It was July 1, 2008 when I first posted Serious Money: Five stable stocks for troubled times. The title speaks for itself. This update, after nine weeks and horrible market conditions, is through Friday October 3, 2008.
The index for comparison is the Standard & Poor's 500 Index, which closed on June 30, 2008 at 1,280.00. The S&P closed Friday at 1,099.23 , down 14.12%.
Each of my five picks is beating the market and three of the five are actually up despite crushing news in the financial sector, unemployment and housing. Congress did pass a Wall Street backstop/bailout bill that President Bush has signed, but only after adding another 450 pages and $130 billion to the amount. Although the five stocks have averaged a 0.75% loss, as intended, they easily beat the S&P by 13.37%.
Here are the five stocks that I still think are worth considering. For my original rationale see the linked story above.
1) Johnson and Johnson (NYSE: JNJ) -- when recommended, the stock closed at $64.34 and paid a 2.89% dividend yield. It closed Friday at $66.16 -- up 2.75%. JNJ was featured in Barron's this month as the most respected from the top 100 companies in the world.
2) Teva Pharmaceuticals ADR (NASDAQ: TEVA) -- when recommended, the stock closed at $45.80 and paid a 1% dividend yield. It closed October 3 at $46.08 -- up 0.06%0.62% Teva (of Isreal) is the largest generic drug company in the world and just got bigger through the acquisition of Barr Pharmaceuticals last month.
Many people are questioning why they should be in the stock market at all, now or ever. One person even asked me to show him a single stock that has had anything positive to show for itself in the last ten years.
How about something positive over the entire ten years, or at least eight. Given I have made many sour picks this year I was proud to reveal one of my best picks ever and perhaps a good place to hide if you can get in on a dip. I first mentioned it in Scary market -- any safe stocks? about fourteen months ago when the market first took a dump.
My star attraction is the Southern Company (NYSE: SO) and the following is the chart. It has been a consistent performer and paid a dividend to boot which currently stands at 4.38%. As you can see this stock would have allowed you to double your money when the Standard & Poors 500 Index is actually down.
Here is what I said back then:
Southern Company (SO) has been the biggest addition to our family holdings. It is now in at least seven portfolios and I have sold naked puts for November 30's. I AM NOT RECOMMENDING ANYBODY SELL NAKED PUTS. Selling naked puts is very risky and as they say..."don't try this at home folks." I like Southern because it is near a 52-week low, but has had five years of continuous growth. It pays a huge dividend, as utilities traditionally do, and it is located in a part of the country that has relatively low wages, cheap land, good weather, a favorable tax environment and it has seen tremendous growth in the past two decades, which I believe is very likely to continue.
'SO' there is good news to report even in a crappy market. Put this on your watch list. If the next ten years turn out to be as bleak as some fear they might, the dividend alone will provide you with some much needed shade from the heat.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of SO.
I don't normally toot my own horn, but stock picks I made earlier this year through my investment newsletter have done far better than the S&P which has fallen 6% since the beginning of the year.
Each month my newsletter mentions three stocks. I average the percentage changes in the stocks I mention at the end of each month. I also have a stop loss rule in which stocks that decline by 2% are sold from the theoretical portfolio and the -2% return is included in the average for the month.
The top three performing stocks through April are:
In sharp contrast to the ten horrifically downtrending stocks I warned against buying in this article, today I feature these 10 solidly uptrending stocks.
It's charts like theirs that make you wonder why you're messing around with any other stocks. Ahhh, if it was only that easy. No matter that all the stocks listed above are making new highs, now the concern is that they may have come too far too fast. In 2008, several of these stocks-the gold plays in particular-have risen nearly 50%. Obviously the oil stocks have also been surging, but how much further can the "black gold" plays really run?
The Dow Jones Industrial Average is down about 150 points as I peck away on my laptop. I was looking to see what stocks were holding up on a down day, and sure enough one of my favorites showed up -- Precision Drilling Services TR (NYSE: PDS), a stock I recommended two months ago.
I apologize if I seem like a cheerleader, or a play-by-play announcer, but it was only two weeks ago that I posted on what were already strong gains, and this one keeps going up (even though its business is to drill down...).From my original December recommendation at $15.47 per share, PDS has moved up to $22.61 by midday today and climbing, for a 46% gain. This is when the Dow industrials are down almost 7%.
Awhile back, amid the subprime default fall-out, more-somber outlook for the U.S. economy and hence, the markets, yours truly suggested that investors increase the number of defensive stocks in their portfolios. In doing so I drew on a lesson offered by my late Uncle Nick, a lifelong New York Giants fan and season ticket holder. The wisdom:
In tough times, think established companies. Something, as my Uncle Nick would say, "As strong as the New York Giants' defensive front four." And I added that in case one hadn't noticed lately, the defensive front four of the Giants, also the favorite football team of yours truly, is still pretty good.
(My late Uncle Nick, of course, based his advise on the Giants' longstanding tradition of building a strong defense first, because, according to many revered football head coaches, Vince Lombardi and Bill Parcells among them, defense wins championships.)
I don't understand what Microsoft (NASDAQ: MSFT) is doing. Last week at this time, investors were celebrating a very nice earnings report, and after years of watching the stock go nowhere, investors had some hope for the rest of '08. Now comes today's announcement that the software maker wants to buy struggling internet search firm Yahoo (NASDAQ: YHOO), for a 60% premium to where Yahoo stock was trading.
I know that Microsoft wants to go after Google (NASDAQ: GOOG). I also know that I have an egg on my face for a "buy Google into earnings" post that I wrote yesterday. But why pay 60% more than the market price for a company that admittedly has all kinds of problems and no one else wants?
Just when investors had thought they may just make some money with their Microsoft stock, this news comes along and now, I'm afraid it will be many more years until they see their stock move up.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 2/1/08
Among my stock picks this year, Newcastle Investment Corp (NYSE: NCT) may seem to have the greatest risk, but it is a calculated risk and has the potential of very high rewards. It has lost two-thirds of its value since the first quarter of 2007 and I believe has the potential to double if it can just tread water for a couple of quarters. The reason the dividend is so high is that the price dropped due to fear in the market place over its loan portfolio, not a loss of cash flow. The fear is palpable, but is it warranted? I do not think so. On December 28, 2007 NCT closed at $13.08 per share.
Newcastle is a REIT that invests in real estate loans, not the actual real estate, and 90% of those loans are in non-residential projects. Over the past six months, the financial sector has become one big horror story and investors ran from the "financial theaters" in panic. So in my own version of the story, Chasing Value: Newcastle's 21.9% yield too good to be I true?, I decided to play Ghostbusters and tried to make it clear that there is value in NCT. Suppose the yield fell with the stock price as defaults affected cash flow, I could still be very happy with a 7% to 8% yield.
I will summarize here by letting you know I did what homework I could and checked out NCT's recent conference call. This company has averaged an 8.8% yield over the last five years. However, today because the stock is now a third of its recent price, the yield has jumped to 21.9%. Newcastle is standing by this dividend. Actually I think it has to, because REITs are required to pay out most of their profits, and Newcastle has earned 23% over the last fiscal year.
Next week marks the beginning of 2008 and my two high school kids will also receive their first semester report cards, the moment of truth for them. It got me to think perhaps it was time to grade my own performance for 2007 on BloggingStocks. So here goes, the A's to the F's...
The A's:
My recommendation of Aquantive Corp at $24 and stating that Microsoft (NASDAQ: MSFT) needed to buy this company. It did at $66.50. Many readers and members of my investment web site made a near three bagger in less than six months.
Recommendation of Color Kinetics at $19 back in May to only watch it get bought out at $34 by LG Phillips (NYSE: LPL) of the Netherlands.
Recommendation of Kyphon at $37 and have Medtronic (NYSE: MDT) buy it at $71
Recommendation of Opsware at $8 back in March and then again in May at $9 and have Hewlett-Packard Compaq (NYSE: HPQ) buy it out at $14.50
Recommending Apple ( NASDAQ: AAPL) all year and re-iterating the buy since $80, now at $198 with a new price target at $300 for 2008
Writing the exhaustive series of the Top 25 Stocks for the NEXT 25 Years back in May/June. Many of the stocks have been bought out and several are up more than 20%.
Of the 267 stocks whose coverage Kessler oversees, 14 are rated strong buy. From those, Kessler likes these three:
eBay - Up 15% in the last year, eBay still seems undervalued to Kessler. He thinks its marketplace business is pretty strong -- with good growth in the U.S. and Germany, likes its acquisitions of shopping.com and StubHub and thinks eBay will benefit from international growth. He believes that its PayPal unit is "unheralded" and that it will grow by expanding geographically, by taking on new currencies, and by grabbing new off-eBay payment opportunities. He thinks Skype's new management will find a way to monetize the service to its 100 million users and believes eBay, at a P/E of 20 and forecast 2008 EPS of $1.77, is poised to grow 20% at the low end -- and thus it's reasonably priced.
Corning - Kessler likes Corning's business mix of flat panel displays, telecommunications infrastructure, and alternative energy. He thinks it will earn $1.53 in 2008 and that at a P/E of 16 and 16% earnings growth, Corning is reasonably priced.
Oracle - Kessler thinks that despite a forecasted slowdown in corporate spending on technology, Oracle will benefit from two trends: international growth and consolidation in the business software industry -- a trend which Oracle has been pushing. He thinks Oracle is reasonably priced at a P/E of 18 on what he expects to be 2008 EPS of $1.21.
I'd recommend taking a look at these -- but try to decide whether you think they're selling at a good price. One way to do that is to calculate their Price/Earnings to Growth (PEG) ratios -- which divides their P/E by their forecast earnings growth rate. If the number is less than one, the stock may be fairly valued.
Conventional wisdom says that growth in the America container-board market is heavily tied to the health of the U.S. economy, and a company's overall success is directly proportional to the size of the operation. But Packaging Corporation of America (NYSE: PKG), one of the most profitable of all of the U.S. container-board companies, defies both of these notions.
PCA is a relatively small operation, when compared to its rivals. But the company is successful because of two fundamental strengths: a low debt load and flexibility of both fuel and fiber. The low overhead of a company operating with relatively little debt is easy to understand, but there are significant cost savings to be gained in this market as well by having the ability to adapt production to whichever raw materials are cheapest and most readily available.
PCA's flexibility also gives it an advantage over the competition when it comes to the international markets. Other countries, especially in Asia, require different products than the U.S. market does, and PCA's ability to adjust its production process to meet this foreign demand with relatively little change in expense leaves the company able offset any instability in the U.S. economy with income from foreign markets (especially China).
But wait ... there's more! In the giving spirit of the holidays, here's a bonus pick for bargain-hunters looking for stocks under the $10 threshold. Skyworks Solutions (NASDAQ: SWKS), manufactures semiconductors that are used primarily in wireless telephone handsets and infrastructure products. Nearly 40% of the company's sales are thanks to Motorola (NYSE: MOT) and Sony Ericsson Mobile.
The firm has been a solid performer in the earnings confessional of late, topping analysts' expectations consistently for the past five quarters, by an average surprise of nearly 15%. On November 1, the company reported fourth-quarter profit of $22 million, or 14 cents per share, a penny above Street expectations and a welcome change from a year-ago loss of $96.4 million (60 cents per share). Looking ahead to the current (first) quarter, SWKS officials targeted first-quarter profit -- excluding items -- of 15 to 17 cents per share.
It's time to wrap up our list of 10 stocks under $10. The list was culled from a large grouping of momentum names that have outperformed on a relative-strength basis during the short and intermediate term. The selection was filtered to eliminate any stocks trading above the $10 region, naturally, and then adjusted for other fundamental, technical, and sentiment factors. I hope you've had fun learning about some potential bargains for your portfolio and hearing the stories behind some equities that you've likely not come across in your daily investing research.
The last entry (and these have been in no particular order, by the way) is Allos Therapeutics (NASDAQ: ALTH). The pharmaceutical company is hard at work on technology that improves existing cancer medications. According to HooversOnline, ALTH's current lead drug candidate -- PDX -- is in trials to combat T-cell lymphoma. Some of the firm's other proposed treatments work to fight solid tumors and lymphoma.
General Moly (AMEX: GMO) is a mining company that specializes in mineral development and exploration in central Nevada. On November 19, the company announced a strategic alliance with ArcelorMittal (NYSE: MT), which includes MT's purchase of 8.2 million shares at $8.50 per share, for a net investment of about $70 million. After this transaction, MT will own roughly 12.6% of GMO's outstanding shares. GMO will in turn supply approximately 6.5 million pounds of molybdenum each year for five years once its Mt. Hope deposit begins production.
GMO shares have been moving higher since February, when they collided into their 10-month and 20-month moving averages after months of sideways consolidation. Since this impact, the stock has nearly quadrupled in value to hit a new all-time high.
Currently, from a shorter-term perspective, the stock is pulling back to test double-barreled support around the $8.50 level. Not only is this the site of the security's July 2007 valuation (former resistance can come back and serve as support), but it is currently home to GMO's rising 10-day moving average as well.
Ampal-American Israel (NASDAQ: AMPL) is a Massachusetts-based holding company with interest in more than a dozen Israeli and Israeli-related firms. The company's niche business is commercial real estate and the leisure industry, including retail outlets. Earnings at AMPL jumped to $11.9 million in the third quarter -- or 22 cents per diluted share -- compared to the net loss of $1.8 million swallowed in the previous year.
AMPL shares have moved 47% higher in the past 52 weeks, compared to a 4% increase in the S&P 500 Index. The equity's relative-strength showing has indeed been stellar, and has improved as well during the last several weeks. Since September 18, AMPL shares have ridden their 10-day and 20-day moving averages higher to post a gain of 33% in slightly more than 2 months. The recent market pullback has had little impact on the shares, which have continued higher even while the broader market has stumbled.
It was July 1, 2008 when I first posted Serious Money: Five stable stocks for troubled times. The title speaks for itself. This update, after nine weeks and horrible market conditions, is through Friday October 3, 2008.
Many people are questioning why they should be in the stock market at all, now or ever. One person even asked me to show him a single stock that has had anything positive to show for itself in the last ten years.
I don't normally toot my own horn, but stock picks I made earlier this year through my investment newsletter have done far better than the S&P which has fallen 6% since the beginning of the year.
In sharp contrast to the ten horrifically downtrending stocks I warned against buying in 
The Dow Jones Industrial Average is down about 150 points as I peck away on my laptop. I was looking to see what stocks were holding up on a down day, and sure enough one of my favorites showed up -- 
Awhile back, amid the subprime default fall-out, more-somber outlook for the U.S. economy and hence, the markets, yours truly suggested that investors increase the number of 
Among my stock picks this year, 
Conventional wisdom says that growth in the America container-board market is heavily tied to the health of the U.S. economy, and a company's overall success is directly proportional to the size of the operation. But 
But wait ... there's more! In the giving spirit of the holidays, here's a bonus pick for bargain-hunters looking for stocks under the $10 threshold. 
It's time to wrap up our list of 10 stocks under $10. The list was culled from a large grouping of momentum names that have outperformed on a relative-strength basis during the short and intermediate term. The selection was filtered to eliminate any stocks trading above the $10 region, naturally, and then adjusted for other fundamental, technical, and sentiment factors. I hope you've had fun learning about some potential bargains for your portfolio and hearing the stories behind some equities that you've likely not come across in your daily investing research. 
General Moly
Ampal-American Israel
Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...
Is Berkshire Hathaway better than S&P Index?
Closing Bell: Torch Passing on a Friday Rally
