ten times estimated 2015 earnings, with a 1.4% dividend yield.
Within Australia's banking oligopoly, National Australia Bank (NABZY, 16) is the fourth-largest retail but largest business bank. Widening global yield curve spreads (long-term interest rates minus short-term) should boost lending and profitability. It's also Down Under's cheapest bank at only 11 times my 2014 earnings estimate with a fat 5.5% yield.
This column's smallest, most-speculative and lowest-quality pick is Textron Textron. It's below what it was 15 years ago but is now a better firm. Called a conglomerate, it's grown ever more strategic while analysts sour on it. For example, Textron last month completed its acquisition of Beechcraft's parent company; that and its Cessna line (both based in Wichita) make Textron the clear small-plane leader in America–just as this market is bottoming–with huge cost-cutting opportunities.
Today's Textron is an aerospace firm with a tail of other businesses. It sells at 90% of annual revenue and 14 times my 2015 earnings estimate. But I bet it's at four times 2020 earnings–unless we hit that unseen wall.
Money manager Ken Fisher's latest book is Markets Never Forget (But People Do) (John Wiley, 2011). Visit his home page at www.forbes.com/fisher.