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Top 10 Stocks to Consider in 2009
Tuesday January 06, 2009 With all the uncertainty in today's economy, many investors look at the stock market like a leper colony. But there are a lot of very sound opportunities in the stock market. Here's a list of the Top 10 Stocks for 2009, as first reported by MSN Money senior markets editor, Jim Jubak: The 5 best stocks for the first half of 2009 Deere (NYSE: DE), a farm machine producer that tracks the price of agricultural commodities. Yield: 3.1%. Enbridge (TSX: ENB), a natural-gas and oil pipeline company that has a 3.8% yield. ExxonMobil (NYSE: XOM), the world's best integrated oil company for the current environment. With a yield of 2%, these shares just make my cut.Flowserve (NYSE: FLS). Can you say infrastructure? It makes pumps and valves for moving everything from water to oil and has a yield of 2%.Rayonier (NYSE: RYN), a producer of wood products and an owner of timberland. Yield: 7.2%.The 5 best stocks for the second half of 2009 Goldcorp (NYSE:GG), the world's low-cost producer of gold. Google (Nasdaq: GOOG), the dominant Internet search company just gets more dominant.HSBC (NYSE:HBC), the best banking franchise left standing in Asia.Petrobras (NYSE: PBR). The Brazilian national oil company has dozens of new fields under development. Thompson Creek Metals (TSX: TC), the second-largest private producer of molybdenum in the world. Here are a few words from Jubak's article on how and when to invest in these stocks: My selection of the 10 best stocks for 2009 -- and my strategy for when to invest in them -- is designed to help you do three things: Make some money (although not a lot of money) in the first half of the year. Get you into position for a rally in the fall.Make sure your portfolio is ready for 2010, when the economy itself is likely to be in recovery mode and the major long-term trends driving the global economy will be your key to market-beating returns.Always thinking ahead Stock prices are built on anticipation. The market indexes had been falling for months before we got the initial gross-domestic-product numbers in October showing the economy had started to contract in the third quarter. And stocks have kept falling since then as investors have anticipated that the economy would contract even more -- maybe at an annual rate of 4% or 5% -- in the three months that end in December. Anticipation of an end to the recession and an economic recovery will start stocks moving up again well before the recession is actually over. The historical record shows that stocks start to recover, on average, about two quarters (or six months) before an economic recession ends. In other words, if the U.S. recession ends in the fourth quarter of 2009 or, more likely, in the first quarter of 2010, then we can expect stocks to rally starting in the summer or fall of 2009. Timing is trickyTiming the turn can't be exact. There's the risk of being early. The U.S. economy could struggle for longer than I now expect, and stocks could linger at low levels into 2010. But there's also a risk of being late. If the bottom for the Chinese economy is in the second quarter of 2009, as Goldman Sachs now projects, then the global economy would start to pick up before the fourth quarter of 2009, and stocks would be likely to rally earlier than the fall of 2009. So 2009 presents quite a strategic challenge. In the first half -- or even three-quarters -- of 2009, you'll need to play defense. (But you don't want to be completely on the sidelines, just in case growth in China does bottom in the second quarter.) That means losing as little money as possible as stocks continue to founder while picking up a few percentage points of return here or there. In the first part of 2009, I'd be very happy with anything like a 5% return from a stock portfolio. (Why not just stick it in supersafe Treasury bills or notes, you ask? Have you seen the yield on T-bills lately? It's as close to zero as you can get.) Then toward the end of the year, move more of your portfolio to offense, without taking on a huge risk in case your timing is off. We know from the end of other bear markets that the first months of a bull market can produce explosive returns. But bear markets are notorious for producing final rallies that pull investors in and then fail, sending the early birds reeling to yet more losses. Building a coreSo what kind of stock picks could possibly work in that kind of uncertain and labyrinthine market? I'd suggest these 10 culled from the 50 in my new book, "The Jubak Picks." (I'll post the full list of 50 when the book comes out Dec. 30. This long-term portfolio will replace my existing 50 Best Stocks in the World list. You'll be able to find a link to it near the top in the left margin of every column, just under my 12- to 18-month portfolio.) Why did I pick these 10 from the 50 in my book to be my best picks for 2009? First, these stocks offer what I'd like to see now and for the next six to nine months: safety, a modest dividend return of at least 2% to 4% and some upside leverage if the global economy delivers a positive growth surprise. And second, they offer what I'd like to see for later: exposure to the most timely of the 10 long-term macro-investing trends that I describe in my book. (You can find a list of these 10 trends in my Oct. 21 column, "10 trends for long-term gains.") By buying these stocks, I start creating the core of a long-term portfolio for the five years or more after this bear market. Use some cash to ease your way into positions in the five stocks in my picks for the first half of 2009 on dips in the stock market. Look for a stretch of days when the Standard & Poor's 500 Index is sitting near 840, which looks like a bottom for this stage of the bear at least. Or you can also start to dollar-cost average into these stocks. That's an especially useful method if you are a beginning investor starting a portfolio. Don't rush into investing all your cash. Remember this is still a high-risk bear market. And you want to have cash on hand to invest in my best stocks for the second half of 2009 when the time is right in the fall. If you're a beginning investor or have moved all your cash to the sidelines, I'd suggest buying at a pace that puts about 25% of the cash that you ultimately want to devote to stocks into the market by mid-2009. How to rebalanceIf you're already invested, as I am in Jubak's Picks, I suggest rebalancing your existing portfolio using these dividend-paying stocks to replace other stocks in the sector that don't pay you to wait. If the stock allocation of your portfolio is already 50% or more in the market, I wouldn't recommend increasing that commitment to stocks now. I've got Jubak's Picks at almost 50% in cash as of Dec. 16. That means I've got just 50% of my stock portfolio actually in stocks. (I run an all-stock portfolio on these pages. You, I assume, have some money in other instruments, such as bonds. I'm writing here only about the stock portion of your portfolio.) And I'm trying to keep my cash position at roughly that level even as I shift the portfolio to take advantage of the current opportunities in the market. Think about gradually putting another 25% of your cash to work in the fall -- if it looks like the economic scenario that I outlined at the beginning of this column is working out as projected. Increase that buying if the recovery seems nearer than the end of 2009 -- or if we get a major "buy" signal from technical indicators. Hold off or slow down your buying if the economy sinks deeper and faster than economists currently project. Remember this second group of five stocks isn't designed to pay you to wait. Don't try to hit a home run in 2009. You're likely to wind up whiffing. A solid single or two, maybe even a double, would be enough to turn 2009 into a better year for you than just about anybody expects right now. Read the complete article here. At the time of publication, Jim Jubak owned or controlled shares of the following companies mentioned in this column: Deere, Enbridge, Flowserve, Goldcorp, Petrobras, Rayonier and Thompson Creek Metals. He did not hold short positions in any company mentioned.
Infrastructure Stocks for 2009
Thursday December 11, 2008 President-elect Barack Obama is focusing his economic recovery strategy on making the biggest investment in the nation’s infrastructure since President Dwight D. Eisenhower created the interstate highway system a half- century ago. Speaking yesterday at a Chicago news conference and on NBC’s “Meet the Press,” Obama said state governors have many such projects that are “shovel ready,” meaning they could be undertaken swiftly and have an immediate impact on jobs. He declined to specify a price tag for the stimulus, saying his advisers are “busy working, crunching the numbers, looking at the macroeconomic data to make a determination as to what the size and the scope of the economic recovery plan needs to be. But it is going to be substantial.” (Read this article in its entirety, here) Here are a few companies that are in the building of building. AECOM Technology Corporation (ACM) is a Los Angeles, California based company which provides architecture, engineering, construction management, project management, asset management, and environmental consulting services to governments and industry. Their P/E is 27.97 and their PEG is 1.12.
Stock market recovery in 2009?
Thursday December 04, 2008 NEW YORK -(Dow Jones)- Asked to describe his performance this year, value manager Bill Miller said that "terrible," "disastrous" and "awful" are words that come to mind. But Miller is expecting better for himself and other value managers in the coming year. It looks as if the "bottom was made" in the stock market earlier this year, both from a psychology standpoint and "from what we've seen in the credit markets," said Miller, chairman and chief investment officer of Baltimore-based Legg Mason Inc.'s (LM) Legg Mason Capital Management Inc. If we aren't going to have 20% unemployment and gross domestic product down 15% or 20%, historical odds favor the market being up well over 20% in the next year, Miller said at the money manager's year-end briefing. "Panic is really hard to sustain," said Miller, so the worst case for next year "is the market just moving sideways." Any recovery from this year's slaughter, however slight, would likely be a welcome respite for Miller. His Legg Mason Value Trust (LMNVX), which outperformed the S&P 500 for 15 consecutive calendar years through the beginning of 2006, is down more than 59% this year through Tuesday and more than 12% over five years, according to Morningstar Inc. In comparison, the average large blend fund has lost about 42.4% this year through Tuesday, and is down about 3.3% over five years, Morningstar said. "We have performed far worse than I would have predicted we would," said Miller. "We have had maybe a tougher time than most value investors, but few are doing well because value spreads have widened." When those spreads start to narrow, value managers should do very well, he said. Miller said he has seen characteristics of late that are consistent with a market bottom, such as a series of lows over a course of a few months. No one knows for sure whether those signs mark the end of this bear market or just a bear-market rally, he said. But Miller echoed Warren Buffett, saying, "If you can buy U.S. equities at these prices, you are likely to do well over time." Value Trust is experiencing redemptions, though they have been "pretty steady" over the past year or so, meaning that they haven't accelerated or declined over the period, Miller said. The fund is pretty much fully invested, though its cash position is currently higher than its normal "1% or so," he said. "It's not like we are sitting out there with 30% or 40% in cash like a lot of hedge funds are." What he's trying to do and what he believes other value managers are trying to do is to "keep moving your capital to where it can give you the best risk- adjusted returns over whatever time horizon," Miller said. Since the end of the second quarter, there's been "a pure scramble for liquidity," he said. "People sold without regard to value." As a result, quality is very cheap now, Miller said. The only place where relative values aren't as good is the consumer staples sector as well as companies regarded as bulletproof, such as Wal-Mart Stores Inc. (WMT) and Johnson & Johnson (JNJ), Miller said. Colgate-Palmolive Co. (CL) is a good example, he said. He noted that at one point a few days ago, Colgate traded at a higher price/earnings multiple than Google Inc. (GOOG), likely because Google is younger and less well-known. Google was one of Value Trust's weakest performers in the quarter ended Sept. 30, according to a regulatory filing made Tuesday. The Value Trust fund currently holds Time Warner Inc. (TWX), which closed at $ 9.11 Wednesday, and Citigroup Inc. (C), which closed at $7.82, but nothing else in the single digits, Miller said. The fund took a stake in credit-card company American Express Co. (AXP) in the third quarter, according to the filing Tuesday. "You can buy now the No. 1 companies in a wide variety of industries" very cheaply, Miller said when asked about that purchase. Value Trust also added positions in Bank of America Corp. (BAC), EMC Corp. ( EMC), Microsoft Corp. (MSFT), NYSE Euronext (NYX) and 3M Co. (MMM) in the third quarter, according to the SEC filing. Among the stocks the fund sold were American International Group Inc. (AIG), Countrywide Financial Corp., Expedia Inc. (EXPE), Freddie Mac (FRE), Goldman Sachs Group Inc. (GS) and Sprint Nextel Corp. (S), according to the filing. Bank of America bought Countrywide in July. Among Value Trust's top 10 holdings as of Sept. 30 were Amazon.com Inc. (AMZN) , Citigroup, Sears Holdings Corp. (SHLD), General Electric Co. (GE), JPMorgan Chase & Co. (JPM) and Eastman Kodak Co. (EK). Asked how far along we are in the delevering process, Miller made it clear that things can change quickly. "There is a huge amount of cash sitting out there on the sidelines," he said. "To the extent that that cash starts coming in, delevering will essentially be over." Miller said the Federal Reserve should "buy everything in sight" because "the taxpayer is going to make a killing." There is virtually no investor who doesn't believe there is value in the market, he said. |
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