Could a stock that you made 1,100% on still have room to run? Yes, it is possible. In particular if it had a near death experience as a penny stock for a while.
That is the case with Newcastle Investments (NCT), the CMBS lender and real estate investment company that reached a recent high of $7.10 and has settled back down, most recently hovering between $6.70 to $7.00. It closed Thursday December 23 at $6.71.
It's that time of year when I start thinking about my 2011 stock picks, and enough folks have been nudging me that I might as well get on with it. The list will not be finalized until the end of the month. During the interim time I will take readers through a number of possibilities, explaining the rational for my suggestions along the way and adding and subtracting until I get the list down to ten.
Today I will start by reviewing opportunities discussed in another post and determine which of these stocks might provide the best value. The list was originally cast as a globally diversified, large cap, dividend paying and relatively stable group of companies that would likely weather any storm. See: Chasing Value: Bonds, Gold, Stocks and Capital Flight
It certainly is presumptuous, perhaps even self serving of me to assume the market is going higher in the face of so much uncertainty.
The reason I hold this belief is that so much money is sitting on the sidelines and much of it is getting restless. It's one thing for those on a fixed income to suffer because the Federal Reserve is keeping interest rates so low, but it is quite another thing to expect $2 trillion dollars of corporate cash to want to live like senior citizens. That cash is a bigger drag on earnings with each passing day.
One of my largest holdings and growing is Diageo plc (DEO), which was one of my 2009 stock picks. At the time I recommended it, I figured that the economy was going to drive everyone to either church pews or bar stools and that rational worked out. Today, in a battered market, folks must be hitting the bottle because Diageo is up when the majority of stocks are down. During the day it touched a new high of $73.63. (Update: Final $72.76)
There are very few stocks that I might say are a must own as a core holding. However, unless you think alcoholic beverages are going out of style, Diageo might be one of them. Trading at a 52-week high and surpassing the market last year and so far this year, too, the metrics are starting to look average. But several things do jump off the page on closer inspection. One is the whopping 46% return on equity and the other is the 3.3% dividend yield.
I have always felt that for all the blabbing we do -- or blogging, in my case -- we should try as best we can to be accountable for our good and bad calls. This report is long overdue, but I will post it anyway since all of my past year's picks and results have been made public.
The market was very harsh in the early part of 2009, filling investors fear and trepidation, and sinking to a March 9, 2009 bottom. Perhaps some of the bleeding has stopped, but the economy has not healed as bears and bulls seem to carry the day, or every other day.
Here is a common sentiment about the stock market: "No fun at all. As I have said before, I believe it has turned into one big casino largely divorced from its original goal of providing capital to companies who produce something of value."
There's a lot of truth to what "granny" recently said to me in an e-mail. Fortunately she also noted "FYI Granny's up 5.86% + dividends." That would give her a gain of about 10% in the past ten months since I posted Where should granny put $50,000, suggesting a very conservative portfolio for an uncertain time.
Not only has she earned a very nice return, surpassing her CD account by 9.5% (20 fold), but she was able to do so with a great deal less volatility than the overall market most of us have lived through.
Is it time to take a bite out of Apple, Inc (AAPL) or leave it on the vine? After reviewing the current list by examining the stock yields and price-to-cash flow (P/CF) we will take a look at Apple for 2010.
Yesterday I dropped two stocks, but the list is still too long. In the coming weeks there will be more cuts and if I find anything of more value perhaps there will be something new.
Today it's time to do some trimming of the fourteen stocks and four options on the contenders list. This review will prioritize the companies by price-to-book (P/B), price-to-sales (P/S) and return-on-equity (ROE). This does not preclude more possible stocks being added and the final list will not be done until the end of the month.
We will also compare recent stock prices to three-year highs to give us a relative idea where the stock floated in rosier times.
There are only seven weeks left in the year, so it is time to start thinking about 2010. If you have been keeping up with my 2009 picks (see: Chasing Value: 2009 blazing picks -- Q3 review ) than you would be aware that the group is up 40% through the third quarter.
This year I bought all of my picks so that I would be riding in the same ship as anyone that might have considered my suggestions.
I will be breaking up my potential picks into three categories; contender, on the fence, and out of the running, until I finalize the list in the last week of the year.
The market continues to befuddle the bears as the third quarter earnings and stock prices continued to move in a positive direction.
During this period Washington has taken charge of the auto industry and helped prop it up with the "cash-for-clunkers" program. They continue to subsidize the real estate market with first-time home buyers incentives, and very low interest rates. The banks are being refueled by the Federal Reserve with interest rates as low as zero, while all the time currency stability has been sacrificed. This has driven gold prices to new highs.
This is the third review of my 2009 stock picks through September 30 (see: Chasing Value: 9 picks for 2009 -- APC, GE, ISRG, WFC and more). This years picks have annihilated index comparisons, so much so that I must attribute some of my good fortune to luck. However, I do believe the original reasoning was sound and the outlier nature of the gains certainly a result of an oversold market living in fear.
Oppenheimer upgraded Viacom (NYSE: VIA, VIA.B) to Outperform from Perform following the better-than-expected Q3 results to reflect an improving outlook for all the company's segments. The firm raised its target on shares to $36.
Deutsche Bank upgraded C.R. Bard (NYSE: BCR) to Buy from Hold on expectations the company's underlying growth trends will improve. The firm raised its target on shares to $88 from $78.
Wells Fargo upgraded Cognizant (NASDAQ: CTSH) to Outperform from Market Perform. The firm upgraded the stock after Cognizant reported better-than-expected Q3 results.
Plug Power (NASDAQ: PLUG) was upgraded to Sector Perform from Underperform at RBC Capital.
Digital River (NASDAQ: DRIV) was upgraded to Buy from Hold at Collins Stewart and to Overweight from Neutral at Piper Jaffray.
Steris (NYSE: STE) was upgraded to Overweight from Equal Weight at Stephens.
One of my wonderful friends, Ms. P, asked me for some guidance on how she might allocate $50,000 currently earning peanuts in a money market account. Though she is decades from becoming a grandmother, after a brief discussion about her financial parameters, it became clear to me that she was looking for a "granny fund."
In reality, my recommendations would be suitable, and perhaps desirable, for many passive investors as well.
The $50,000 is a portion of money Ms. P has set aside to purchase a home, which might happen in six months, but could also be pushed out further, depending on the economy and her situation. Basically, she wants to cover all her bases because she might need the money at any time and does not want to be caught short, while at the same time she would like to generate some revenue without taking any big risks.
This morning, Diageo (NYSE: DEO), the world's largest spirits maker, announced that annual profit increased 7%. The company's net sales for the year increased 15% to 9.3 billion pounds thanks to solid performance in its international segments.
Diageo's sales increased during the past few quarters, thanks to investment in major brands like Johnny Walker, Guinness, and Smirnoff. This investment has helped the company weather the global economic downturn better than most of its major rivals.
Jefferies upgraded Warner Chilcott (NASDAQ: WCRX) to Buy from Hold. The firm views Warner Chilcott's acquisition of P&G's (NYSE: PG) pharma business as a positive given its attractive product fit and purchase price.
ThinkEquity upgraded Google (NASDAQ: GOOG) to Buy from Source of Funds and raised its target to $550 from $400. Previously, the firm thought Google Street estimates were too high and that low single-digit growth in Q2 and Q3 would cause multiple contraction. They said their thesis played out fundamentally but they were wrong on the stock. Given Q2 has past, the analyst raised estimates above consensus and expects an in-line Q3 and for shares to outperform as the economic cycle turns.
Bernstein upgraded Diageo (NYSE: DEO) to Outperform from Market Perform and views Diageo's valuation as attractive. The firm expects 2H09 results on August 27 to mark a bottom in weakening top-line trends.
Costco (NASDAQ: COST) was upgraded to Market Perform from Underperform at William Blair.
Lowe's (NYSE: LOW) was upgraded to Overweight from Equal Weight at Morgan Stanley.
Siemens (NYSE: SI) was upgraded to Buy from Neutral at BofA/Merrill.
Could a stock that you made 1,100% on still have room to run? Yes, it is possible. In particular if it had a near death experience as a penny stock for a while.
It's that time of year when I start thinking about my 2011 stock picks, and enough folks have been nudging me that I might as well get on with it. The list will not be finalized until the end of the month. During the interim time I will take readers through a number of possibilities, explaining the rational for my suggestions along the way and adding and subtracting until I get the list down to ten.
It certainly is presumptuous, perhaps even self serving of me to assume the market is going higher in the face of so much uncertainty.
One of my largest holdings and growing is Diageo plc (DEO), which was one of my 2009 stock picks. At the time I recommended it, I figured that the economy was going to drive everyone to either church pews or bar stools and that rational worked out. Today, in a battered market, folks must be hitting the bottle because Diageo is up when the majority of stocks are down. During the day it touched a new high of $73.63. (Update: Final $72.76)
I have always felt that for all the blabbing we do -- or blogging, in my case -- we should try as best we can to be accountable for our good and bad calls. This report is long overdue, but I will post it anyway since all of my past year's picks and results have been made public.
Here is a common sentiment about the stock market: "No fun at all. As I have said before, I believe it has turned into one big casino largely divorced from its original goal of providing capital to companies who produce something of value."
Is it time to take a bite out of Apple, Inc (AAPL) or leave it on the vine? After reviewing the current list by examining the stock yields and price-to-cash flow (P/CF) we will take a look at Apple for 2010.
Today it's time to do some trimming of the fourteen stocks and four options on the contenders list. This review will prioritize the companies by price-to-book (P/B), price-to-sales (P/S) and return-on-equity (ROE). This does not preclude more possible stocks being added and the final list will not be done until the end of the month.
There are only seven weeks left in the year, so it is time to start thinking about 2010. If you have been keeping up with my 2009 picks (see: Chasing Value: 2009 blazing picks -- Q3 review ) than you would be aware that the group is up 40% through the third quarter.
The market continues to befuddle the bears as the third quarter earnings and stock prices continued to move in a positive direction. 
Analyst upgrades:
One of my wonderful friends, Ms. P, asked me for some guidance on how she might allocate $50,000 currently earning peanuts in a money market account. Though she is decades from becoming a grandmother, after a brief discussion about her financial parameters, it became clear to me that she was looking for a "granny fund."
This morning, Diageo (NYSE: DEO), the world's largest spirits maker, announced that annual profit increased 7%. The company's net sales for the year increased 15% to 9.3 billion pounds thanks to solid performance in its international segments. 
Analyst upgrades:
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Johnson & Johnson's Income Falls 23%
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