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Only three weeks to go before the list of contenders are finalized into my ten picks for 2010. There were 14 before I added three more today and moved one of the stocks on the fence up, leaving another three still on the fence.
I continue to read everything I can get my hands on and recommend doing the same to anyone else seeking to do some stock picking. A lot of the recommendations I come across project possible appreciation of 10% to 15%, and that would be great, but I am seeking at least the potential to double that.
Current Contenders
- Abbott Laboratories (ABT)
- American Eagle Outfitters (AEO)
- Anadarko Petroleum (APC)
- Anglo American ADR (AAUKY)
- Berkshire Hathaway (BRK.B)
- Brown-Forman (BF.A)
- Diageo plc (DEO)
- EZCorp (EZPW)
- E-Trade (ETFC)
- Grubb & Ellis (GBE)
Brasil Telecom (BTM) was going to be a separate story based on it's amazing numbers, but I decided to focus Chasing Value on this series until January. It came to my attention screening mid-caps for yield, currently 7.6% and P/S 0.52. Then I took a closer look because I have been reviewing Brazilian companies to diversify and because Rio de Janeiro will be hosting the 2016 summer Olympics.
Well the numbers seem too good to be true. The P/B is 0.79, the P/E is under 6, the ROE and ROIC are 20, the debt is manageable, the P/CF is only 2.2. These are among the best metrics I have ever seen. Analysts rate it a hold, based on its recent price run-up, but that did not dissuade me. I did need a little sobering up so I called David Racusin, an opinionated friend with Amerprise Financial to wake me up to the error of my ways, but he could not find much fault it either, so we concluded it's just price. It was around $30 last Friday. We will have to see where it ends up come decision time.
Deere & Co. (DE) has been getting some attention lately as a fine company that has not yet bounced back as much as many less substantial companies. I just ran it through the mill recently and it was one of four survivors from a list of twenty formidable companies; see Serious Money: Fortune's 25 leaders, final 4. Among the standout metrics were an average P/E but a downright cheap P/S of 0.59. Deere also maintains a shareholder friendly ROE of 29.94. While the stock has recovered from the first quarter closing at $54.24 last Friday, near it's 52-week high, it is still only half what it was at its peak two years ago.
General Electric Co. (GE) is being moved up to the contenders list. There is just too much potential. It has a low P/E, P/S, and P/B, a solid dividend, and it's stock has been in the dumps for too long. It made the best showing of any of the 25 stocks included in last week's Serious Money series mentioned above.
TNT Post (TNTTY) is the third stock from the Fortune leadership list (FedEx was the fourth) and is the only national postal service to become public. It derives 30% of its revenue from Dutch mail delivery and the rest from its foreign messenger service. Having a low P/S of 1.11 and a high ROE of 31.35 make it worth following. Like the other major delivery services, an improved global economy positions it for continued growth.
Naked puts (sell to open put options) See Chasing Value: Ten stocks for 2010 -- Part 4 for the analysis of these options:
- E-Trade (ETFC) -- April 2010 puts (EUS-PY) with a strike price of $1.50 are offering $0.30 a share.
- EZCorp (EZPW) -- March 2010 puts (ULP-OC) with a strike price of $15.00 are offering $1.55 a share.
- Ford (F) -- January 2010 puts (F-RK E) with a strike price of $8.00 are offering $0.91 a share.
- Wells Fargo (WFC) -- April 2010 puts (FHU-PA) with a strike price of $27.00 are offering $2.85 a share.
On the Fence (GE moved above)
Out of the Running
- American Oriental Bioengineering (AOB)
- Annaly Capital Management (NLY)
- Avi BioPharma (AVII)
- Exxon Mobil (XOM)
- Intuitive Surgical (ISRG)
- Johnson & Johnson (JNJ)
- Tupperware Brands (TUP)
- Wells Fargo (WFC)
Four more possibilities. So many things affect the potential gains. I often wonder how one is to make such calculated guesses when the people inside a company with supposed special knowledge can't even predict their level of success very well.
Series commentary for the other listed stocks can be found here: 2010 picks: Part 1 / Part 2 / Part 3 / Part 4 / Part 5 / Part 6
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: Among the positions discussed in this post I own shares of GE.
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Reader Comments (Page 1 of 1)
12-08-2009 @ 3:00PM
kpinvest said...
This is a great series; I really do enjoy reading these. I was curious about BTM, so I just hit up Google Finance real fast. Their EPS is -1.32, they haven't paid dividends since December of last year (I guess it's an annual dividend), and the insiders only hold 3% of the company. I haven't done my research at all, but at initial glance, I don't think I'd run out to invest money in this company. I look forward to Chasing Value :)