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You don't have to be 007 to find the best picks for 2007!

Posted Dec 28th 2006 5:51PM by Sheldon LiberSheldon Liber RSS Feed
Filed under: Forecasts, Time Warner (TWX), Home Depot (HD), China, Market matters, Getting started, Columns, Duke Energy (DUK), Dow Chemical (DOW), ETF Investing, Valero Energy (VLO), PetroChina Co Ltd ADR (PTR), Huaneng Power Intl ADS (HNP)

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bond, james bondThey are hiding under newspapers and in the newspapers. They are lurking in back alleys and under the stairs, under the sink and on the shelves in the garage. Some are in far-away lands and can easily slip by undetected by the average investor. Some are so obvious you do not give them a second thought. Sometimes they are screaming at you from the radio and television but you tune them out.

Great companies and great stocks can be found everyday and everywhere you look. However, sometimes we look but we do not see. How can that be? Well, just follow me, and I will bring a brighter light to illuminate my picks for 2007 and beyond. Listed here in alphabetical order are my seven for 2007, with links to longer, deeper analyses:

Disclosure: I own shares in DUK, HNP, PTR, and TWX. I do not own DOW, HD, or VLO as of this writing, but I am considering them all right now, as you may be.

The Dow Chemical Company (NYSE: DOW): Dow has been trending downward for over two years from its high of $56 per share. Last night it closed at $40.14 -- roughly the same share price as three years ago.Its 52-week low was $33, which I do not believe we will see again, but anywhere between $33 and $40 should be a steal. Consider adding DOW to your watch list and buying it at an even greater discount. I think the company will pay handsomely now and in the long-term.

Duke Energy (NYSE: DUK) -- Earlier in the year I reported that the Dow Jones Utility Index had beaten the Industrials across the board for six-month, year-to-date, one-year, three-year, five-year and 10-year periods. Another vote for boring stocks. If you follow the reported activities of Warren Buffet over the past few years you will also find he has been acquiring utilities for Berkshire Hathaway. Now factor in a very good dividend yield of 3.86% and you might be compelled to consider this stock. I cannot say that DUK is cheap. But there is plenty here to at least justify putting it on investors' watch list to facilitate picking some up on an off day or week.

The Home Depot Inc. (NYSE: HD) Like many of my picks, you will find I look for out-of-favor companies with depressed stock prices and compelling stories, while ignoring most analyst banter. Home Depot has been buying back shares all year, and on December 14, 2006 it announced it would buy back another $3 billion worth -- why? While sales and profits are growing, its same-store-sales have been depressed by the reduction in housing starts and declining home sales in many markets. So here you have a shunned company with a low P/S, low P/E, high yield, good ROE, ROA, ROIC, a stagnant share price, and tremendous assets. It has to be on your watchlist and, if it falls even a little, perhaps on your buy list.

Huaneng Power International ADS (NYSE: HNP) Yes, I know you have heard me push this stock before. If you regularly read my stories you have heard it many times. This is one of my favorite companies and, unless something changes, it will remain so for the rest of my life! It is particularly attractive in a Roth IRA where you can collect the dividend tax free. Since I started proclaiming this as a must-own stock it is up over 40% in real terms and much more on an annualized basis. The shares have climbed so much (you can't see it but I'm taking a bow, thank you very much) that I must express a word of caution. It is at an all-time high and that is not usually the best time to buy. But we are not trying to time the market, just appreciate it over time.

PetroChina ADR (NYSE: PTR) Okay, I admit it, I love this company! I bought it at $44 and again at $55 per share. You could have bought in at anytime in the last two years and made good money. I think it will remain a big story for a long time and smart investors will want to look at it.

Time Warner Inc. (NYSE: TWX) On this one James Cramer and I agree 100%, but I was there first! We are in at $12.10. I also agree with Cramer that TWX could easily be $28 to $30 per share in a year. Management has made bold moves with AOL, radically changing the business plan, now offering free service and continue to focus each business segment. I expect that we will see the metrics improve significantly over the next few quarters as it reports growing earnings.

Valero Energy (NYSE: VLO) This is an unbelievable value in my opinion, and even more incredible because it has been hiding in plain sight. This stock has gotten some attention because it has a P/E of 5.8. That will get a lot of people's attention. But the metrics for this company are amazing, top to bottom. If you want a stock that has all the upside potential in the world, and what appears to be strong downside protection, take a look at Valero Energy.

Common themes:

You will note some common themes among my picks. They all pay dividends and are suitable for Roth IRA's. They are large cap stocks and provide some level of safety in down markets. They are well-established companies with long histories and huge cash flow. Four companies are energy-related. They all have a story beyond the numbers that I find compelling and may not have been considered by the average investor or even from any analyst's perspective, so I hope I'm bringing some fresh ideas to the reader for your consideration.

I want to add that, as of this writing, my portfolio is up 29% for the year with two days to go. If you go back and look at my 100+ stories you will be able to substantiate for yourself a very strong record, or ask Mr. Noital, someone who has been following my stories closely. And December 27, 2006, another milestone, if you ask our editor Amey Stone, she will verify that I thought that the Dow would likely hit 12,500 this month for quite some time [Amey's note: It's true, folks!].

What I'm proudest of, about all of my recommendations is that I stayed away from the Googles of the world and demonstrated that you do not have to take big risks to make money. To paraphrase General George S. Patton, 'Let the other son-of-a-B take the risks to make his money'.

In closing:

All of the data given is from AOL Money & Finance. I expect this group of seven stocks to beat the market considerably over the next year. At a minimum I would put them all on your watch list. I will be tracking them publicly on the BloggingStocks site. Right or wrong you will see it.

Check out my other posts for BloggingStocks here.

Lets discuss your picks for 2007

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.

Tags: Amey Stone, AmeyStone, Dow Chemical (DOW), DowChemical(dow), Duke Energy (DUK), DukeEnergy(duk), Home Depot (HDR), HomeDepot(hdr), Huaneng Power International (HNP), HuanengPowerInternational(hnp), Petro- China (PTR), Petro-China(ptr), Sheldon Liber, SheldonLiber, Time Warner )TWX), TimeWarner)twx), Valero Energy (VLO), ValeroEnergy(vlo)

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