Deutsche Boerse agreed to buy NYSE Euronext for $10.2 billion in a politically charged deal that would create the world's largest exchange operator and put it under German control.
The friendly agreement did, however, dodge some tough issues that could yet derail a deal in the months ahead, when regulators take a close look at the transaction.
NYSE Euronext Chief Executive Duncan Niederauer, an American who would head the combined entity, acknowledged "a long road" to secure the many regulatory approvals but stressed the necessity of banding together to survive and grow in the increasingly global and competitive trading world.
Permalink: [639] Top Stocks To Buy - Deutsche Boerse Buy NYSE In 2011
Deutsche Boerse shareholders will control 60 percent of the new company and 10 of 17 board seats. Still there are suspicions in Germany that NYSE management will be in the driver's seat, in addition to concerns in the United States that the New York Stock Exchange will lose influence and independence.
That tension could raise obstacles to regulatory approval of the deal, which values the two-century-old icon of American capitalism at about $39 a share.
"This merger -- if approved -- creates a true thousand-pound gorilla," said Herbie Skeet, analyst at exchange consultancy Mondo Visione.
No name has yet been given to the combined group. Niederauer said talks were continuing to find a name that would address political concerns on both sides of the Atlantic, adding at a news conference that it would be an "emotional decision" for everyone involved.
Reto Francioni, CEO of Deutsche Boerse, will become chairman of the combined companies. He argued at a news conference that the deal, which he said "reshapes our entire industry," would strengthen the roles of both New York, as the financial capital of the world, and Frankfurt, as a European financial capital.
U.S. Senator Charles Schumer, who first raised the name issue over the weekend, has been insisting that NYSE should come first in the name of the group, which will have headquarters in both New York and Frankfurt.
Schumer reiterated those concerns after the deal was announced on Tuesday, calling the NYSE a "preeminent brand" and saying there was no reason for it not to come first.
The merged entity will have more than $20 trillion in annual trading volume, and operations in the United States, Germany, France, Britain, the Netherlands, Portugal and Belgium.
Under the terms of the deal, each NYSE Euronext share will be exchanged for 0.47 share in the new company; Deutsche Boerse shares will be swapped on a one-for-one basis, the companies said in a statement.
The deal values NYSE Euronext at 13 to 14 times its expected 2012 earnings, and could be seen as cheap given the growth prospects of the combined company, analysts said.
A source familiar with the deal said 55 percent of the shareholders in the new company would be from the United States, with 11 percent from Germany, 11 percent from Britain and 23 percent from the rest of the world.
The exchanges face intense competition in their traditional stock-trading business from newer trading venues geared toward today's increasingly dominant high-speed electronic traders.
NYSE -- created in 1792 by brokers and merchants who met under a buttonwood tree in lower Manhattan -- is one of several exchanges that have responded by investing in technology and moving into more profitable derivatives trading Deutsche Boerse Buy NYSE .
But the Big Board's once dominant market share in U.S. equities trading has steadily dwindled in recent years, and NYSE Euronext shares are down 61 percent since early 2007.
Together, the companies dominate futures and options on European bonds, shares and rates, with Deutsche Boerse's Eurex unit focused on the long end of the interest rate curve and NYSE Euronext's Liffe unit on the short end -- potentially raising antitrust questions among market regulators.
Niederauer said the deal was "no act of desperation," adding that he assumed it will be subject to a U.S. government foreign investment review.
There also remains a chance that some other U.S. exchange could get involved in a counterbid for NYSE. Officials from exchange companies CME Group Inc and NASDAQ OMX Group will meet to discuss "strategy to respond" to the buyout deal, Fox Business Network reported on Tuesday.
Niederauer said he was aware of the rumor of a possible CME bid for NYSE but had heard nothing official, adding that the Big Board had signed a deal with a partner that it trusts.
Shortly after the 90-minute transatlantic press conference announcing the deal, the Frankfurt-based company reported a 16 percent quarterly profit drop.
NYSE shares closed trading on Tuesday down 3.4 percent at $38.12, while Deutsche Boerse shares finished 2.4 percent lower.
CONSOLIDATION WAVE Deutsche Boerse Buy NYSE
After a several-year hiatus that included the financial crisis and the beginning of a global regulatory revamp, the world's exchange operators are back in the takeover game.
Singapore Exchange bid for Australia's ASX late last year. And last week, London Stock Exchange said it would buy Toronto Stock Exchange operator TMX Group.
Local concerns over the wave of consolidation sweeping the industry surfaced in Asia on Tuesday as Singapore Exchange tweaked its $7.9 billion bid for ASX to allow more Australian directors onto a combined board --- an attempt to win over skeptical Australian politicians.
Nationalism has long been one of the biggest hurdles to exchange mergers. The marketplaces are often symbols of national pride and important to attracting business and capital.
The LSE-TMX deal has already run into foreign ownership concerns in Canada Deutsche Boerse Buy NYSE.
Regulators are paying close attention to the deals, and exchange users have expressed fear that the takeovers will limit competition.
"Euronext and Deutsche Boerse are still screwing us on fees for clearing, the closing auctions and small and mid-cap trading -- the areas where they still have virtual monopolies," said the head of markets at a large European bank, who declined to be named. "A merger is concerning because together they will be more powerful and better placed to protect these monopolies."
Deutsche Bank and JPMorgan Chase & Co advised Deutsche Boerse on the deal; NYSE Euronext's main financial advisers were Perella Weinberg Partners and BNP Paribas.
(Additional reporting by Philipp Halstrick, Ed Taylor, Paritosh Bansal, Adrian Bathgate, Saeed Azhar, Luke Jeffs and Narayanan Somasundaram; Writing by Alexander Smith and Christian Plumb; Editing by Jane Merriman, Chris Wickham, Martin Howell, John Wallace and Steve Orlofsky)
2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
2011 Stock Picks: Cambiar Small Cap (CAMSX)
What are our favorite funds for 2011? Among US funds, we particularly like Cambiar Small Cap (CAMSX); the fund combines many characteristics for long-term success with good positioning for the current investment environment.
Cambiar Small Cap is managed by Andy Baumbusch and Jeff Susman. Baumbusch specializes in the analysis of industrial, media and telecommunications stocks. Susman specializes in the consumer-discretionary and technology sectors.
In 2010, their efforts produced a total return of 35.7%, among the top performances of all the funds we track.
Permalink: [632] Top Stocks To Buy - 2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
And, they aren’t looking for stocks that are just a little cheap, historically speaking. They search out stocks whose valuations fall in the bottom 25% or so of these historical ranges.
In this way, they hope to increase the odds of picking stocks that gain at least 50% over the next 12 to 24 months, which is their goal for performance.
One key to doing so, they believe, is to find companies that are likely to benefit from near-term catalysts including new products and services, or from restructuring, such as the closing of an unprofitable business unit or product line.
We also like how the fund’s current sector weightings shake out from the managers’bottom-up (i.e., stock by stock) stock picking.
Cambiar Small Cap has especially large allocations to industrials and technology, whichh are among our favorite sectors for equity investment in 2011.
2011 Stock Picks: Novavax (NVAX)
Novavax (NVAX), one of our new buys last year, has basically been flat since our initial recommendation at $2.44.
The stock was recommended because we believe that they are a industry leader in the development, manufacture, and commercialization of innovative vaccines for a variety of viral diseases.
The company is currently testing two vaccines based on its virus-like particle (VLP) technology in late stage trials; vaccines for seasonal and pandemic influenza are in Phase II and the company is preparing for Phase III trials.
We believe that NVAX has substantial potential to develop a vaccine platform based on their VLP technology.
NVAX has differentiated itself from its competitors within the vaccine development space with a proven management team, including CEO Dr. Rahul Singvhi, a recognized vaccine industry leader.
He has worked in vaccines for entire career, including substantial experince at vaccine-giant Merck.
When we recommended NVAX, we said we exepcted the following events to occur for NVAX.
First, we expect the company to receive a government contract in the $100+ million range that will be used to finish developing and bring both their pandemic and seasonal flu vaccines to the market.
Then in the Q1 of 2011 we expect NVAX to start a Phase 1 clinic trial for their respiratory syncytial virus (RSV) vaccine to prevent infection in neonates and the elderly.
We are still waiting for the government contract, which we still exepct at any time. The Phase I RSV trial recently starte.
The trial is a blinded, placebo-controlled, escalating-dose study of healthy adults 18 to 49 years old, a total of 100 subjects will be allocated to four cohorts and randomized to receive vaccine treatment or saline placebo in a 4:1 ratio.
It is expected that interim top-line data from the trial will be available in the third quarter of 2011.
We want to emphasize that this is a substantial market opportunity with very large potential sales around the world.
For example, the passive RSV vaccine Synagis for just infants exceeded $1 billion in sales in 2009.
There are currently no cost-effective measures for protecting elderly people against RSV, so a new solution would significantly enlarge what is already a billion dollar market. NVAX is a buy under $3.
What are our favorite funds for 2011? Among US funds, we particularly like Cambiar Small Cap (CAMSX); the fund combines many characteristics for long-term success with good positioning for the current investment environment.
Cambiar Small Cap is managed by Andy Baumbusch and Jeff Susman. Baumbusch specializes in the analysis of industrial, media and telecommunications stocks. Susman specializes in the consumer-discretionary and technology sectors.
In 2010, their efforts produced a total return of 35.7%, among the top performances of all the funds we track.
Permalink: [632] Top Stocks To Buy - 2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
And, they aren’t looking for stocks that are just a little cheap, historically speaking. They search out stocks whose valuations fall in the bottom 25% or so of these historical ranges.
In this way, they hope to increase the odds of picking stocks that gain at least 50% over the next 12 to 24 months, which is their goal for performance.
One key to doing so, they believe, is to find companies that are likely to benefit from near-term catalysts including new products and services, or from restructuring, such as the closing of an unprofitable business unit or product line.
We also like how the fund’s current sector weightings shake out from the managers’bottom-up (i.e., stock by stock) stock picking.
Cambiar Small Cap has especially large allocations to industrials and technology, whichh are among our favorite sectors for equity investment in 2011.
2011 Stock Picks: Novavax (NVAX)
Novavax (NVAX), one of our new buys last year, has basically been flat since our initial recommendation at $2.44.
The stock was recommended because we believe that they are a industry leader in the development, manufacture, and commercialization of innovative vaccines for a variety of viral diseases.
The company is currently testing two vaccines based on its virus-like particle (VLP) technology in late stage trials; vaccines for seasonal and pandemic influenza are in Phase II and the company is preparing for Phase III trials.
We believe that NVAX has substantial potential to develop a vaccine platform based on their VLP technology.
NVAX has differentiated itself from its competitors within the vaccine development space with a proven management team, including CEO Dr. Rahul Singvhi, a recognized vaccine industry leader.
He has worked in vaccines for entire career, including substantial experince at vaccine-giant Merck.
When we recommended NVAX, we said we exepcted the following events to occur for NVAX.
First, we expect the company to receive a government contract in the $100+ million range that will be used to finish developing and bring both their pandemic and seasonal flu vaccines to the market.
Then in the Q1 of 2011 we expect NVAX to start a Phase 1 clinic trial for their respiratory syncytial virus (RSV) vaccine to prevent infection in neonates and the elderly.
We are still waiting for the government contract, which we still exepct at any time. The Phase I RSV trial recently starte.
The trial is a blinded, placebo-controlled, escalating-dose study of healthy adults 18 to 49 years old, a total of 100 subjects will be allocated to four cohorts and randomized to receive vaccine treatment or saline placebo in a 4:1 ratio.
It is expected that interim top-line data from the trial will be available in the third quarter of 2011.
We want to emphasize that this is a substantial market opportunity with very large potential sales around the world.
For example, the passive RSV vaccine Synagis for just infants exceeded $1 billion in sales in 2009.
There are currently no cost-effective measures for protecting elderly people against RSV, so a new solution would significantly enlarge what is already a billion dollar market. NVAX is a buy under $3.
2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
2011 Stock Picks: Cambiar Small Cap (CAMSX)
What are our favorite funds for 2011? Among US funds, we particularly like Cambiar Small Cap (CAMSX); the fund combines many characteristics for long-term success with good positioning for the current investment environment.
Cambiar Small Cap is managed by Andy Baumbusch and Jeff Susman. Baumbusch specializes in the analysis of industrial, media and telecommunications stocks. Susman specializes in the consumer-discretionary and technology sectors.
In 2010, their efforts produced a total return of 35.7%, among the top performances of all the funds we track.
Permalink: [632] Top Stocks To Buy - 2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
And, they aren’t looking for stocks that are just a little cheap, historically speaking. They search out stocks whose valuations fall in the bottom 25% or so of these historical ranges.
In this way, they hope to increase the odds of picking stocks that gain at least 50% over the next 12 to 24 months, which is their goal for performance.
One key to doing so, they believe, is to find companies that are likely to benefit from near-term catalysts including new products and services, or from restructuring, such as the closing of an unprofitable business unit or product line.
We also like how the fund’s current sector weightings shake out from the managers’bottom-up (i.e., stock by stock) stock picking.
Cambiar Small Cap has especially large allocations to industrials and technology, whichh are among our favorite sectors for equity investment in 2011.
2011 Stock Picks: Novavax (NVAX)
Novavax (NVAX), one of our new buys last year, has basically been flat since our initial recommendation at $2.44.
The stock was recommended because we believe that they are a industry leader in the development, manufacture, and commercialization of innovative vaccines for a variety of viral diseases.
The company is currently testing two vaccines based on its virus-like particle (VLP) technology in late stage trials; vaccines for seasonal and pandemic influenza are in Phase II and the company is preparing for Phase III trials.
We believe that NVAX has substantial potential to develop a vaccine platform based on their VLP technology.
NVAX has differentiated itself from its competitors within the vaccine development space with a proven management team, including CEO Dr. Rahul Singvhi, a recognized vaccine industry leader.
He has worked in vaccines for entire career, including substantial experince at vaccine-giant Merck.
When we recommended NVAX, we said we exepcted the following events to occur for NVAX.
First, we expect the company to receive a government contract in the $100+ million range that will be used to finish developing and bring both their pandemic and seasonal flu vaccines to the market.
Then in the Q1 of 2011 we expect NVAX to start a Phase 1 clinic trial for their respiratory syncytial virus (RSV) vaccine to prevent infection in neonates and the elderly.
We are still waiting for the government contract, which we still exepct at any time. The Phase I RSV trial recently starte.
The trial is a blinded, placebo-controlled, escalating-dose study of healthy adults 18 to 49 years old, a total of 100 subjects will be allocated to four cohorts and randomized to receive vaccine treatment or saline placebo in a 4:1 ratio.
It is expected that interim top-line data from the trial will be available in the third quarter of 2011.
We want to emphasize that this is a substantial market opportunity with very large potential sales around the world.
For example, the passive RSV vaccine Synagis for just infants exceeded $1 billion in sales in 2009.
There are currently no cost-effective measures for protecting elderly people against RSV, so a new solution would significantly enlarge what is already a billion dollar market. NVAX is a buy under $3.
What are our favorite funds for 2011? Among US funds, we particularly like Cambiar Small Cap (CAMSX); the fund combines many characteristics for long-term success with good positioning for the current investment environment.
Cambiar Small Cap is managed by Andy Baumbusch and Jeff Susman. Baumbusch specializes in the analysis of industrial, media and telecommunications stocks. Susman specializes in the consumer-discretionary and technology sectors.
In 2010, their efforts produced a total return of 35.7%, among the top performances of all the funds we track.
Permalink: [632] Top Stocks To Buy - 2011 Stock Picks: Cambiar Small Cap (CAMSX),Novavax (NVAX)
And, they aren’t looking for stocks that are just a little cheap, historically speaking. They search out stocks whose valuations fall in the bottom 25% or so of these historical ranges.
In this way, they hope to increase the odds of picking stocks that gain at least 50% over the next 12 to 24 months, which is their goal for performance.
One key to doing so, they believe, is to find companies that are likely to benefit from near-term catalysts including new products and services, or from restructuring, such as the closing of an unprofitable business unit or product line.
We also like how the fund’s current sector weightings shake out from the managers’bottom-up (i.e., stock by stock) stock picking.
Cambiar Small Cap has especially large allocations to industrials and technology, whichh are among our favorite sectors for equity investment in 2011.
2011 Stock Picks: Novavax (NVAX)
Novavax (NVAX), one of our new buys last year, has basically been flat since our initial recommendation at $2.44.
The stock was recommended because we believe that they are a industry leader in the development, manufacture, and commercialization of innovative vaccines for a variety of viral diseases.
The company is currently testing two vaccines based on its virus-like particle (VLP) technology in late stage trials; vaccines for seasonal and pandemic influenza are in Phase II and the company is preparing for Phase III trials.
We believe that NVAX has substantial potential to develop a vaccine platform based on their VLP technology.
NVAX has differentiated itself from its competitors within the vaccine development space with a proven management team, including CEO Dr. Rahul Singvhi, a recognized vaccine industry leader.
He has worked in vaccines for entire career, including substantial experince at vaccine-giant Merck.
When we recommended NVAX, we said we exepcted the following events to occur for NVAX.
First, we expect the company to receive a government contract in the $100+ million range that will be used to finish developing and bring both their pandemic and seasonal flu vaccines to the market.
Then in the Q1 of 2011 we expect NVAX to start a Phase 1 clinic trial for their respiratory syncytial virus (RSV) vaccine to prevent infection in neonates and the elderly.
We are still waiting for the government contract, which we still exepct at any time. The Phase I RSV trial recently starte.
The trial is a blinded, placebo-controlled, escalating-dose study of healthy adults 18 to 49 years old, a total of 100 subjects will be allocated to four cohorts and randomized to receive vaccine treatment or saline placebo in a 4:1 ratio.
It is expected that interim top-line data from the trial will be available in the third quarter of 2011.
We want to emphasize that this is a substantial market opportunity with very large potential sales around the world.
For example, the passive RSV vaccine Synagis for just infants exceeded $1 billion in sales in 2009.
There are currently no cost-effective measures for protecting elderly people against RSV, so a new solution would significantly enlarge what is already a billion dollar market. NVAX is a buy under $3.
Top Stocks To Buy For 2011
"Servotronics (NYSE: SVT) as our top investment idea for the coming year," says Tom Vass.
In his The Technology Stock Advisor, he explains, "The stock meets our proprietary criteria for both its technical innovation as well as our value approach to stock selection.
"Servotronics engages in designing, manufacturing, and marketing advanced technology products in the United States and internationally.
"Its Advanced Technology Group markets various servo-control components, which convert an electrical current into a mechanical force or movement and other related products.
Permalink: [635] Top Stocks To Buy - Top Stocks To Buy For 2011
"The company's Consumer Products Group sells various cutlery products, including kitchen knives, such as steak, carving, bread, butcher, and paring knives for household use, as well as for use in restaurants and institutions.
"Our selection of Servotronics is based upon our patented methodology for investigating technology stock. We developed a theory of technological innovation using Leontief's theory about input output economics that helps us predict technological investment opportunities.
"Our theory helps us conduct our first screening of the universe of stocks in order for us to narrow the selection to companies that are in nine high technology industrial clusters.
"Next, we apply rigorous standards to those stocks based upon a value approach to investing that shares many elements in common with the Graham and Dodd approach to investment selection.
"We first added the stock to our portfolio last April. but note that Servotronics continues to meet all the selection criteria needed for our strategy. We continue to recommend purchase under $9 per share."
Top Stocks To Buy For 2011: SmartHeat (HEAT)
By Brendan Corey
Brendan Co?ey is the editor of The Cabot Green Investor, a newsletter focused on companies involved in varous aspects of the broad environmental technologies sector.
For his top pick for 2011 Here, he looks to SmartHeat (NASDAQ: HEAT), a maker of plate-heat exchange systems and heat meters.
"Like in seemingly every other business, China promises to be a massive market for the products SmartHeat provides: plate-heat exchange systems and heat meters.
"These are relatively simple products that are only just starting to be required in China. Using SmartHeat PHE systems can slash coal usage by up to two-thirds in wildly ine?cient Chinese buildings, oil refineries and chemical factories, where legacy shell and tube technology dominates.
"The market for PHEs in China will rise 20% to $3.2 billion in 2011, while the submarket for smaller, customized PHE units in which SmartHeat has a highly profitable specialty should grow triple-digits to nearly $1 billion.
"Plenty of growth should come in future years too: China generates 70% of its electricity from coal, and the government is keen to be more energy e?cient to ween itself from imported oil and improve its notorious urban air quality.
"There are plenty of competitors in PHEs, but SmartHeat has two advantages: It is Chinese and has production costs around 15% cheaper than imports at comparable quality.
"Sales through the first three quarters of fiscal 2010 were up 92% to $56.5 million, while net income surged 96% to 51 cents a share over the same period. Both should nearly double again in 2011.
"Management are industry veterans who are confident enough in the company they signed an agreement not to sell any of their shares until January 2012.
"The stock only began trading on the Nasdaq Global Market in March so the company’s story is still unheard by many investors. That will change quickly."
Top Stocks To Buy For 2011: Aflac
by Richard Moroney, editor Dow Theory Forecasts
Aflac (AFL) represents a top year-ahead pick based on its solid operating momentum and modest valuation. In our proprietary ranking system (known as Quadrix), the stock earns an Overall score of 99. At 10 times trailing earnings, the shares trade 33% below the five-year average P/E ratio of 15.
The insurer's sales rose 13% in the first nine months of this year, while free cash how rose 12%. At 10 times trailing earnings, shares trade 32% below the three-year average P/E ratio. Arac continues to grow in Japan (about 75% of sales), but growth in the U.S. (roughly 25%) has been tougher to find.
Management remains cautious about its U.S. outlook, but it should benefit as small companies, which make up a large portion of the domestic business, begin to hire again. A?ac -- yielding 2.2% -- is a Focus List Buy and a holding on our Long-Term Buy list.
Top Stocks To Buy For 2011: Allot Communications
by Ian Wyatt, editor Small Cap Investor PRO
The smartphone revolution -- with web-browsing, video-watching, music-streaming mobile devices -- has made bandwidth a scarce resource.
That's where Allot Communications (ALLT) comes in. Allot is an Israeli company that develops deep packet inspection (DPI) technology specifically designed to manage bandwidth use Consumers want phones that let them listen to music, surf the web, watch video, and access a wide array of applications. Maybe even occasionally make a call or two. Allot's solutions are critical for Internet Service Providers (ISP), cable companies, landline operators, mobile phone companies, businesses and governments.
The company has consistently grown overseas in Europe, Asia, and South America. The U.S. still represents a huge growth market, if and when regulations permit carriers to implement Allot's technology. Allot's third quarter was a good one. The company increased revenue by 36 percent to $14.7 million year-over-year.
Quarter-over-quarter revenue also increased, by 8 percent, marking the sixth consecutive quarter of sequential revenue growth. On a GAAP basis, Allot earned $0.03 per share, a nice improvement over a $0.10 loss in the third quarter of 2009.
But what I really like here is that the company ended the quarter with $56.2 million in cash and essentially zero debt. Allot is a play on the future growth of smartphones, and the near certainty that service providers will segment bandwidth in order to design service plans tailored to customer behavior.
What's more, this tiny company is a potential takeout candidate and management has shown an ability to orchestrate acquisitions in the past.
Top Stocks To Buy For 2011: China Digital TV (STV)
By Glenn Cutler
"My top pick for 2011 is China Digital TV Holding Co Ltd. (NYSE: STV), the #1 provider of conditional access (CA) systems in China’s digital TV market," says Glenn Cutler.
In his Winner Forum and Special Situations Reports, he explains, "I consider this a conservative idea to play the China market through an established company that dominates its business sector.
"China Digital TV Holding is based in Beijing, China and was founded in 2004. They are in a strong position to leverage their current 50% market share in China. Of 375 million TV households across China, 168 million are cable subscribers with an additional 10 million added each year.
"With only 54 million smart cards shipped industry wide, there is ample opportunity for growth, market share expansion and royalties and revenue sharing with cable operators. They have over 225 customers, with roughly 30 of them providing over 1 million subscribers each.
"Currently, their CA systems consist of smart cards (90% of revenue) and head-end software for television network operators, as well as terminal-end software for set-top box manufacturers.
"They enable digital television network operators to control the distribution of content and value-added services to their subscribers and block unauthorized access to their networks.
"The company also licenses its set-top box design to set-top box manufacturers and sells advanced digital television application software, such as electronic program guides and subscriber management systems to digital television network operators.
"There are several reasons why the stock price has been trading near its annual lows. Recent revenues have been under pressure and earnings have been soft due to the postponement of digital migration projects as cable operators wait for greater clarity with respect to industry consolidation and subscription fee adjustments in certain regions.
"The company has faced pricing pressures and they’ve reduced selling prices at times as a tradeo? for gaining new customers in less populated areas.
"These factors have led to downgrades by some analysts. Earnings for FY2010 are expected to be .42/share down from .72/share in FY2008. Expectations are low as earnings projections for FY2011 are estimated to be flat at .42/share.
"China Digital has a solid financial structure with $225 million in cash ($3.87/share) which was reduced by distribution of a $1 per share special cash dividend in Feb/ 2010. The balance sheet is solid with zero debt. They maintain a strong market position for continuing growth.
"The company intends as a policy to consider special dividends every two years. The current market cap is $348 million. Trailing 12-month profit margins are 54%.
"Book value is $4.25 a share. The P/E Ratio is 11. There are currently 58 million shares outstanding. The shares are trading close to their 52-week low, within a yearly range of $5.60 (low) to $11.80 (high). Return on equity is 12%.
"With expectations low, there is potential for upside surprise if digital migration projects start to accelerate. With shares trading at about $2 above their cash position, downside risk is partially mitigated. The company could use cash on hand to acquire productive assets should attractive opportunities arise to compliment their product o?erings or consolidate their industry sector.
"As a conservative way to play expected growth in China, this company o?ers an excellent low-risk technology angle for a 2011 stock portfolio. A good upside target range over 12-months would be $8-$10."
Top Stocks To Buy For 2011: China Mobile (CHL)
By John Reese
Validea is an intriguing advisory that bases its stock selections on the known investment criteria of legendary stock market investors.
John Reese explains, "China Mobile Ltd. (NYSE: CHL) is one of the rare stocks to get approval from three of tour Guru Strategy computer models; it earns top marks from my Warren Bu?ett-, Peter Lynch-, and James O'Shaughnessy-based models.
"With the Western world still working its way through the aftermath of the credit crisis, a number of top strategists are looking eastward for growth in 2011.
"Byron Biggs, Anthony Bolton, Jim Rogers -- these are just some of the market gurus who have been keying in on China, where one of the world's greatest exporting nations is now poised for some major domestic growth as well.
"I also see a lot of opportunities in China, and Hong Kong-based China Mobile may be the greatest. The country's largest mobile phone network, it topped the 500-million- subscriber mark in the third quarter.
"The Bu?ett approach looks for firms with lengthy histories of earnings growth and conservative financing, and China Mobile delivers.
"It has upped earnings per share in each year of the past decade (and is on track to do so again in 2010), and its debt of $1.45 billion is less than a tenth of its annual earnings ($16.6 billion).
"The company also has averaged a 23.1% return on equity over the past ten years, a sign of both the strong management and durable competitive advantage Bu?ett is known to look for.
"The Lynch model, meanwhile, considers China Mobile a 'fast-grower' -- Lynch's favorite type of investment -- because of its 24.4% long-term EPS growth rate. (I use an average of the three-, four-, and five-year EPS growth figures to determine a long-term rate.)
" Lynch is famous for using the P/E/Growth ratio to identify growth stocks selling on the cheap, and the model I base on his writings considers P/E/Gs below 1.0 acceptable, and those below 0.5 the best case.
"When we divide China Mobile's 11.3 P/E ratio by its growth rate, we get a P/E/G of just 0.46, a great sign. Lynch also liked conservatively financed firms, and China Mobile's tiny 2.3% debt/equity ratio easily passes muster with my Lynch-based strategy.
"Finally, the model I base on James O'Shaughnessy's value stock approach targets large firms with strong cash flows and high yields.
"China Mobile's $185 billion market cap, $6.97 in cash flow per share (vs. the market average of just $0.49), and 3.8% dividend yield are all good enough to earn this model's approval. Disclosure: I'm long CHL and own the stock in the portfolios o?ered by my advisory firm, Validea Capital Management."
Top Stocks To Buy For 2011: Canadian Oil Sands Trust
by David Dittman, contributing editor Canadian Edge
Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.
And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.
New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.
Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.
At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.
Top Stocks To Buy For 2011: Catlin Group
by Vivian Lewis, editor Global Investing
Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.
It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.
It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.
It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..
It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.
It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.
Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.
It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.
Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.
Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)
"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.
BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.
What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.
Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.
And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.
If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.
Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).
Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.
Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.
Top Stocks To Buy For 2011: Equinix (EQIX)
By Stephen Quickel
"Equinix (NASDAQ: EQIX), the global data center operator, is one of the most tempting growth stock opportunities on the 2011 horizon," says Stephen Quickel.
The editor of US Investment Report explains, "Big banks, market data providers, telecoms and other technology-driven clients use the firm's data center platforms to reduce their own capital expenditures and operating costs.
"The Silicon Valley-based company, barely ten years from startup, has moved quickly to open 45 data full-service centers serving clients in 18 key regions of the U.S., Europe and Asia-Pacific areas.
"These centers provide data management services to global enterprises of all sorts, including content and financial companies and network service providers,. "With demand rising rapidly, Equinix, has been able to lift revenues from $118 million in 2003 to $705 million in 2008, and to an estimated $880 million in recessionary 2010. Analysts project $1.17 billion in 2011—a two-year rise of 67%.
"As for earnings, the rapidly expanding company showed deficits for its first eight years, but reduced them in all but one year. Now firmly in the black and established as a sector leader, its gains could be large over the next few years.
"Rapid expansion of its IBX centers (short for International Business Exchanges) has required considerable debt. The latest available debt/equity ratio is an elevated 1.27.
"But capital spending is leveling o?, and Smith and his managers have kept of tight rein on operating costs.
"Earnings have risen 26 quarters in a row. After tax margins are reportedly at a four-year high. Third quarter 2010 earnings jumped 213% year-over-year, beating analyst estimates by 57%.
"Zacks reports consensus five-year earnings growth projection of 18.4% a year going forward. First Call shows earnings up 26% in 2011 and more than 40% in 2011.
"Those eye-catching numbers have not gone unnoticed. EQIX is not cheap by conventional measures. At 105 in late December (up from 40 in March), it traded at 51 times FC’s 2011 earnings projection and 34 times its 2011 estimate.
"But the stock has impressive support. Among 26 brokers—a large following for a young $4-billion market cap stock—15 rated it a Strong Buy in December, 3 a Buy and 8 a Hold, with no Sells.
"Goldman Sachs, altogether, owns 12.5% of the outstanding shares, with Wellington Management and Shumway Capital Partners each holding 8%-plus. Wells Fargo, Barclays, Morgan Stanley and Vanguard also have large positions.
"Of course, the Big Boys bought in at lower levels and have added shares along the way—and will doubtless continue to do so.
"With its high debt and P/E, it’s not the kind of play-it-safe stock that attracted investors in late 2010. But as we head into 2011, few mid-caps have emerged with more fascinating near- and long-term growth possibilities."
Top Stocks To Buy For 2011: EZchip (EZCH)
Paul McWillams
"EZchip Semiconductor (NASDAQ: EZCH), a fabless semiconductor company that specializes in network processors," is my top pick for the coming year," says technology sector guru Paul McWilliams.
In his Next Inning newsletter, designed for sophisticated tech investors, he suggests, "I think the upside potential here in 2011 and beyond is significant.
"Its initial market target has been what's termed as CESR (Carrier Network Switching and Routing). EZCH has since expanded its focus to include products that are broadly grouped into what's called the 'Access' market.
"Between organic demand growth in the CESR market and EZCH's expansion into the Access markets, it is estimated the company will be addressing a total available market potential of about $1.5B by 2012.
"That implies substantial upside revenue potential for a company that will report somewhat less than $40M in revenue for calendar 2010.
"In 2011, EZCH will be shipping NP2 and NP3 / NP3C network processors in volume to its CESR customer base. In addition to this, we'll also see the initial revenue generated from its next generation CESR solution, the NP4 and its debut Access product, the NPAx.
"Notable production ramps for the NPA and NP4, which sells for roughly twice the price of a NP3, will begin in 2011. Revenue from its NP2 will likely peak in late 2011 or 2011 as Juniper winds down its demand and replaces the NP2 with an internally designed ASIC.
"However, I believe this will be much more than o?set with the ramp of the NP3 and NP3C, the latter of which is designed into various platforms at Cisco including its new ASR series edge router.
"I believe EZCH's lack of participation in the 2010 tech rally is attributable to two factors. The first is what I think will prove to be a misunderstanding as to when its business at Juniper will peak and the sharpness of the decline following the peak.
"In my view, this peak won't happen until late in 2011 at the earliest and by then it will be much more than o?set by growing business at Cisco; not to mention design wins at other leading networking companies that will ramp in 2011 and beyond.
"The second factor has been the selling of shares by some of EZCH's early venture capitalists (VC's). Due to the fact EZCH initiated a secondary o?ering to liquidate these VC shares in one fell swoop as well as complete the purchase of its a?liated EZchip Technologies operating unit, this selling pressure will soon be eliminated. In my view, with this gone and EZCH poised to post impressive growth in 2011."
Top Stocks To Buy For 2011: Marvell Technology Group
by Paul McWilliams, editor Next Inning
Marvell Technology Group (MRVL) clearly fits the bill of a stock that is currently unloved by Wall Street. As a matter of a fact, there's not much at all that Wall Street likes about the company. Nevertheless, I would choose this as one of my favorite stocks for the coming year.
Nearly half of Marvell's revenue comes from the hard disk drive (HDD) industry, and even though it has gained market share, Wall Street believes the HDD sector will be wiped out by solid state drive (SSD) technology.
We'll set aside for now that Marvell is also a leader in SSD controllers, which it just so happens to sell for more than it does its industry leading HDD controllers.
As I see it, Wall Street has penned the HDD obituary far in advance of when we should plan to attend the funeral.
The short story for Marvell comes in two intersecting pieces. First, Marvell is one of only three semiconductor companies in the world that has an Architectural License from ARM Holdings (ARMH). This means Marvell can tweak the internal design of the ARM core processor to optimize it for targeted applications.
It has done this very eectively in the past to dominate the HDD controller market, and the company has more recently taken a new approach to design highly integrated smartphone chips that are intended to materially drive down the total cost for smartphones, and thereby radically increase their presence in emerging markets.
China is, of course, the first target, and I believe we'll see a ?urry of new Marvell-powered smartphones released there in 2011.
Intersecting with Marvell's expertise with ARM core processors, which you'll find in some shape or form in roughly 95% of the chips Marvell ships, is Marvell's integration talent.
Few, if any, competitors can match Marvell when it comes to mixed-signal integration (integrating analog and digital functions on a single chip)."" "
While integration skills have always been important for semiconductor companies, we are now at a tipping point where the companies that are very good at it will have an opportunity to accelerate growth. I believe that tipping point will occur sometime between now and 2015, and when it does, Marvell's growth curve has the potential to ride a very favorable wave. That said, my price target range for 2011 is somewhere in the high-$20s to very low $30s.
Top Stocks To Buy For 2011: MDU Resources
by Roger Conrad, editor The Utility Forecaster
Even among great companies, one year's leader is often the next's laggard and vice versa; MDU Resources (MDU) is one under-performer that looks increasingly likely to get it's legs back in 2011.
The company is best thought of as a financially conservative resource company, whose cash ?ows are anchored by solid regulated energy assets.
Management has systematically grown both sides of its business year after year, even while holding debt to 40 percent or less of capital and increasing its dividend 20 consecutive years.
The latest--a 3.2 percent boost e"ective with the quarterly payment in January--is remarkable for two reasons.
First, it comes at the end of a tough year for several operations and at the same time management has continued aggressive spending in several areas. Second, despite earnings that are likely to prove a nadir for the company, dividend coverage was still nearly 2-to-1.
That suggests immense staying power, even if the US economy remains sluggish. And the more growth picks up, the greater the potential for MDU's profits to rise. As an oil and gas producer, the company has an increasingly lucrative position in the Bakken trend producing light oil.
Utility construction is in good shape to benefit from the buildout of transmission infrastructure to bring renewable energy from the upper Midwest to Chicago and other major cities.
And the company's position as a top 10 producer of construction materials and aggregates is well placed to profit from government-sponsored infrastructure projects, such as road building and maintenance.
Finally, the company's Montana, Dakotas and Pacific Northwest gas and electric utilities and pipeline unit enjoy some of the most supportive regulation in the country, ensuring planned investment will ?ow to rate base and earnings. That adds up to double-digit earnings growth in coming years, though a"ected by economic ups and downs.
Over the past 20 years, MDU has thrown o" a nearly 1,000 percent return--rising a combination of rising dividends and capital growth to annual returns approaching 13 percent. Buy up to 24.
Top Stocks To Buy For 2011: Level 3 Communications (LVLT)
By Gene Inger
"Our bias has again shifted temporarily to the bearish side, which makes me cautious about picking stocks in early 2011," says Gene Inger. With that caveat in mind, the editor of The Inger Letter looks to the Level 3 Communications(NASDAQ: LVLT), s speculative, low-priced issue.
"We owned this stock years ago and when Level 3 bought Broadwing we got stock and cash; thus solid profits years ago or zero-cost basis on Level 3 shares. "After pundits hyped it (at triple current prices) the stock has dropped to an area of attractiveness. One caution: from sub-$1 levels during our forecast market panic a year ago, the shares have doubled; thus it's not impossible that 'capital gains taking' could suppress the stock somewhat early-on in the new year.
"Thus our buy-zone will be particularly wide; such as between 90 cents and $1.30 or so. One may elect to pay more and scale-in; though we’d prefer to buy in on pullbacks.
"Meanwhile, we note that their ability to service their debt should not be an issue presently; so we are interested to see what they do over the next year or two; not past 2012.
"Our original interest in Broadwing -- now absorbed by Level 3 -- was the all-digital-optical as well as transcontinental (now to Europe as well) fiber system.
"This system has no latency as still is common with satellite and many other systems (including most fiber networks).
"On top of that mobile carriers are increasingly looking to 'backhaul alternatives' to meet their increasing bandwidth needs, which should increasingly result in o?oading to fiber backhaul systems.
"The low latency is a reason why most sports and news networks are using Level 3 (two-way conversation reveals latency, whereas one-way conventional transmission doesn’t) for their HDTV broadcasts, and we believe that will increase in importance as 3D arrives eventually.
"Additional pluses in the fullness of time include bandwidth requirements in the Cloud Computing area; digitized medical record keeping; military uses (they have certain key Federal accounts) and certainly the growth of telecommunications in-lieu of physical travel.
"In the sense that reduced physical, and increased optical transport, is e?cient; that's actually a bit of a green' story as well."
Top Stocks To Buy For 2011: Longtop Financial (LFT)
By Timothy Lutt
"Longtop Financial Technologies (NYSE: LFT), our top pick for for 2011, was the first Chinese software company to list on the NYSE when its ADRs began trading in October 2007, and we're impressed by the progress made since then," says Timothly Lutts.
The editor of Cabot Stock of the Month Report explains, "Financial services industries are booming in China, and Longtop is a great way to benefit. We've long maintained that watching China’s growth in recent decades has been like watching a video of American history … but played at fast- forward speed.
"The transition from farming to industrial production was accomplished in one generation (in part by following the U.S. roadmap) and now the country is entering into the software era.
"Longtop Financial Technologies was founded in 1996 as a financial systems integration company, but made the transition to software and solutions in 2001.
"Today it’s the #1 developer of banking software in China and the #2 developer of software for the insurance industry. And now it's breaking into the securities industry; Longtop announced its first contract there in November.
"Longtop's main customers are banks; they accounted for 82% of revenue in the latest quarter. And its biggest bank customers (no surprise) are the 'Big Four' banks of China. These are the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, and the Agricultural Bank of China.
"These four banks together hold more than 65% of domestic market share. For Longtop, three of them (it's working to get business from the fourth) accounted for 48% of revenues in the latest quarter.
"In China, of course, the banks are healthy -- none have gone bankrupt, or been bailed out by the government. And none are expected to. Yes, business has slowed a little, but the future is still expected to bring great growth. And as the banks grow, Longtop will, too.
"In addition to banks, Longtop serves the insurance industry and the financial departments of major non-financial companies, and there’s no reason those won't grow, as well. But banks are the company’s bread and butter and will be for the foreseeable future.
"Furthermore, Longtop, which spends 5.8% of revenue on R&D, has new projects starting frequently. Recent announcements include projects on anti-money laundering, e-banking, financial testing solutions, financial risk management and data warehousing.
"And then there are acquisitions. Longtop completed the acquisition of Sysnet in second quarter, and it’s currently working on an acquisition that would be its biggest yet.
"Technically, Longtop’s stock chart is encouraging. After coming public in October 2007 at 18, it peaked at 35 and then drifted slowly down over the next year (with the market), bottoming at 10 1/2 in November 2008. By late February, it had recovered to 15, and that’s when the big move of 2010 began that took the stock to a high of 38.
"Currently, it’s digesting that advance; it may pull back as far as 32, where we now find the 50-day moving average. And if it does I recommend that you treat the pullback as a buying opportunity.
"While the American banking industry struggles, the Chinese banking and financial services industries are booming, and Longtop is a great way to benefit from that boom."
Top Stocks To Buy For 2011: Seadrill
by Elliott Gue, editor The Energy Strategist
Seadrill (SDRL) is the best-placed contract driller in my coverage universe. The company doesn't produce or explore for oil and natural gas; rather, it is in the business of owning drilling rigs that are leased out to major producers for a daily fee known as a day rate.
There are three major reasons to buy Seadrill. First, the company has the youngest and most advanced ?eet of drilling rigs of any of the major contractors.
Second, Seadrill's rigs are primarily booked under long-term contracts at attractive rates for several years into the future, providing a guaranteed backlog of cash how regardless of the path of commodity prices.
And finally, Seadrill has a policy of paying out sizeable quarterly dividends supported by its backlog of rig contracts.
In the most recent quarter, Seadrill paid $0.65 per share, equivalent to an annualized yield of approximately 8 percent at the current price.
I see the company boosting its payout to around $0.75 per quarter by the fourth quarter of 2011; given strong investor preference for income-paying stocks, a growing dividend will continue to drive further upside in the stock.
Seadrill owns a feet of sixteen deepwater drilling rigs including ten semi-submersibles and six drillships.
The average operating Seadrill rig is less than five years old and that only includes the 13 rigs currently working on contracts.
The remaining 10 rigs in the feet were all built between 2008 and 2010 and are of the most modern and capable design.
All are ultra-deepwater rigs able to drill in waters more than 10,000 feet deep and are powerful enough to complete wells more than 6 miles in length.
Deepwater operations are only going to get more complex in coming years; as a result, producers need the most advanced, state-of-the-art rigs In addition to its deepwater feet, Seadrill also owns around 20 shallow-water jackup rigs and 17 tender rigs that are used to ferry people and equipment and to support o "shore drilling operations.
Seadrill has a backlog of over $8.5 billion in contracts covering its deepwater rigs, $2 billion covering its jack-ups and $1.5 billion for tender rigs.
Since these revenues are essentially guaranteed under long-term deals signed with major oil and gas producers, this represents a highly visible stream of cash?ow over the next few years.
With a ?eet that's ideal for the current market, a growing 8 percent yield and opportunities to grow via new rig construction, the stock rates a buy under $38.
Top Stocks To Buy For 2011: Siga Technologies
by Dennis Slothower, editor Stealth Stocks
Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.
In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.
SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.
Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.
In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.
It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.
Top Stocks To Buy For 2011: AECOM (ACM)
By Georey Seiler
"Our top pick for 2011 is engineering and construction (E&C) firm AECOM Technology (NYSE:ACM)," says Geo?rey Seiler.
In his BullMarket.com the advisor explains, "AECOM, unlike some better-known E&C names, o?ers a relatively low-risk business model. It performs no construction work at all and thus has none of the lump-sum, fixed-rate contracts that other companies might sign.
"The Los Angeles-based company focuses on a broad range of services that includes planning, design, environmental impact studies, project management, logistics and other jobs in the facilities, transportation, environmental, and energy and power segments.
"Transportation is the company's largest end market, representing 28% of the business, followed by environmental at 25%, facilities work at 24%, and Management Support Services (MSS), which delivered 17% of its revenues in fiscal 2010.
"Energy and power is the company's smallest segment, representing about 6% of its total revenues, but the company does view it as a growth opportunity. It is particularly strong in hydroelectric projects.
"The MSS business is 100% dedicated to working directly for the U.S. government, but government spending of all types -- either from federal state and local governments and foreign governments -- accounts for 70% of the company's revenue. The remainder comes from the private sector.
"AECOM has been under some pressure toward the end of the year, despite initially rallying following a strong fiscal Q4 earnings report in November. The culprit was some weak reports from fellow E&C firms and the Dubai debt debacle.
"However, AECOM isn't subject to the same type of energy sector cancellations that some other E&C companies experienced, and its exposure to Dubai is negligible.
"Impressively, AECOM is one of the few E&C firms to grow its backlog sequentially last quarter. Total backlog stood at a record $9.5 billion on September 30th, a 10% increase year over year and a 3% increase quarter over quarter.
"Meanwhile, AECOM is well positioned to be a beneficiary of increased government stimulus spending in 2011, as well as the possible passage of a substantial highway bill late next year.
"AECOM guided for fiscal year 2011 EPS to be in the range of $1.90 to $2.00. The midpoint of this range reflects 15% growth in earnings per share. We think the guidance is relatively conservative.
"In summary, we like AECOM's position in the marketplace, its consistent growth, and sound low-risk strategy. With a pristine balance sheet, trading at under 14x the midpoint of conservative guidance, and an over 15% expected 5-year growth rate, AECOM is undervalued and our top pick for 2011."
Top Stocks To Buy For 2011: AeroVironment (AVAV)
By Gregg Early
Technology expert Gregg Early looks to AeroVironment (NDSQ: AVAV) as his top pick for the coming year.
The editor of The New Tech Investor -- and the soon-to-be-launched 2020 Portfolio -- explains, "Although the firm's miltary aerospace business should be strong, it is the firm's new 'clean technology' and energy e?ciency projects that should be the real growth kicker.
"AeroVironment started o? 2010 strong but it was hit in the spring by the global economic collapse and the irrational fears of investors -- both individual and institutional -- about what the future held in store for this unique firm.
"But 2011 should be the perfect climate for this company to continue is comeback and head to new highs.
"AeroVironment was founded by the father of human powered flight, Dr. Paul MacCready (1925-2007), the inventor of the human powered Gossamer Condor and Gossamer Albatross (which was flown across the English Channel and resides in the Smithsonian Air and Space Museum).
"MacCredy also developed the first solar powered aircraft, the Gossamer Penguin and the Solar Challenger. He also co-developed the GM Sunraycer, one of the first solar powered land vehicles.
"His revolutionary developments in aerospace design were put to good use in AeroVironment's unmanned air systems (UASs) division. The company's hand launched and micro UASs are deployed extensively in Iraq and Afghanistan with special forces units and well loved by the troops who rely on them.
"While general defense spending is on a downtrend, C4ISR (command, control, computing, communications, intelligence, surveillance, reconnaissance) budgets are increasing briskly across all the armed services as well intelligence and homeland security sectors.
"This business has sustained AeroVironment in the past and will continue to generate more business in coming years. But it E?cient Energy division is the real growth kicker.
"The company pioneered electric vehicle (EV) charging stations and has a long and abiding relationship with many car manufacturers as well as government agencies.
"As EV filling stations begin to dot the US landscape--and that development is already growing briskly in the West -- AeroVironment will be a significant player.
"Also, because the stimulus plan had the unintended e?ect of holding up cleantech projects as everyone waited to see who would get government money, it made 2010 a tough year for cleantech.
"Now that the monies have been earmarked, projects will move ahead faster now that companies have better visibility on where the funding will be derived. AeroVironment is a buy up to 35."
Top Stocks To Buy For 2011: VIST Financial Corporation
by Benj Gallander and Ben Stadelmann, editors Contra the Heard
VIST Financial Corporation (VIST) is our favorite investment idea for the coming year. Last April two institutional investors specializing in banking recently purchased 644,000 shares at $8.00, moving the share count to around 6.5 million. The stock fits in with our focus recently of buying financial plays. This past quarter there was a nominal loss of $602,000, knocking net income for the first nine months of this year down to about $2.5 million.
Last April two institutional investors specializing in banking recently purchased 644,000 shares at $8.00, moving the share count to around 6.5 million. Perhaps the buyers were regarding the bank's capital ratios, which exceed all regulatory guidelines.
Or maybe they like that VIST is looking to grow somewhat with the purchase of Allegiance Bank that is expected to be accretive immediately. Whatever their rationale, this pushed insider ownership to better than 11 percent.
Our target price is $24.75, a distance from the current level of around $7.00. The stock had a good stretch where it traded above this price.
The annual dividend of $0.20 will almost certainly increase if the operation returns to previous levels of profitability.
Learn more about this financial newsletter at Benj Gallander's Contra the Heard.
Top Stocks To Buy For 2011: Yongye International
by Jim Trippon, editor Global Profits Alert
Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.
Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.
As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?
ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.
While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.
From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.
Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.
In his The Technology Stock Advisor, he explains, "The stock meets our proprietary criteria for both its technical innovation as well as our value approach to stock selection.
"Servotronics engages in designing, manufacturing, and marketing advanced technology products in the United States and internationally.
"Its Advanced Technology Group markets various servo-control components, which convert an electrical current into a mechanical force or movement and other related products.
Permalink: [635] Top Stocks To Buy - Top Stocks To Buy For 2011
"The company's Consumer Products Group sells various cutlery products, including kitchen knives, such as steak, carving, bread, butcher, and paring knives for household use, as well as for use in restaurants and institutions.
"Our selection of Servotronics is based upon our patented methodology for investigating technology stock. We developed a theory of technological innovation using Leontief's theory about input output economics that helps us predict technological investment opportunities.
"Our theory helps us conduct our first screening of the universe of stocks in order for us to narrow the selection to companies that are in nine high technology industrial clusters.
"Next, we apply rigorous standards to those stocks based upon a value approach to investing that shares many elements in common with the Graham and Dodd approach to investment selection.
"We first added the stock to our portfolio last April. but note that Servotronics continues to meet all the selection criteria needed for our strategy. We continue to recommend purchase under $9 per share."
Top Stocks To Buy For 2011: SmartHeat (HEAT)
By Brendan Corey
Brendan Co?ey is the editor of The Cabot Green Investor, a newsletter focused on companies involved in varous aspects of the broad environmental technologies sector.
For his top pick for 2011 Here, he looks to SmartHeat (NASDAQ: HEAT), a maker of plate-heat exchange systems and heat meters.
"Like in seemingly every other business, China promises to be a massive market for the products SmartHeat provides: plate-heat exchange systems and heat meters.
"These are relatively simple products that are only just starting to be required in China. Using SmartHeat PHE systems can slash coal usage by up to two-thirds in wildly ine?cient Chinese buildings, oil refineries and chemical factories, where legacy shell and tube technology dominates.
"The market for PHEs in China will rise 20% to $3.2 billion in 2011, while the submarket for smaller, customized PHE units in which SmartHeat has a highly profitable specialty should grow triple-digits to nearly $1 billion.
"Plenty of growth should come in future years too: China generates 70% of its electricity from coal, and the government is keen to be more energy e?cient to ween itself from imported oil and improve its notorious urban air quality.
"There are plenty of competitors in PHEs, but SmartHeat has two advantages: It is Chinese and has production costs around 15% cheaper than imports at comparable quality.
"Sales through the first three quarters of fiscal 2010 were up 92% to $56.5 million, while net income surged 96% to 51 cents a share over the same period. Both should nearly double again in 2011.
"Management are industry veterans who are confident enough in the company they signed an agreement not to sell any of their shares until January 2012.
"The stock only began trading on the Nasdaq Global Market in March so the company’s story is still unheard by many investors. That will change quickly."
Top Stocks To Buy For 2011: Aflac
by Richard Moroney, editor Dow Theory Forecasts
Aflac (AFL) represents a top year-ahead pick based on its solid operating momentum and modest valuation. In our proprietary ranking system (known as Quadrix), the stock earns an Overall score of 99. At 10 times trailing earnings, the shares trade 33% below the five-year average P/E ratio of 15.
The insurer's sales rose 13% in the first nine months of this year, while free cash how rose 12%. At 10 times trailing earnings, shares trade 32% below the three-year average P/E ratio. Arac continues to grow in Japan (about 75% of sales), but growth in the U.S. (roughly 25%) has been tougher to find.
Management remains cautious about its U.S. outlook, but it should benefit as small companies, which make up a large portion of the domestic business, begin to hire again. A?ac -- yielding 2.2% -- is a Focus List Buy and a holding on our Long-Term Buy list.
Top Stocks To Buy For 2011: Allot Communications
by Ian Wyatt, editor Small Cap Investor PRO
The smartphone revolution -- with web-browsing, video-watching, music-streaming mobile devices -- has made bandwidth a scarce resource.
That's where Allot Communications (ALLT) comes in. Allot is an Israeli company that develops deep packet inspection (DPI) technology specifically designed to manage bandwidth use Consumers want phones that let them listen to music, surf the web, watch video, and access a wide array of applications. Maybe even occasionally make a call or two. Allot's solutions are critical for Internet Service Providers (ISP), cable companies, landline operators, mobile phone companies, businesses and governments.
The company has consistently grown overseas in Europe, Asia, and South America. The U.S. still represents a huge growth market, if and when regulations permit carriers to implement Allot's technology. Allot's third quarter was a good one. The company increased revenue by 36 percent to $14.7 million year-over-year.
Quarter-over-quarter revenue also increased, by 8 percent, marking the sixth consecutive quarter of sequential revenue growth. On a GAAP basis, Allot earned $0.03 per share, a nice improvement over a $0.10 loss in the third quarter of 2009.
But what I really like here is that the company ended the quarter with $56.2 million in cash and essentially zero debt. Allot is a play on the future growth of smartphones, and the near certainty that service providers will segment bandwidth in order to design service plans tailored to customer behavior.
What's more, this tiny company is a potential takeout candidate and management has shown an ability to orchestrate acquisitions in the past.
Top Stocks To Buy For 2011: China Digital TV (STV)
By Glenn Cutler
"My top pick for 2011 is China Digital TV Holding Co Ltd. (NYSE: STV), the #1 provider of conditional access (CA) systems in China’s digital TV market," says Glenn Cutler.
In his Winner Forum and Special Situations Reports, he explains, "I consider this a conservative idea to play the China market through an established company that dominates its business sector.
"China Digital TV Holding is based in Beijing, China and was founded in 2004. They are in a strong position to leverage their current 50% market share in China. Of 375 million TV households across China, 168 million are cable subscribers with an additional 10 million added each year.
"With only 54 million smart cards shipped industry wide, there is ample opportunity for growth, market share expansion and royalties and revenue sharing with cable operators. They have over 225 customers, with roughly 30 of them providing over 1 million subscribers each.
"Currently, their CA systems consist of smart cards (90% of revenue) and head-end software for television network operators, as well as terminal-end software for set-top box manufacturers.
"They enable digital television network operators to control the distribution of content and value-added services to their subscribers and block unauthorized access to their networks.
"The company also licenses its set-top box design to set-top box manufacturers and sells advanced digital television application software, such as electronic program guides and subscriber management systems to digital television network operators.
"There are several reasons why the stock price has been trading near its annual lows. Recent revenues have been under pressure and earnings have been soft due to the postponement of digital migration projects as cable operators wait for greater clarity with respect to industry consolidation and subscription fee adjustments in certain regions.
"The company has faced pricing pressures and they’ve reduced selling prices at times as a tradeo? for gaining new customers in less populated areas.
"These factors have led to downgrades by some analysts. Earnings for FY2010 are expected to be .42/share down from .72/share in FY2008. Expectations are low as earnings projections for FY2011 are estimated to be flat at .42/share.
"China Digital has a solid financial structure with $225 million in cash ($3.87/share) which was reduced by distribution of a $1 per share special cash dividend in Feb/ 2010. The balance sheet is solid with zero debt. They maintain a strong market position for continuing growth.
"The company intends as a policy to consider special dividends every two years. The current market cap is $348 million. Trailing 12-month profit margins are 54%.
"Book value is $4.25 a share. The P/E Ratio is 11. There are currently 58 million shares outstanding. The shares are trading close to their 52-week low, within a yearly range of $5.60 (low) to $11.80 (high). Return on equity is 12%.
"With expectations low, there is potential for upside surprise if digital migration projects start to accelerate. With shares trading at about $2 above their cash position, downside risk is partially mitigated. The company could use cash on hand to acquire productive assets should attractive opportunities arise to compliment their product o?erings or consolidate their industry sector.
"As a conservative way to play expected growth in China, this company o?ers an excellent low-risk technology angle for a 2011 stock portfolio. A good upside target range over 12-months would be $8-$10."
Top Stocks To Buy For 2011: China Mobile (CHL)
By John Reese
Validea is an intriguing advisory that bases its stock selections on the known investment criteria of legendary stock market investors.
John Reese explains, "China Mobile Ltd. (NYSE: CHL) is one of the rare stocks to get approval from three of tour Guru Strategy computer models; it earns top marks from my Warren Bu?ett-, Peter Lynch-, and James O'Shaughnessy-based models.
"With the Western world still working its way through the aftermath of the credit crisis, a number of top strategists are looking eastward for growth in 2011.
"Byron Biggs, Anthony Bolton, Jim Rogers -- these are just some of the market gurus who have been keying in on China, where one of the world's greatest exporting nations is now poised for some major domestic growth as well.
"I also see a lot of opportunities in China, and Hong Kong-based China Mobile may be the greatest. The country's largest mobile phone network, it topped the 500-million- subscriber mark in the third quarter.
"The Bu?ett approach looks for firms with lengthy histories of earnings growth and conservative financing, and China Mobile delivers.
"It has upped earnings per share in each year of the past decade (and is on track to do so again in 2010), and its debt of $1.45 billion is less than a tenth of its annual earnings ($16.6 billion).
"The company also has averaged a 23.1% return on equity over the past ten years, a sign of both the strong management and durable competitive advantage Bu?ett is known to look for.
"The Lynch model, meanwhile, considers China Mobile a 'fast-grower' -- Lynch's favorite type of investment -- because of its 24.4% long-term EPS growth rate. (I use an average of the three-, four-, and five-year EPS growth figures to determine a long-term rate.)
" Lynch is famous for using the P/E/Growth ratio to identify growth stocks selling on the cheap, and the model I base on his writings considers P/E/Gs below 1.0 acceptable, and those below 0.5 the best case.
"When we divide China Mobile's 11.3 P/E ratio by its growth rate, we get a P/E/G of just 0.46, a great sign. Lynch also liked conservatively financed firms, and China Mobile's tiny 2.3% debt/equity ratio easily passes muster with my Lynch-based strategy.
"Finally, the model I base on James O'Shaughnessy's value stock approach targets large firms with strong cash flows and high yields.
"China Mobile's $185 billion market cap, $6.97 in cash flow per share (vs. the market average of just $0.49), and 3.8% dividend yield are all good enough to earn this model's approval. Disclosure: I'm long CHL and own the stock in the portfolios o?ered by my advisory firm, Validea Capital Management."
Top Stocks To Buy For 2011: Canadian Oil Sands Trust
by David Dittman, contributing editor Canadian Edge
Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.
And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.
New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.
Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.
At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.
Top Stocks To Buy For 2011: Catlin Group
by Vivian Lewis, editor Global Investing
Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.
It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.
It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.
It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..
It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.
It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.
Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.
It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.
Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.
Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)
"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.
BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.
What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.
Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.
And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.
If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.
Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).
Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.
Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.
Top Stocks To Buy For 2011: Equinix (EQIX)
By Stephen Quickel
"Equinix (NASDAQ: EQIX), the global data center operator, is one of the most tempting growth stock opportunities on the 2011 horizon," says Stephen Quickel.
The editor of US Investment Report explains, "Big banks, market data providers, telecoms and other technology-driven clients use the firm's data center platforms to reduce their own capital expenditures and operating costs.
"The Silicon Valley-based company, barely ten years from startup, has moved quickly to open 45 data full-service centers serving clients in 18 key regions of the U.S., Europe and Asia-Pacific areas.
"These centers provide data management services to global enterprises of all sorts, including content and financial companies and network service providers,. "With demand rising rapidly, Equinix, has been able to lift revenues from $118 million in 2003 to $705 million in 2008, and to an estimated $880 million in recessionary 2010. Analysts project $1.17 billion in 2011—a two-year rise of 67%.
"As for earnings, the rapidly expanding company showed deficits for its first eight years, but reduced them in all but one year. Now firmly in the black and established as a sector leader, its gains could be large over the next few years.
"Rapid expansion of its IBX centers (short for International Business Exchanges) has required considerable debt. The latest available debt/equity ratio is an elevated 1.27.
"But capital spending is leveling o?, and Smith and his managers have kept of tight rein on operating costs.
"Earnings have risen 26 quarters in a row. After tax margins are reportedly at a four-year high. Third quarter 2010 earnings jumped 213% year-over-year, beating analyst estimates by 57%.
"Zacks reports consensus five-year earnings growth projection of 18.4% a year going forward. First Call shows earnings up 26% in 2011 and more than 40% in 2011.
"Those eye-catching numbers have not gone unnoticed. EQIX is not cheap by conventional measures. At 105 in late December (up from 40 in March), it traded at 51 times FC’s 2011 earnings projection and 34 times its 2011 estimate.
"But the stock has impressive support. Among 26 brokers—a large following for a young $4-billion market cap stock—15 rated it a Strong Buy in December, 3 a Buy and 8 a Hold, with no Sells.
"Goldman Sachs, altogether, owns 12.5% of the outstanding shares, with Wellington Management and Shumway Capital Partners each holding 8%-plus. Wells Fargo, Barclays, Morgan Stanley and Vanguard also have large positions.
"Of course, the Big Boys bought in at lower levels and have added shares along the way—and will doubtless continue to do so.
"With its high debt and P/E, it’s not the kind of play-it-safe stock that attracted investors in late 2010. But as we head into 2011, few mid-caps have emerged with more fascinating near- and long-term growth possibilities."
Top Stocks To Buy For 2011: EZchip (EZCH)
Paul McWillams
"EZchip Semiconductor (NASDAQ: EZCH), a fabless semiconductor company that specializes in network processors," is my top pick for the coming year," says technology sector guru Paul McWilliams.
In his Next Inning newsletter, designed for sophisticated tech investors, he suggests, "I think the upside potential here in 2011 and beyond is significant.
"Its initial market target has been what's termed as CESR (Carrier Network Switching and Routing). EZCH has since expanded its focus to include products that are broadly grouped into what's called the 'Access' market.
"Between organic demand growth in the CESR market and EZCH's expansion into the Access markets, it is estimated the company will be addressing a total available market potential of about $1.5B by 2012.
"That implies substantial upside revenue potential for a company that will report somewhat less than $40M in revenue for calendar 2010.
"In 2011, EZCH will be shipping NP2 and NP3 / NP3C network processors in volume to its CESR customer base. In addition to this, we'll also see the initial revenue generated from its next generation CESR solution, the NP4 and its debut Access product, the NPAx.
"Notable production ramps for the NPA and NP4, which sells for roughly twice the price of a NP3, will begin in 2011. Revenue from its NP2 will likely peak in late 2011 or 2011 as Juniper winds down its demand and replaces the NP2 with an internally designed ASIC.
"However, I believe this will be much more than o?set with the ramp of the NP3 and NP3C, the latter of which is designed into various platforms at Cisco including its new ASR series edge router.
"I believe EZCH's lack of participation in the 2010 tech rally is attributable to two factors. The first is what I think will prove to be a misunderstanding as to when its business at Juniper will peak and the sharpness of the decline following the peak.
"In my view, this peak won't happen until late in 2011 at the earliest and by then it will be much more than o?set by growing business at Cisco; not to mention design wins at other leading networking companies that will ramp in 2011 and beyond.
"The second factor has been the selling of shares by some of EZCH's early venture capitalists (VC's). Due to the fact EZCH initiated a secondary o?ering to liquidate these VC shares in one fell swoop as well as complete the purchase of its a?liated EZchip Technologies operating unit, this selling pressure will soon be eliminated. In my view, with this gone and EZCH poised to post impressive growth in 2011."
Top Stocks To Buy For 2011: Marvell Technology Group
by Paul McWilliams, editor Next Inning
Marvell Technology Group (MRVL) clearly fits the bill of a stock that is currently unloved by Wall Street. As a matter of a fact, there's not much at all that Wall Street likes about the company. Nevertheless, I would choose this as one of my favorite stocks for the coming year.
Nearly half of Marvell's revenue comes from the hard disk drive (HDD) industry, and even though it has gained market share, Wall Street believes the HDD sector will be wiped out by solid state drive (SSD) technology.
We'll set aside for now that Marvell is also a leader in SSD controllers, which it just so happens to sell for more than it does its industry leading HDD controllers.
As I see it, Wall Street has penned the HDD obituary far in advance of when we should plan to attend the funeral.
The short story for Marvell comes in two intersecting pieces. First, Marvell is one of only three semiconductor companies in the world that has an Architectural License from ARM Holdings (ARMH). This means Marvell can tweak the internal design of the ARM core processor to optimize it for targeted applications.
It has done this very eectively in the past to dominate the HDD controller market, and the company has more recently taken a new approach to design highly integrated smartphone chips that are intended to materially drive down the total cost for smartphones, and thereby radically increase their presence in emerging markets.
China is, of course, the first target, and I believe we'll see a ?urry of new Marvell-powered smartphones released there in 2011.
Intersecting with Marvell's expertise with ARM core processors, which you'll find in some shape or form in roughly 95% of the chips Marvell ships, is Marvell's integration talent.
Few, if any, competitors can match Marvell when it comes to mixed-signal integration (integrating analog and digital functions on a single chip)."" "
While integration skills have always been important for semiconductor companies, we are now at a tipping point where the companies that are very good at it will have an opportunity to accelerate growth. I believe that tipping point will occur sometime between now and 2015, and when it does, Marvell's growth curve has the potential to ride a very favorable wave. That said, my price target range for 2011 is somewhere in the high-$20s to very low $30s.
Top Stocks To Buy For 2011: MDU Resources
by Roger Conrad, editor The Utility Forecaster
Even among great companies, one year's leader is often the next's laggard and vice versa; MDU Resources (MDU) is one under-performer that looks increasingly likely to get it's legs back in 2011.
The company is best thought of as a financially conservative resource company, whose cash ?ows are anchored by solid regulated energy assets.
Management has systematically grown both sides of its business year after year, even while holding debt to 40 percent or less of capital and increasing its dividend 20 consecutive years.
The latest--a 3.2 percent boost e"ective with the quarterly payment in January--is remarkable for two reasons.
First, it comes at the end of a tough year for several operations and at the same time management has continued aggressive spending in several areas. Second, despite earnings that are likely to prove a nadir for the company, dividend coverage was still nearly 2-to-1.
That suggests immense staying power, even if the US economy remains sluggish. And the more growth picks up, the greater the potential for MDU's profits to rise. As an oil and gas producer, the company has an increasingly lucrative position in the Bakken trend producing light oil.
Utility construction is in good shape to benefit from the buildout of transmission infrastructure to bring renewable energy from the upper Midwest to Chicago and other major cities.
And the company's position as a top 10 producer of construction materials and aggregates is well placed to profit from government-sponsored infrastructure projects, such as road building and maintenance.
Finally, the company's Montana, Dakotas and Pacific Northwest gas and electric utilities and pipeline unit enjoy some of the most supportive regulation in the country, ensuring planned investment will ?ow to rate base and earnings. That adds up to double-digit earnings growth in coming years, though a"ected by economic ups and downs.
Over the past 20 years, MDU has thrown o" a nearly 1,000 percent return--rising a combination of rising dividends and capital growth to annual returns approaching 13 percent. Buy up to 24.
Top Stocks To Buy For 2011: Level 3 Communications (LVLT)
By Gene Inger
"Our bias has again shifted temporarily to the bearish side, which makes me cautious about picking stocks in early 2011," says Gene Inger. With that caveat in mind, the editor of The Inger Letter looks to the Level 3 Communications(NASDAQ: LVLT), s speculative, low-priced issue.
"We owned this stock years ago and when Level 3 bought Broadwing we got stock and cash; thus solid profits years ago or zero-cost basis on Level 3 shares. "After pundits hyped it (at triple current prices) the stock has dropped to an area of attractiveness. One caution: from sub-$1 levels during our forecast market panic a year ago, the shares have doubled; thus it's not impossible that 'capital gains taking' could suppress the stock somewhat early-on in the new year.
"Thus our buy-zone will be particularly wide; such as between 90 cents and $1.30 or so. One may elect to pay more and scale-in; though we’d prefer to buy in on pullbacks.
"Meanwhile, we note that their ability to service their debt should not be an issue presently; so we are interested to see what they do over the next year or two; not past 2012.
"Our original interest in Broadwing -- now absorbed by Level 3 -- was the all-digital-optical as well as transcontinental (now to Europe as well) fiber system.
"This system has no latency as still is common with satellite and many other systems (including most fiber networks).
"On top of that mobile carriers are increasingly looking to 'backhaul alternatives' to meet their increasing bandwidth needs, which should increasingly result in o?oading to fiber backhaul systems.
"The low latency is a reason why most sports and news networks are using Level 3 (two-way conversation reveals latency, whereas one-way conventional transmission doesn’t) for their HDTV broadcasts, and we believe that will increase in importance as 3D arrives eventually.
"Additional pluses in the fullness of time include bandwidth requirements in the Cloud Computing area; digitized medical record keeping; military uses (they have certain key Federal accounts) and certainly the growth of telecommunications in-lieu of physical travel.
"In the sense that reduced physical, and increased optical transport, is e?cient; that's actually a bit of a green' story as well."
Top Stocks To Buy For 2011: Longtop Financial (LFT)
By Timothy Lutt
"Longtop Financial Technologies (NYSE: LFT), our top pick for for 2011, was the first Chinese software company to list on the NYSE when its ADRs began trading in October 2007, and we're impressed by the progress made since then," says Timothly Lutts.
The editor of Cabot Stock of the Month Report explains, "Financial services industries are booming in China, and Longtop is a great way to benefit. We've long maintained that watching China’s growth in recent decades has been like watching a video of American history … but played at fast- forward speed.
"The transition from farming to industrial production was accomplished in one generation (in part by following the U.S. roadmap) and now the country is entering into the software era.
"Longtop Financial Technologies was founded in 1996 as a financial systems integration company, but made the transition to software and solutions in 2001.
"Today it’s the #1 developer of banking software in China and the #2 developer of software for the insurance industry. And now it's breaking into the securities industry; Longtop announced its first contract there in November.
"Longtop's main customers are banks; they accounted for 82% of revenue in the latest quarter. And its biggest bank customers (no surprise) are the 'Big Four' banks of China. These are the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, and the Agricultural Bank of China.
"These four banks together hold more than 65% of domestic market share. For Longtop, three of them (it's working to get business from the fourth) accounted for 48% of revenues in the latest quarter.
"In China, of course, the banks are healthy -- none have gone bankrupt, or been bailed out by the government. And none are expected to. Yes, business has slowed a little, but the future is still expected to bring great growth. And as the banks grow, Longtop will, too.
"In addition to banks, Longtop serves the insurance industry and the financial departments of major non-financial companies, and there’s no reason those won't grow, as well. But banks are the company’s bread and butter and will be for the foreseeable future.
"Furthermore, Longtop, which spends 5.8% of revenue on R&D, has new projects starting frequently. Recent announcements include projects on anti-money laundering, e-banking, financial testing solutions, financial risk management and data warehousing.
"And then there are acquisitions. Longtop completed the acquisition of Sysnet in second quarter, and it’s currently working on an acquisition that would be its biggest yet.
"Technically, Longtop’s stock chart is encouraging. After coming public in October 2007 at 18, it peaked at 35 and then drifted slowly down over the next year (with the market), bottoming at 10 1/2 in November 2008. By late February, it had recovered to 15, and that’s when the big move of 2010 began that took the stock to a high of 38.
"Currently, it’s digesting that advance; it may pull back as far as 32, where we now find the 50-day moving average. And if it does I recommend that you treat the pullback as a buying opportunity.
"While the American banking industry struggles, the Chinese banking and financial services industries are booming, and Longtop is a great way to benefit from that boom."
Top Stocks To Buy For 2011: Seadrill
by Elliott Gue, editor The Energy Strategist
Seadrill (SDRL) is the best-placed contract driller in my coverage universe. The company doesn't produce or explore for oil and natural gas; rather, it is in the business of owning drilling rigs that are leased out to major producers for a daily fee known as a day rate.
There are three major reasons to buy Seadrill. First, the company has the youngest and most advanced ?eet of drilling rigs of any of the major contractors.
Second, Seadrill's rigs are primarily booked under long-term contracts at attractive rates for several years into the future, providing a guaranteed backlog of cash how regardless of the path of commodity prices.
And finally, Seadrill has a policy of paying out sizeable quarterly dividends supported by its backlog of rig contracts.
In the most recent quarter, Seadrill paid $0.65 per share, equivalent to an annualized yield of approximately 8 percent at the current price.
I see the company boosting its payout to around $0.75 per quarter by the fourth quarter of 2011; given strong investor preference for income-paying stocks, a growing dividend will continue to drive further upside in the stock.
Seadrill owns a feet of sixteen deepwater drilling rigs including ten semi-submersibles and six drillships.
The average operating Seadrill rig is less than five years old and that only includes the 13 rigs currently working on contracts.
The remaining 10 rigs in the feet were all built between 2008 and 2010 and are of the most modern and capable design.
All are ultra-deepwater rigs able to drill in waters more than 10,000 feet deep and are powerful enough to complete wells more than 6 miles in length.
Deepwater operations are only going to get more complex in coming years; as a result, producers need the most advanced, state-of-the-art rigs In addition to its deepwater feet, Seadrill also owns around 20 shallow-water jackup rigs and 17 tender rigs that are used to ferry people and equipment and to support o "shore drilling operations.
Seadrill has a backlog of over $8.5 billion in contracts covering its deepwater rigs, $2 billion covering its jack-ups and $1.5 billion for tender rigs.
Since these revenues are essentially guaranteed under long-term deals signed with major oil and gas producers, this represents a highly visible stream of cash?ow over the next few years.
With a ?eet that's ideal for the current market, a growing 8 percent yield and opportunities to grow via new rig construction, the stock rates a buy under $38.
Top Stocks To Buy For 2011: Siga Technologies
by Dennis Slothower, editor Stealth Stocks
Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.
In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.
SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.
Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.
In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.
It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.
Top Stocks To Buy For 2011: AECOM (ACM)
By Georey Seiler
"Our top pick for 2011 is engineering and construction (E&C) firm AECOM Technology (NYSE:ACM)," says Geo?rey Seiler.
In his BullMarket.com the advisor explains, "AECOM, unlike some better-known E&C names, o?ers a relatively low-risk business model. It performs no construction work at all and thus has none of the lump-sum, fixed-rate contracts that other companies might sign.
"The Los Angeles-based company focuses on a broad range of services that includes planning, design, environmental impact studies, project management, logistics and other jobs in the facilities, transportation, environmental, and energy and power segments.
"Transportation is the company's largest end market, representing 28% of the business, followed by environmental at 25%, facilities work at 24%, and Management Support Services (MSS), which delivered 17% of its revenues in fiscal 2010.
"Energy and power is the company's smallest segment, representing about 6% of its total revenues, but the company does view it as a growth opportunity. It is particularly strong in hydroelectric projects.
"The MSS business is 100% dedicated to working directly for the U.S. government, but government spending of all types -- either from federal state and local governments and foreign governments -- accounts for 70% of the company's revenue. The remainder comes from the private sector.
"AECOM has been under some pressure toward the end of the year, despite initially rallying following a strong fiscal Q4 earnings report in November. The culprit was some weak reports from fellow E&C firms and the Dubai debt debacle.
"However, AECOM isn't subject to the same type of energy sector cancellations that some other E&C companies experienced, and its exposure to Dubai is negligible.
"Impressively, AECOM is one of the few E&C firms to grow its backlog sequentially last quarter. Total backlog stood at a record $9.5 billion on September 30th, a 10% increase year over year and a 3% increase quarter over quarter.
"Meanwhile, AECOM is well positioned to be a beneficiary of increased government stimulus spending in 2011, as well as the possible passage of a substantial highway bill late next year.
"AECOM guided for fiscal year 2011 EPS to be in the range of $1.90 to $2.00. The midpoint of this range reflects 15% growth in earnings per share. We think the guidance is relatively conservative.
"In summary, we like AECOM's position in the marketplace, its consistent growth, and sound low-risk strategy. With a pristine balance sheet, trading at under 14x the midpoint of conservative guidance, and an over 15% expected 5-year growth rate, AECOM is undervalued and our top pick for 2011."
Top Stocks To Buy For 2011: AeroVironment (AVAV)
By Gregg Early
Technology expert Gregg Early looks to AeroVironment (NDSQ: AVAV) as his top pick for the coming year.
The editor of The New Tech Investor -- and the soon-to-be-launched 2020 Portfolio -- explains, "Although the firm's miltary aerospace business should be strong, it is the firm's new 'clean technology' and energy e?ciency projects that should be the real growth kicker.
"AeroVironment started o? 2010 strong but it was hit in the spring by the global economic collapse and the irrational fears of investors -- both individual and institutional -- about what the future held in store for this unique firm.
"But 2011 should be the perfect climate for this company to continue is comeback and head to new highs.
"AeroVironment was founded by the father of human powered flight, Dr. Paul MacCready (1925-2007), the inventor of the human powered Gossamer Condor and Gossamer Albatross (which was flown across the English Channel and resides in the Smithsonian Air and Space Museum).
"MacCredy also developed the first solar powered aircraft, the Gossamer Penguin and the Solar Challenger. He also co-developed the GM Sunraycer, one of the first solar powered land vehicles.
"His revolutionary developments in aerospace design were put to good use in AeroVironment's unmanned air systems (UASs) division. The company's hand launched and micro UASs are deployed extensively in Iraq and Afghanistan with special forces units and well loved by the troops who rely on them.
"While general defense spending is on a downtrend, C4ISR (command, control, computing, communications, intelligence, surveillance, reconnaissance) budgets are increasing briskly across all the armed services as well intelligence and homeland security sectors.
"This business has sustained AeroVironment in the past and will continue to generate more business in coming years. But it E?cient Energy division is the real growth kicker.
"The company pioneered electric vehicle (EV) charging stations and has a long and abiding relationship with many car manufacturers as well as government agencies.
"As EV filling stations begin to dot the US landscape--and that development is already growing briskly in the West -- AeroVironment will be a significant player.
"Also, because the stimulus plan had the unintended e?ect of holding up cleantech projects as everyone waited to see who would get government money, it made 2010 a tough year for cleantech.
"Now that the monies have been earmarked, projects will move ahead faster now that companies have better visibility on where the funding will be derived. AeroVironment is a buy up to 35."
Top Stocks To Buy For 2011: VIST Financial Corporation
by Benj Gallander and Ben Stadelmann, editors Contra the Heard
VIST Financial Corporation (VIST) is our favorite investment idea for the coming year. Last April two institutional investors specializing in banking recently purchased 644,000 shares at $8.00, moving the share count to around 6.5 million. The stock fits in with our focus recently of buying financial plays. This past quarter there was a nominal loss of $602,000, knocking net income for the first nine months of this year down to about $2.5 million.
Last April two institutional investors specializing in banking recently purchased 644,000 shares at $8.00, moving the share count to around 6.5 million. Perhaps the buyers were regarding the bank's capital ratios, which exceed all regulatory guidelines.
Or maybe they like that VIST is looking to grow somewhat with the purchase of Allegiance Bank that is expected to be accretive immediately. Whatever their rationale, this pushed insider ownership to better than 11 percent.
Our target price is $24.75, a distance from the current level of around $7.00. The stock had a good stretch where it traded above this price.
The annual dividend of $0.20 will almost certainly increase if the operation returns to previous levels of profitability.
Learn more about this financial newsletter at Benj Gallander's Contra the Heard.
Top Stocks To Buy For 2011: Yongye International
by Jim Trippon, editor Global Profits Alert
Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.
Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.
As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?
ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.
While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.
From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.
Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.
Stock Trading, Money Management and the Duke of Yarborough
Unless you're a pure gambler, "betting it all on black" or putting all your trading money into one position definitely isn't the way to go. Money management can be critical to long term success in stock and option trading and investing. "Diversify." "Don't put all your eggs in one basket." Who hasn't heard those words of wisdom? Yet, time and time again, people forget that wisdom. They put all their savings into one stock -- often the company where they work. Apparently they believe the company can't fail so they don't perceive the risk until it is too late (we all remember Worldcom, Enron, United Airlines, Qwest, etc...). Clearly, many stayed until the all too bitter end in some of those stocks and suffered the life changing results.
Permalink: [628] Top Stocks To Buy - Stock Trading, Money Management and the Duke of Yarborough
What do I mean by "money management"? How is it done? When someone trades stock (or options) he should set aside a specific amount to trade. The money set aside should be risk money; money that isn't needed to pay the bills, the mortgage, the car payment, groceries, etc. Since all trading involves risk, the amount set aside should definitely be considered to be at risk. Once the amount is identified, the trader has the option of making equal dollar amount trades or trading a fixed percentage of the risk money on each trade. Someone with a relatively small stake may initially make equal dollar amount trades. So, for example, if the trader has $10,000 in risk money, he may make each trade $500 (or $750 or maybe even $1,000) thus if everything is lost in one trade, there is still $9,500 (or $9,250 or $9,000) left to trade. He is still in the game. Even better, in my view, is making equal percentage trades. I prefer something in the 3% to 5% of risk money in any given trade. Let's say our hypothetical trader starts with $100,000 and trades 3% per trade. The first trade is for about $3,000. Let's say that all is lost on that trade, now the trader has $97,000 and the next trade would be only $2,910. Again, the $2,910 is lost, now there is $94,090 in risk money and the next trade would be about $2,800. Finally, that trade makes a nice gain of $2000. Now, there is $96,090 and the next trade would be for $2,900. Again, there is a gain, and this time a big one for $6,000. Now the risk money is $102,090 and the following trade would be for about $3,060. You get the point. As the fund diminishes, the trades are getting smaller and as it gains, the trades get larger. Several wins in a row will result in more money traded so dollar gains should be greater. If there are several losses in a row, less and less money is traded so potential losses are smaller and smaller. The chances of staying in the game are greater with this method of money management, and you can't make money trading unless you are able to trade. Of course, there is the old bridge players story of the Duke of Yarborough who purportedly went years without having a single point in a hand of bridge. If you are the stock trader's equivalent of the Duke of Yarborough, I guess nothing will help, but proper money management could give you a better chance.
While many people who trade are aware of money management principles, they fail to use them. Though money management makes sense, greed sometimes takes over. I once had a trading student who was doing very well. He'd call me and say "I made "x" today." The next day he'd tell me he made twice as much as the day before and the following day he did well again. The calls went on for some time, each one more excited, and then they stopped. I was concerned so I called him and asked how he was doing. He was crestfallen. He had five winning trades in a row on a particular stock and then guess what he did. He put all his money on the next trade. As fate would have it, the stock gapped down hugely the following morning and my friend not only lost all the profits he had claimed, he was out of the trading business. The market is a stern teacher and "Murphy" is always near at hand. Knowing that every trade involves risk, do everything you can in your trades to try to put the odds in your favor. Proper money management is one of those things that could help.
Another thing I believe a trader should analyze is the reward to risk ratio of a trade. I am a firm believer that I should know my initial exit before I ever enter a trade. I should also have a "first target" for the move I am trying to play. That does not mean that I will exit just because my position hits the first target. I'll see what the stock is doing if it gets there. If I'm bullish, I won't sell automatically if it hits that first target -- it may keep going, you know. If I sold just because it hit the target I may cut my profits by getting right out. I'll have my stop close, but unless the stock turns back at that point, I'll stay in the position.
My "first target" is important in determining the reward to risk ratio I am looking at when I buy the stock. Suppose the stock is trading at $50 and my initial exit is $1 below that at $49. My risk, for the purposes of this calculation only (the real risk is $50) is $1.00. Further suppose that my initial target is $53. My reward to risk ratio in this scenario is $3 to $1 ($3 potential profit to $1 potential loss) or 3:1.
Let's say, for purposes of this Article, that my reward to risk criteria for entry into a position is 2:1 and that I do 10 trades. Here is the hypothetical Trade Table:
Trade 1 +2
Trade 2 +2
Trade 3 +2
Trade 4 +2
Trade 5 -1
Trade 6 -1
Trade 7 -1
Trade 8 -1
Trade 9 -1
Trade 10 -1
____________
Total +2
In that example, I could have lost 6 out of 10 trades and still come out ahead if I lost my anticipated risk in 6 and gained my initial target in the other 4 trades. So I can theoretically lose 60% of the time and still make money if I am trading positions with a 2:1 reward to risk. In actuality, I try to find trades that have a 2.5:1 reward to risk ratio. Money management and reward to risk awareness can make all of us better traders and help try to enhance our trading.
HIGH ALTITUDE BOMBING IN OIL
At the risk of stating the obvious, the recent market action in the commodities has been manic with wild gyrations of price in a wide variety of basic materials, metals, and energy. Given these wild fluctuations in price, I thought we could look at a trade in USO that gives a high probability of success.
In order to give a bit of a conceptual framework for this sort of trade, let me share the way I look at these. Development of precision high altitude bombing during World War II resulted in a dramatic reduction in casualties while inflicting devastating consequences to enemy forces. I view the sort of strategy I will describe as the equivalent of high altitude precision bombing. We will extract substantial profit without putting ourselves at high risk of damaging anti-aircraft fire ...
ABM (ABM Industries Inc.)
Our Success Trading Group members scored another winning trade this week when we closed out a position in ABM Industries (Ticker: ABM). We are watching several stocks and are looking forward to trading next week.
MCD (McDonald's Corp.) Our Dividend Trader likes McDonald's Corp. (Ticker: MCD) for a new Trade position at its current price. We will be watching several stocks closely for entry points and we look forward to trading next week.
With these trades we attempt to get in and get out quickly. Once we buy, we immediately set an exit point of 3% above the buy price. We have had great success in the past. In fact, we have put together a string of 61 positions in a row that have hit our 3% target subsequent to the buy alert!
While we titled this service a "trader" service, we also invest in these dividend-paying stocks from time to time for the long-term. We will buy these stocks for their powerful dividend producing income with a purpose to make capital gains as the stock increases in value.
Many of the stocks that we will be "investing" in have had a history of raising their dividends almost every year. Year after year. This can be powerful. Building up your dividend income in a tax deferred account such as an IRA can significantly boost your account over the years.
STD - Banco Santander, S.A. is currently trading at $12.02. The March $12 Calls (STD20110319C00012000) are trading at $.55. That provides a return of about 5% if STD is above $12 on expiration Friday in March.
Permalink: [628] Top Stocks To Buy - Stock Trading, Money Management and the Duke of Yarborough
What do I mean by "money management"? How is it done? When someone trades stock (or options) he should set aside a specific amount to trade. The money set aside should be risk money; money that isn't needed to pay the bills, the mortgage, the car payment, groceries, etc. Since all trading involves risk, the amount set aside should definitely be considered to be at risk. Once the amount is identified, the trader has the option of making equal dollar amount trades or trading a fixed percentage of the risk money on each trade. Someone with a relatively small stake may initially make equal dollar amount trades. So, for example, if the trader has $10,000 in risk money, he may make each trade $500 (or $750 or maybe even $1,000) thus if everything is lost in one trade, there is still $9,500 (or $9,250 or $9,000) left to trade. He is still in the game. Even better, in my view, is making equal percentage trades. I prefer something in the 3% to 5% of risk money in any given trade. Let's say our hypothetical trader starts with $100,000 and trades 3% per trade. The first trade is for about $3,000. Let's say that all is lost on that trade, now the trader has $97,000 and the next trade would be only $2,910. Again, the $2,910 is lost, now there is $94,090 in risk money and the next trade would be about $2,800. Finally, that trade makes a nice gain of $2000. Now, there is $96,090 and the next trade would be for $2,900. Again, there is a gain, and this time a big one for $6,000. Now the risk money is $102,090 and the following trade would be for about $3,060. You get the point. As the fund diminishes, the trades are getting smaller and as it gains, the trades get larger. Several wins in a row will result in more money traded so dollar gains should be greater. If there are several losses in a row, less and less money is traded so potential losses are smaller and smaller. The chances of staying in the game are greater with this method of money management, and you can't make money trading unless you are able to trade. Of course, there is the old bridge players story of the Duke of Yarborough who purportedly went years without having a single point in a hand of bridge. If you are the stock trader's equivalent of the Duke of Yarborough, I guess nothing will help, but proper money management could give you a better chance.
While many people who trade are aware of money management principles, they fail to use them. Though money management makes sense, greed sometimes takes over. I once had a trading student who was doing very well. He'd call me and say "I made "x" today." The next day he'd tell me he made twice as much as the day before and the following day he did well again. The calls went on for some time, each one more excited, and then they stopped. I was concerned so I called him and asked how he was doing. He was crestfallen. He had five winning trades in a row on a particular stock and then guess what he did. He put all his money on the next trade. As fate would have it, the stock gapped down hugely the following morning and my friend not only lost all the profits he had claimed, he was out of the trading business. The market is a stern teacher and "Murphy" is always near at hand. Knowing that every trade involves risk, do everything you can in your trades to try to put the odds in your favor. Proper money management is one of those things that could help.
Another thing I believe a trader should analyze is the reward to risk ratio of a trade. I am a firm believer that I should know my initial exit before I ever enter a trade. I should also have a "first target" for the move I am trying to play. That does not mean that I will exit just because my position hits the first target. I'll see what the stock is doing if it gets there. If I'm bullish, I won't sell automatically if it hits that first target -- it may keep going, you know. If I sold just because it hit the target I may cut my profits by getting right out. I'll have my stop close, but unless the stock turns back at that point, I'll stay in the position.
My "first target" is important in determining the reward to risk ratio I am looking at when I buy the stock. Suppose the stock is trading at $50 and my initial exit is $1 below that at $49. My risk, for the purposes of this calculation only (the real risk is $50) is $1.00. Further suppose that my initial target is $53. My reward to risk ratio in this scenario is $3 to $1 ($3 potential profit to $1 potential loss) or 3:1.
Let's say, for purposes of this Article, that my reward to risk criteria for entry into a position is 2:1 and that I do 10 trades. Here is the hypothetical Trade Table:
Trade 1 +2
Trade 2 +2
Trade 3 +2
Trade 4 +2
Trade 5 -1
Trade 6 -1
Trade 7 -1
Trade 8 -1
Trade 9 -1
Trade 10 -1
____________
Total +2
In that example, I could have lost 6 out of 10 trades and still come out ahead if I lost my anticipated risk in 6 and gained my initial target in the other 4 trades. So I can theoretically lose 60% of the time and still make money if I am trading positions with a 2:1 reward to risk. In actuality, I try to find trades that have a 2.5:1 reward to risk ratio. Money management and reward to risk awareness can make all of us better traders and help try to enhance our trading.
HIGH ALTITUDE BOMBING IN OIL
At the risk of stating the obvious, the recent market action in the commodities has been manic with wild gyrations of price in a wide variety of basic materials, metals, and energy. Given these wild fluctuations in price, I thought we could look at a trade in USO that gives a high probability of success.
In order to give a bit of a conceptual framework for this sort of trade, let me share the way I look at these. Development of precision high altitude bombing during World War II resulted in a dramatic reduction in casualties while inflicting devastating consequences to enemy forces. I view the sort of strategy I will describe as the equivalent of high altitude precision bombing. We will extract substantial profit without putting ourselves at high risk of damaging anti-aircraft fire ...
ABM (ABM Industries Inc.)
Our Success Trading Group members scored another winning trade this week when we closed out a position in ABM Industries (Ticker: ABM). We are watching several stocks and are looking forward to trading next week.
MCD (McDonald's Corp.) Our Dividend Trader likes McDonald's Corp. (Ticker: MCD) for a new Trade position at its current price. We will be watching several stocks closely for entry points and we look forward to trading next week.
With these trades we attempt to get in and get out quickly. Once we buy, we immediately set an exit point of 3% above the buy price. We have had great success in the past. In fact, we have put together a string of 61 positions in a row that have hit our 3% target subsequent to the buy alert!
While we titled this service a "trader" service, we also invest in these dividend-paying stocks from time to time for the long-term. We will buy these stocks for their powerful dividend producing income with a purpose to make capital gains as the stock increases in value.
Many of the stocks that we will be "investing" in have had a history of raising their dividends almost every year. Year after year. This can be powerful. Building up your dividend income in a tax deferred account such as an IRA can significantly boost your account over the years.
STD - Banco Santander, S.A. is currently trading at $12.02. The March $12 Calls (STD20110319C00012000) are trading at $.55. That provides a return of about 5% if STD is above $12 on expiration Friday in March.
Does Technical Analysis Really Work?
Top 10 Stocks 2011#1: AboveNet, Inc.
by Neil Macneale, editor 2 for 1 Stock Split Newsletter
AboveNet, Inc. (ABVT) is my pick for the single best stock for 2011. AboveNet provides broadband services to commercial and government clients requiring secure, very high-speed connections between major metropolitan areas in the US and the UK.
AboveNet's fiber-optic network is utilized by financial institutions, media companies, social networking companies, law firms and medical and health care institutions. ABVT is highly profitable with strong cash ?ow and a solid balance sheet. ABVT does not pay a regular dividend but did declare a special one-time payout of $5.00 per share in November, 2010, indicating a high level of confidence as to future sales and earnings.
AboveNet appeals on several levels.
1. The business of providing high-speed connectivity is booming and can only grow as more and more companies become dependent on Web-based applications, data mining and storage, global supply chains, etc., etc. AboveNet is very well positioned to capitalize on this growth.
2. With a PE of less than 6 and a price-to-book ratio at around 2.2, ABVT seems underpriced at its current $57 level.
Permalink: [629] Top Stocks To Buy - Top 10 Stocks 2011
3. Somewhat akin to a mining company, AboveNet's most important assets are in the ground, i.e., its fiber-optic cables are in place, paid for, and will only grow more valuable as demand for broadband capability grows.
4. ABVT stock is far less volatile than the overall market, something all investors should be looking for in 2011.
Top 10 Stocks 2011#2: Aeropostale
by John Reese, editor Validea Hot List Newsletter
A financial crisis, severe recession, a supposedly "tapped out" U.S. consumer -- none of it has been enough to derail Aeropostale (ARO), the New York City-based teen clothing retailer. While other companies have struggled to survive in the past few years, the mall-based firm upped both earnings and sales in 2007, 2008, and 2009, and it's on track to do so again in 2010
Despite its impressive performance, Aeropostale's shares have been hit hard since this past summer, as profit gains slowed in the firm's third quarter and it issued fourth-quarter guidance below year-ago profit levels.
But the dip has created an opportunity to get shares of a very strong company on the cheap, according to my Guru Strategies (each of which is based on the approach of a di"erent investing great).
In fact, the stock is the one of the highest-rated of nearly 8,000 stocks I track on Validea.com.
The firm, which targets youngsters age 14 to 17 through more than 900 stores in 49 states, Puerto Rico, and Canada, and 7- to -12-year-olds through its P.S. from Aeropostale stores, earns approval from four of my models. One of the strategies highest on Aeropostale is model I base on the writings of hedge fund guru Joel Greenblatt.
In his Little Book that Beats the Market, Greenblatt unveiled a remarkably simple, highly successful strategy that looks at just two variables: earnings yield and return on capital.
With a 21.1% earnings yield and a 65.6% return on total capital, Aeropostale is the 12th-most-attractive stock in the market, according to my Greenblatt-based approach. Another strategy high on Aeropostale: my James O'Shaughnessy-based growth stock model. This approach looks for stocks with market caps of at least $150 million, a price/sales ratio below 1.5, and a track record of having upped earnings per share in each year of the past five-year period.
Then it takes the 50 stocks from that group with the highest relative strength over the past year and gives them final approval. Aeropostale's $2.3 billion market cap, strong earnings history, 0.95 P/S ratio, and relative strength of 59 are good enough to make the grade.
My Peter Lynch-based strategy also likes Aeropostale. It considers the firm a "fast-grower" -- Lynch's favorite type of investment -- thanks to its impressive 33.6% long-term EPS growth rate. (I use an average of the three-, four-, and five-year EPS figures to determine a long-term rate.)
Lynch famously used the P/E/Growth ratio to find bargain-priced growth stocks, and Aeropostale's 0.3 P/E/G falls into my Lynch model's best-case category (below 0.5).This model also likes that Aeropostale has no long-term debt.
Finally, my Warren Bu"ett-inspired strategy sees a lot to like about Aeropostale. While the firm isn't the sort of large, big brand name company Bu"ett's Berkshire Hathaway usually keys on, it does have many of the fundamental, quantitative characteristics Bu"ett reportedly looked for while building his empire. Among those qualities: a lengthy history of increasing annual EPS (Aeropostale has upped earnings in each year of the past decade); manageable debt (it has no long-term debt); and a high return on equity, which is a sign of the "durable competitive advantage" Bu"ett is known to seek (Aeropostale's 10-year average ROE is 32.9%, more than doubling this model's 15% target.)
While Aeropostale's shares have stumbled in recent months, the firm's track record of impressive performance in good and bad economic times, strong balance sheet, and attractive valuation metrics -- combined with a U.S. consumer who has been surprisingly resilient recently -- make the stock one to watch in 2011.
Top 10 Stocks 2011#7: MV Oil Trust
by Carla Pasternak, editor High Yield Investing
MV Oil Trust (MVO) is a U.S. royalty trust which receives 80% of the royalties on all properties of MV Partners; these properties are located in the oil-prone regions of Kansas and Colorado Currently yielding 7.8%, I have selected the trust as my favorite investment idea for the coming year.
The trust had proved reserves of 8,800 thousand barrels of oil equivalent at December 31, 2009, from which it produced about 780 thousand barrels of oil equivalent, giving it an estimated 11.3 years of remaining reserve life.
However, according to the trust agreement, the trust will terminate on the later of June 30, 2026 or when 11.5 Mmboe (millions of barrels oil equivalent) have been produced. To date, less than 4 Mmboe have been produced over the five years since inception in 2006. At the current rate, the trust should have about 10 more years before it expires. The average price MVO receives for its oil has varied dramatically depending on market conditions. This variation has led to historically wide ?uctuations in quarterly distributions.
Over the last four quarters, MVO has distributed a total of $2.76 in variable quarterly payments, for a trailing yield of close to 8% at recent prices. Most of the distributions are treated as return of capital, so the trust can be held in a taxable brokerage account.
At less than 13 times trailing earnings of $2.76 per unit, the units are trading at a discount relative to the S&P 500's almost 15 times.
And considering the shares carry a yield that's about four times more than that of the U.S. equity benchmark, the shares look extremely attractive. The average daily volume of around 118,000 shares a day also provides reasonable liquidity. For income investors looking for an oil play, this trust o"ers a superior yield and capital gains upside.
Top 10 Stocks 2011#8: Northern Dynasty
by Tom Bishop, editor BI Research
Northern Dynasty (NAK) -- my top pick for 2011 -- is an exploration and development mining company that has discovered and drilled o" one of the largest gold-copper deposits in the world.
The Pebble deposit, discovered by and still 50% owned by Northern Dynasty, is located in southwestern Alaska and contains 80 billion pounds of copper and 107 million ounces of gold.
In addition it is the 5th largest copper deposit ever discovered on the planet. But that's not all.
In addition the project contains 5.6 billion pounds of molybdenum (moly), so much in fact that the moly is expected to account for 15% of Pebble's revenue stream on average, producing an amount equivalent to 18% of world production. In a joint venture with 50% partner Anglo American (which is paying for the next $1.4 billion in expenditures to earn a 50% interest), the Pebble project is being advanced toward a preliminary feasibility study.
Also Rio Tinto purchased a 19% shareholding in Northern Dynasty and Mitsubishi owns another 11%.
Interesting to note, this week word surfaced that Rio Tinto will provide $1.8 billion in project financing and increase its stake in Ivanhoe to 43%.
Investors and institutions that made big money in Ivanhoe can see the end in sight there now ? and are looking for the next big play, and Northern Dynasty took o". This project is just too huge and I expect management to sell to the highest bidder in the next year or so.
Meanwhile, little significant new supply is coming on and production continues to decline. The International Copper Study Group recently said that it expects global copper supply/demand to swing to a 400,000 tonne deficit in 2011. For all these reasons I am looking for a $25 to $40+ a share takeover o"er for Northern Dynasty over the next year or so.
Top 10 Stocks 2011#9: Kaminak Gold (KAM)
by Brien Lundin, editor The Gold Newsletter
Kaminak Gold (KAM), a gold exploration firm which trades on the Vancouver exchange, is my top pick for the coming year.
The 'geological baristas' at Kaminak's Co"ee property in the Yukon's White Gold District continue to brew-up a strong blend of results.
The first-ever drilling on the property certainly lived up to expectations. Kaminak intersected significant near-surface, high-grade gold along anomalies measuring more than 10 kilometers in length, resulting in a half-dozen gold discoveries. Plus, Kaminak discovered significant new gold trends from soil sampling, which has proven to be a highly e"ective exploration tool for the company. Kaminak also discovered a significant gold-in-soil geochemical trend 20 kilometers southeast of the Supremo Zone.
Further, nine of 10 holes drilled at the Americano zone intersected gold mineralization.
The gold-bearing potential of these rocks will be a focus of next year's exploration. As we had hoped, the stock has cooled down a bit as the exploration season in the Yukon has come to a close, and the share price has dipped a couple of times into tempting territory around C$2.70.
Frankly, I think Kaminak will be the next Yukon area play to be taken over; potential bidders may not want to allow Kaminak another drill season to prove up additional value on its property.
So Kaminak is a strong buy, especially on any probes downward toward C$2.70. And the lower it goes, the more-aggressive of a buy it will be in my book. I my view, the next drill season will be very exciting for Kaminak...if the company gets to see it.
Top 10 Stocks 2011#10: Longwei Petroleum Investment Holdings
by Jim Trippon, editor China Stock Digest
Longwei Petroleum Investment Holdings Ltd. (LPH) is one of the leading diesel, gasoline, fuel oil and solvent oil distributors and wholesalers in Shanxi Province, China (near Beijing).
The company sells its products mainly to large-scale gas stations, coal plants and power supply companies, and on a smaller scale to small, independent gas stations. Shanxi Province, where Longwei operates, has no oil fields or oil refineries and thus provides a unique market space for fuel oil and petroleum products.
Longwei serves the heavy industries in this rapidly growing region. Shanxi Province's demand for fuel oil has experienced double-digit growth in the past several years. Despite the recent setback caused by derivative contracts, we share Longwei's optimism about future performance. That's why we have set such a high target sell price of $20.00 relative to the current share price.
The company has a forward P/E ratio below 4.0, and a profit margin of 12.07 percent. The company is looking for strong future growth based on rapidly increasing auto usage in China as well as rising industrial activity.
Longwei says China's rapidly growing economy will drive energy demand growth rates of four to five percent annually through 2015. Production and distribution of energy will be one of China's greatest challenges in the coming years. In its earnings report released in November the company increased its profits by a stunning 131 percent to $50.2 million for the year ending June 30, 2010 (the end of its fiscal year).
The company surpassed its revenue guidance for the period by 10 percent. In its guidance for fiscal 2011 the company projects revenues to exceed $500 million and adjusted net income to exceed its forecasted $73 million (the adjusted net of derivative and financing costs).
Top 10 Stocks 2011#3: Under Armour
by Bernie Schaeffer, editor Schaeffer's Investment Research
Athletic apparel manufacturer Under Armour (UA) has been a solid performer in 2010, gaining 110 percent year-to-date.
The stock -- our top pick for 2011 -- has been in a strong uptrend since early September, and is trading above all major moving averages.
On the fundamental side, the company has reported earnings per share that have surpassed analysts' estimates for seven consecutive quarters.
UA reported third-quarter revenues that rose 21.9 percent year over year.In fact, the company has reported revenue growth of more than 15 percent in each quarter since the first quarter of 2008. UA also issued upside guidance for the third straight quarter.
Despite the strong technical performance and solid fundamental results, the stock faces a particularly pessimistic backdrop.
Analysts have remained on the sidelines during the equity's run higher, as currently only five of the 25 analysts covering the stock rate it a "buy."
Should the company continue to outperform expectations, analysts could begin to change their tune, potentially pushing the shares higher.
Short sellers appear to be in the early stages of recognizing the company's consistently improving outlook.
Since reaching a peak in September 2010, short interest has been steadily declining. However, nearly 14 percent of the stock's ?oat remains sold short, representing significant pent-up buying pressure.
A continuation of this short-covering as we move into 2011 could also continue to drive the shares higher.
UA looks poised to have another solid year in 2011 on the heels of positive fundamentals and the unwinding of the surprisingly large amount of pessimism surrounding the shares.
Top 10 Stocks 2011#4: United States Oil Fund
by John Nyaradi, editor Wall Street Selector
Oil prices have been on a roller coaster ride during 2010, and as we look ahead to 2011, "black gold" looms as one of the potentially most lucrative markets for investors around the world.
For bullish investors wanting to participate in this market, my top pick for 2011 is United States Oil Fund (USO).
Oil is a confusing market because the bulls argue that as the recovery in the United States and around the world gathers force, there will be growing demand for oil and energy.
On the other side of the argument, bears say that demand is still weak, global supply is high and unemployment will be an inevitable drag on the price of oil going forward. United States Oil Fund is an Exchange Traded Fund that tracks the price of West Texas Intermediate Crude Oil, "light, sweet crude."
It's a widely traded ETF with daily volume in the millions and widely used by both institutions and retail investors.
USO gives retail investors the opportunity to participate in the commodities markets without actually buying futures contracts directly.
The fund buys oil futures contracts, forwards and swaps and is organized as a limited partnership and so has some tricky tax implications that you need to understand before investing.
Almost everyone agrees that the long term outlook for energy prices is higher as the emerging markets build out and their demand for oil increase.
Short term trends are more challenging; commodity trading isn't for the faint of heart or unprepared and the same holds true for exchange traded funds that track commodities and commodity indexes.
However, oil is one of the largest and most important markets as energy makes the world go 'round; in 2011 oil could be a place to look for fast paced profits. Learn more about this financial newsletter at John Nyaradi's Wall Street Selector.
Top 10 Stocks 2011#5: ProShares UltraShort Yen
by Keith Fitz-Gerald, editor The New China Trader
Bloomberg recently reported that China has recorded two straight months of reducing its holdings of Japanese debt. This suggests that the Japanese yen has reached the point where it's become too "strong" for its own good - or at least for China's taste. Considering China has become the world's de facto financier, we'd be wise to pay attention.
Savvy top-tier traders know that we saw China taking similar actions a few years ago with regard to dollar-based holdings... right before the dollar began its most recent slide and other "currencies," like oil, gold, silver, and rare earths, began their appreciation.
My guess, based on 20+ years of experience, is that the yen is now in the crosshairs. We haven't seen similar pricing since April 19th, 1995, when it traded at 79.95 to the U.S. dollar.
I believe that with Japanese debt at 253% of GDP (more by some estimates), the yen is likely to fall, if not because it's risen too high too fast, then because countries like China have decided they want to take profits.
Here's what to do now if you want to play along: Buy ProShares UltraShort Yen (YCS) at market. This is my top speculation for the new year. Or, if you want an even more speculative play, try purchasing YCS call options. Let's talk brie?y about my expectations.
This is a trade that could take a while to come to life so patience is clearly in order. We are, after all, dealing with governmental policy as the catalyst. Normally that's a problem, but in this case, I think it's the fuel we're looking for. Even if the Japanese government doesn't want to bring its currency into line with historical averages, the markets will if given enough time.
Top 10 Stocks 2011#6: RealD
by Mike Cintolo, editor Cabot Market Letter
To choose my top stock pick of the year, I looked for new stocks (recent IPOs are usually under-owned by institutions, which can help the stock price) with big ideas. It's hard to find an idea much bigger than RealD (RLD), a play on the popularity of 3D movies.
The company is the leading provider of 3D technology to theaters and TV makers. At the end of September, 9,300 movie screens were using its technology.
In addition, another 2,000 movie screen are likely to be converted in the fourth quarter. Yet RealD is just scratching the surface of its potential, as tens of thousands of screens around the world are likely to move to 3D in the quarters to come, and since the firm gets paid on a per-ticket or per-movie basis, each installation creates a huge stream of income.
RealD isn't making money yet (though it's close), but revenues are ramping at 50%-plus rates as the company concentrates on grabbing as much market share as it can. And, longer-term, the 3D TV market could be a huge boost as well. As we said, it's a big idea, and the stock, which just came public in July, is o" to a good start. We think it will have a great 2011.
by Neil Macneale, editor 2 for 1 Stock Split Newsletter
AboveNet, Inc. (ABVT) is my pick for the single best stock for 2011. AboveNet provides broadband services to commercial and government clients requiring secure, very high-speed connections between major metropolitan areas in the US and the UK.
AboveNet's fiber-optic network is utilized by financial institutions, media companies, social networking companies, law firms and medical and health care institutions. ABVT is highly profitable with strong cash ?ow and a solid balance sheet. ABVT does not pay a regular dividend but did declare a special one-time payout of $5.00 per share in November, 2010, indicating a high level of confidence as to future sales and earnings.
AboveNet appeals on several levels.
1. The business of providing high-speed connectivity is booming and can only grow as more and more companies become dependent on Web-based applications, data mining and storage, global supply chains, etc., etc. AboveNet is very well positioned to capitalize on this growth.
2. With a PE of less than 6 and a price-to-book ratio at around 2.2, ABVT seems underpriced at its current $57 level.
Permalink: [629] Top Stocks To Buy - Top 10 Stocks 2011
3. Somewhat akin to a mining company, AboveNet's most important assets are in the ground, i.e., its fiber-optic cables are in place, paid for, and will only grow more valuable as demand for broadband capability grows.
4. ABVT stock is far less volatile than the overall market, something all investors should be looking for in 2011.
Top 10 Stocks 2011#2: Aeropostale
by John Reese, editor Validea Hot List Newsletter
A financial crisis, severe recession, a supposedly "tapped out" U.S. consumer -- none of it has been enough to derail Aeropostale (ARO), the New York City-based teen clothing retailer. While other companies have struggled to survive in the past few years, the mall-based firm upped both earnings and sales in 2007, 2008, and 2009, and it's on track to do so again in 2010
Despite its impressive performance, Aeropostale's shares have been hit hard since this past summer, as profit gains slowed in the firm's third quarter and it issued fourth-quarter guidance below year-ago profit levels.
But the dip has created an opportunity to get shares of a very strong company on the cheap, according to my Guru Strategies (each of which is based on the approach of a di"erent investing great).
In fact, the stock is the one of the highest-rated of nearly 8,000 stocks I track on Validea.com.
The firm, which targets youngsters age 14 to 17 through more than 900 stores in 49 states, Puerto Rico, and Canada, and 7- to -12-year-olds through its P.S. from Aeropostale stores, earns approval from four of my models. One of the strategies highest on Aeropostale is model I base on the writings of hedge fund guru Joel Greenblatt.
In his Little Book that Beats the Market, Greenblatt unveiled a remarkably simple, highly successful strategy that looks at just two variables: earnings yield and return on capital.
With a 21.1% earnings yield and a 65.6% return on total capital, Aeropostale is the 12th-most-attractive stock in the market, according to my Greenblatt-based approach. Another strategy high on Aeropostale: my James O'Shaughnessy-based growth stock model. This approach looks for stocks with market caps of at least $150 million, a price/sales ratio below 1.5, and a track record of having upped earnings per share in each year of the past five-year period.
Then it takes the 50 stocks from that group with the highest relative strength over the past year and gives them final approval. Aeropostale's $2.3 billion market cap, strong earnings history, 0.95 P/S ratio, and relative strength of 59 are good enough to make the grade.
My Peter Lynch-based strategy also likes Aeropostale. It considers the firm a "fast-grower" -- Lynch's favorite type of investment -- thanks to its impressive 33.6% long-term EPS growth rate. (I use an average of the three-, four-, and five-year EPS figures to determine a long-term rate.)
Lynch famously used the P/E/Growth ratio to find bargain-priced growth stocks, and Aeropostale's 0.3 P/E/G falls into my Lynch model's best-case category (below 0.5).This model also likes that Aeropostale has no long-term debt.
Finally, my Warren Bu"ett-inspired strategy sees a lot to like about Aeropostale. While the firm isn't the sort of large, big brand name company Bu"ett's Berkshire Hathaway usually keys on, it does have many of the fundamental, quantitative characteristics Bu"ett reportedly looked for while building his empire. Among those qualities: a lengthy history of increasing annual EPS (Aeropostale has upped earnings in each year of the past decade); manageable debt (it has no long-term debt); and a high return on equity, which is a sign of the "durable competitive advantage" Bu"ett is known to seek (Aeropostale's 10-year average ROE is 32.9%, more than doubling this model's 15% target.)
While Aeropostale's shares have stumbled in recent months, the firm's track record of impressive performance in good and bad economic times, strong balance sheet, and attractive valuation metrics -- combined with a U.S. consumer who has been surprisingly resilient recently -- make the stock one to watch in 2011.
Top 10 Stocks 2011#7: MV Oil Trust
by Carla Pasternak, editor High Yield Investing
MV Oil Trust (MVO) is a U.S. royalty trust which receives 80% of the royalties on all properties of MV Partners; these properties are located in the oil-prone regions of Kansas and Colorado Currently yielding 7.8%, I have selected the trust as my favorite investment idea for the coming year.
The trust had proved reserves of 8,800 thousand barrels of oil equivalent at December 31, 2009, from which it produced about 780 thousand barrels of oil equivalent, giving it an estimated 11.3 years of remaining reserve life.
However, according to the trust agreement, the trust will terminate on the later of June 30, 2026 or when 11.5 Mmboe (millions of barrels oil equivalent) have been produced. To date, less than 4 Mmboe have been produced over the five years since inception in 2006. At the current rate, the trust should have about 10 more years before it expires. The average price MVO receives for its oil has varied dramatically depending on market conditions. This variation has led to historically wide ?uctuations in quarterly distributions.
Over the last four quarters, MVO has distributed a total of $2.76 in variable quarterly payments, for a trailing yield of close to 8% at recent prices. Most of the distributions are treated as return of capital, so the trust can be held in a taxable brokerage account.
At less than 13 times trailing earnings of $2.76 per unit, the units are trading at a discount relative to the S&P 500's almost 15 times.
And considering the shares carry a yield that's about four times more than that of the U.S. equity benchmark, the shares look extremely attractive. The average daily volume of around 118,000 shares a day also provides reasonable liquidity. For income investors looking for an oil play, this trust o"ers a superior yield and capital gains upside.
Top 10 Stocks 2011#8: Northern Dynasty
by Tom Bishop, editor BI Research
Northern Dynasty (NAK) -- my top pick for 2011 -- is an exploration and development mining company that has discovered and drilled o" one of the largest gold-copper deposits in the world.
The Pebble deposit, discovered by and still 50% owned by Northern Dynasty, is located in southwestern Alaska and contains 80 billion pounds of copper and 107 million ounces of gold.
In addition it is the 5th largest copper deposit ever discovered on the planet. But that's not all.
In addition the project contains 5.6 billion pounds of molybdenum (moly), so much in fact that the moly is expected to account for 15% of Pebble's revenue stream on average, producing an amount equivalent to 18% of world production. In a joint venture with 50% partner Anglo American (which is paying for the next $1.4 billion in expenditures to earn a 50% interest), the Pebble project is being advanced toward a preliminary feasibility study.
Also Rio Tinto purchased a 19% shareholding in Northern Dynasty and Mitsubishi owns another 11%.
Interesting to note, this week word surfaced that Rio Tinto will provide $1.8 billion in project financing and increase its stake in Ivanhoe to 43%.
Investors and institutions that made big money in Ivanhoe can see the end in sight there now ? and are looking for the next big play, and Northern Dynasty took o". This project is just too huge and I expect management to sell to the highest bidder in the next year or so.
Meanwhile, little significant new supply is coming on and production continues to decline. The International Copper Study Group recently said that it expects global copper supply/demand to swing to a 400,000 tonne deficit in 2011. For all these reasons I am looking for a $25 to $40+ a share takeover o"er for Northern Dynasty over the next year or so.
Top 10 Stocks 2011#9: Kaminak Gold (KAM)
by Brien Lundin, editor The Gold Newsletter
Kaminak Gold (KAM), a gold exploration firm which trades on the Vancouver exchange, is my top pick for the coming year.
The 'geological baristas' at Kaminak's Co"ee property in the Yukon's White Gold District continue to brew-up a strong blend of results.
The first-ever drilling on the property certainly lived up to expectations. Kaminak intersected significant near-surface, high-grade gold along anomalies measuring more than 10 kilometers in length, resulting in a half-dozen gold discoveries. Plus, Kaminak discovered significant new gold trends from soil sampling, which has proven to be a highly e"ective exploration tool for the company. Kaminak also discovered a significant gold-in-soil geochemical trend 20 kilometers southeast of the Supremo Zone.
Further, nine of 10 holes drilled at the Americano zone intersected gold mineralization.
The gold-bearing potential of these rocks will be a focus of next year's exploration. As we had hoped, the stock has cooled down a bit as the exploration season in the Yukon has come to a close, and the share price has dipped a couple of times into tempting territory around C$2.70.
Frankly, I think Kaminak will be the next Yukon area play to be taken over; potential bidders may not want to allow Kaminak another drill season to prove up additional value on its property.
So Kaminak is a strong buy, especially on any probes downward toward C$2.70. And the lower it goes, the more-aggressive of a buy it will be in my book. I my view, the next drill season will be very exciting for Kaminak...if the company gets to see it.
Top 10 Stocks 2011#10: Longwei Petroleum Investment Holdings
by Jim Trippon, editor China Stock Digest
Longwei Petroleum Investment Holdings Ltd. (LPH) is one of the leading diesel, gasoline, fuel oil and solvent oil distributors and wholesalers in Shanxi Province, China (near Beijing).
The company sells its products mainly to large-scale gas stations, coal plants and power supply companies, and on a smaller scale to small, independent gas stations. Shanxi Province, where Longwei operates, has no oil fields or oil refineries and thus provides a unique market space for fuel oil and petroleum products.
Longwei serves the heavy industries in this rapidly growing region. Shanxi Province's demand for fuel oil has experienced double-digit growth in the past several years. Despite the recent setback caused by derivative contracts, we share Longwei's optimism about future performance. That's why we have set such a high target sell price of $20.00 relative to the current share price.
The company has a forward P/E ratio below 4.0, and a profit margin of 12.07 percent. The company is looking for strong future growth based on rapidly increasing auto usage in China as well as rising industrial activity.
Longwei says China's rapidly growing economy will drive energy demand growth rates of four to five percent annually through 2015. Production and distribution of energy will be one of China's greatest challenges in the coming years. In its earnings report released in November the company increased its profits by a stunning 131 percent to $50.2 million for the year ending June 30, 2010 (the end of its fiscal year).
The company surpassed its revenue guidance for the period by 10 percent. In its guidance for fiscal 2011 the company projects revenues to exceed $500 million and adjusted net income to exceed its forecasted $73 million (the adjusted net of derivative and financing costs).
Top 10 Stocks 2011#3: Under Armour
by Bernie Schaeffer, editor Schaeffer's Investment Research
Athletic apparel manufacturer Under Armour (UA) has been a solid performer in 2010, gaining 110 percent year-to-date.
The stock -- our top pick for 2011 -- has been in a strong uptrend since early September, and is trading above all major moving averages.
On the fundamental side, the company has reported earnings per share that have surpassed analysts' estimates for seven consecutive quarters.
UA reported third-quarter revenues that rose 21.9 percent year over year.In fact, the company has reported revenue growth of more than 15 percent in each quarter since the first quarter of 2008. UA also issued upside guidance for the third straight quarter.
Despite the strong technical performance and solid fundamental results, the stock faces a particularly pessimistic backdrop.
Analysts have remained on the sidelines during the equity's run higher, as currently only five of the 25 analysts covering the stock rate it a "buy."
Should the company continue to outperform expectations, analysts could begin to change their tune, potentially pushing the shares higher.
Short sellers appear to be in the early stages of recognizing the company's consistently improving outlook.
Since reaching a peak in September 2010, short interest has been steadily declining. However, nearly 14 percent of the stock's ?oat remains sold short, representing significant pent-up buying pressure.
A continuation of this short-covering as we move into 2011 could also continue to drive the shares higher.
UA looks poised to have another solid year in 2011 on the heels of positive fundamentals and the unwinding of the surprisingly large amount of pessimism surrounding the shares.
Top 10 Stocks 2011#4: United States Oil Fund
by John Nyaradi, editor Wall Street Selector
Oil prices have been on a roller coaster ride during 2010, and as we look ahead to 2011, "black gold" looms as one of the potentially most lucrative markets for investors around the world.
For bullish investors wanting to participate in this market, my top pick for 2011 is United States Oil Fund (USO).
Oil is a confusing market because the bulls argue that as the recovery in the United States and around the world gathers force, there will be growing demand for oil and energy.
On the other side of the argument, bears say that demand is still weak, global supply is high and unemployment will be an inevitable drag on the price of oil going forward. United States Oil Fund is an Exchange Traded Fund that tracks the price of West Texas Intermediate Crude Oil, "light, sweet crude."
It's a widely traded ETF with daily volume in the millions and widely used by both institutions and retail investors.
USO gives retail investors the opportunity to participate in the commodities markets without actually buying futures contracts directly.
The fund buys oil futures contracts, forwards and swaps and is organized as a limited partnership and so has some tricky tax implications that you need to understand before investing.
Almost everyone agrees that the long term outlook for energy prices is higher as the emerging markets build out and their demand for oil increase.
Short term trends are more challenging; commodity trading isn't for the faint of heart or unprepared and the same holds true for exchange traded funds that track commodities and commodity indexes.
However, oil is one of the largest and most important markets as energy makes the world go 'round; in 2011 oil could be a place to look for fast paced profits. Learn more about this financial newsletter at John Nyaradi's Wall Street Selector.
Top 10 Stocks 2011#5: ProShares UltraShort Yen
by Keith Fitz-Gerald, editor The New China Trader
Bloomberg recently reported that China has recorded two straight months of reducing its holdings of Japanese debt. This suggests that the Japanese yen has reached the point where it's become too "strong" for its own good - or at least for China's taste. Considering China has become the world's de facto financier, we'd be wise to pay attention.
Savvy top-tier traders know that we saw China taking similar actions a few years ago with regard to dollar-based holdings... right before the dollar began its most recent slide and other "currencies," like oil, gold, silver, and rare earths, began their appreciation.
My guess, based on 20+ years of experience, is that the yen is now in the crosshairs. We haven't seen similar pricing since April 19th, 1995, when it traded at 79.95 to the U.S. dollar.
I believe that with Japanese debt at 253% of GDP (more by some estimates), the yen is likely to fall, if not because it's risen too high too fast, then because countries like China have decided they want to take profits.
Here's what to do now if you want to play along: Buy ProShares UltraShort Yen (YCS) at market. This is my top speculation for the new year. Or, if you want an even more speculative play, try purchasing YCS call options. Let's talk brie?y about my expectations.
This is a trade that could take a while to come to life so patience is clearly in order. We are, after all, dealing with governmental policy as the catalyst. Normally that's a problem, but in this case, I think it's the fuel we're looking for. Even if the Japanese government doesn't want to bring its currency into line with historical averages, the markets will if given enough time.
Top 10 Stocks 2011#6: RealD
by Mike Cintolo, editor Cabot Market Letter
To choose my top stock pick of the year, I looked for new stocks (recent IPOs are usually under-owned by institutions, which can help the stock price) with big ideas. It's hard to find an idea much bigger than RealD (RLD), a play on the popularity of 3D movies.
The company is the leading provider of 3D technology to theaters and TV makers. At the end of September, 9,300 movie screens were using its technology.
In addition, another 2,000 movie screen are likely to be converted in the fourth quarter. Yet RealD is just scratching the surface of its potential, as tens of thousands of screens around the world are likely to move to 3D in the quarters to come, and since the firm gets paid on a per-ticket or per-movie basis, each installation creates a huge stream of income.
RealD isn't making money yet (though it's close), but revenues are ramping at 50%-plus rates as the company concentrates on grabbing as much market share as it can. And, longer-term, the 3D TV market could be a huge boost as well. As we said, it's a big idea, and the stock, which just came public in July, is o" to a good start. We think it will have a great 2011.
Best Stocks 2011
Best Stocks 2011: Siga Technologies
by Dennis Slothower, editor Stealth Stocks
Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.
In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.
SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.
Permalink: [631] Top Stocks To Buy - Best Stocks 2011
Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.
In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.
It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.
Best Stocks 2011: Timberline Resources
by Gene Arensberg, editor Got Gold Report
Timberline Resources (TLR) is a soon-to-be gold producer that we believe has been overlooked by the market. However, we doubt it will remain overlooked for much longer.
Overall, I consider this a strongly undervalued stock that is highly likely to have a string of excellent news in 2011.
Not exactly a household name, Timberline's management teamed up with the premier underground mining and development company in North America, Small Mine Development (SMD), to develop the Butte Highlands gold deposit just south of Butte, Montana.
Timberline provided the project; SMD provides the development funding and knowhow to bring the gold ore out from under Nevin Hill.
When we visited the future mine in June of 2010, the 16-foot tall and 14-foot wide development ramp had already been excavated nearly 1,000 feet down. Timberline shareholders benefit from the SMD partnership because the company did not have to heavily dilute the share structure in order to raise the development capital
to get the gold ore out of the ground.
In addition, the company will spare investors the cost of building an expensive processing mill because the ore can be hauled to nearby existing third-party processing facilities already permitted and operational in Montana. Once the development capital has been recovered through production, the partners will share the net proceeds of the gold mined at Butte on a 50/50 basis.
Timberline estimated in 2010 that the cost of production for the gold would be less than U.S. $500 the ounce given the richness (high grade) of the deposit. With gold above $1,300 the ounce that means that the Butte Highlands project should enjoy significant positive cash ?ow once production, estimated to be about 50,000 to 70,000 ounces per year, begins.
The mine could be operational for approximately ten years at that production level, perhaps longer if there are additional resources discovered just ahead.
Best Stocks 2011: Yongye International
by Jim Trippon, editor Global Profits Alert
Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.
Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.
As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?
ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.
While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.
From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.
Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.
Best Stocks 2011: Aastrom Biosciences
by John McCamant, editor The Medical Technology Stock Letter
We are recommending Aastrom Biosciences (ASTM) as our top stock recommendation for 2011 because we believe that they are the clear leader in the regenerative stem cell space.
The company is focused on the development of autologous cellular therapies for the treatment of cardiovascular diseases utilizing its Tissue Repair Cell (TRC) technology. We are impressed with the Phase II clinical data sets we have seen in Critical Limb Ischemia (CLI) and ASTM will start a Phase III development program to treat CLI patients in 2011.
More importantly, we believe that ASTM has the experienced and motivated management team with a proven track record of creating shareholder value. Tissue repair cell (TRC) technology is ASTM's platform for processing a patient's bone marrow cells into a therapeutic treatment. The collected sample of bone marrow will contain mostly hematopoietic and endothelial stem cells.
Simply put, ASTM's technology increases the amounts of other types of cells in a way that mimics the response to a wound, increasing the sample's regenerative properties. When the cells are re-inserted into the patient they act in harmony to regenerate the vasculature (in the case of CLI).
ASTM has published convincing research, corroborated by independent experts, that a mixed population of stem and progenitor cells is optimal for regenerating tissue, and it makes sense intuitively that many cells will work better than a single type since the body naturally uses many di"erent cell types acting in concert. In addition to the CLI clinical program, ASTM also has an ongoing program to use the TRC technology to treat dilated cardiomyopaty (DCM).
DCM is an enlargement of the heart due to weakening, leading to further degradation of cardiac function and associated with end- stage heart failure.
The only option left for these patients is a heart transplant, but ASTM's technology may help to regenerate the heart and add time and quality to these patient's lives. Both of these clinical programs and ASTM's TRC technology are protected by a strong intellectual property portfolio.
We are very familiar with ASTM's new CEO, Tim Mayleben, who took over the reins at the Company late last year.
Mr. Mayleben served as COO of Esperion Therapeutics, where he led the raising of more than $200 million in venture capital and institutional equity funding. On top of that, far and away his most impressive achievement was when Tim led the negotiations that triggered the acquisition of Esperion by Pfizer in December 2003 at a huge premium.
Tim has significant operations experience and has no pie-in-the-sky illusions regarding the di#culty of navigating new technologies through the FDA gauntlet. We have found through the years that it is much harder to get new technologies to market than anyone has forecasted.
This puts an even higher premium on quality management, as the promise of a technology is not enough in the hands of poor leadership. The upcoming year is shaping up to be an excellent time for ASTM. The company has recently raised cash that will enable them to start their Phase III progrma for CLI patients in 2011. We could also see the CLI Phase II data published in a peer-reviewed medical journal, which would be an important validatation of the Company's technologies and drug dvelopment candidates.
Interestingly, publication of Phase II data was one of the main drivers that got Esperion bought by Pfizer for a huge premium.
We have been impressed with ASTM's management team and have growing confidence that they will continue to deliver and create value for their shareholders. With the recent financing out of the way we believe the stock is poised to regain momentum. We are recommending ASTM as a buy under $3.50 with a one year target of $7.
Best Stocks 2011: Canadian Oil Sands Trust
by David Dittman, contributing editor Canadian Edge
Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.
And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.
New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.
Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.
At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.
Best Stocks 2011: Catlin Group
by Vivian Lewis, editor Global Investing
Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.
It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.
It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.
It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..
It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.
It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.
Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.
It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.
Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.
Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)
"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.
BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.
What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.
Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.
And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.
If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.
Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).
Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.
Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.
Best Stocks 2011: Ecopetrol
by Frida Ghitis, contributing editor Global Investing
Back in the days when Colombia was a political and military battleground, and leftist rebels regularly bombed the oil pipelines, investing in Colombian oil was only for people prepared to take enormous risks.
Now the landscape has changed considerably. Indeed our top stock idea for 2011 is now Columbian oil firm Ecopetrol (EC). To be sure, the war is not over. Colombian soldiers still fight leftist guerrillas, and drug money still fuels the fight.
But the tide has turned and now oil is ?owing fast through those rebuilt pipelines. Better yet, Colombia's fast-growing oil industry is welcoming investors.
The primary vehicle for investing in Colombia's booming oil business is Ecopetrol, which started decades ago as a government-owned monopoly.
In 2003, when the country had already embarked on its own reinvention, the so-called 'economic security' plan, Ecopetrol was restructured by a government that wanted it to become internationally competitive.
Colombia's oil output has grown 50% since just 2006. That's not all EC, because other companies participate in what is an increasingly more market-friendly economy. Ecopetrol produces about 60% of Colombia's total output. In fact, however, EC's production has left the national numbers in the dust. Heavy crude production jumped 111% from 2006 to 2009. And the numbers have continued gushing skywards in 2010.
Almost all the company is still owned by the government, but the push is on to sell larger pieces of it. The latest plan is to sell stock worth 10 percent of the company. Exploration is moving at a fast clip, with new and large finds coming on a regular basis. Widening its horizons, EC has joined a number of partnerships and is now exploring in the US Gulf of Mexico, Brazil and Peru.
At the end of Q2, EC announced stellar results; Q2 income jumped 137% y-o-y to $940 million. But the real news was the plans for the future. Ecopetrol announced plans to invest a staggering $80 billion during this decade, with most of it going towards exploration and production.
EC shares have climbed more than 70% over the past year, pointing to a possible drop before the shares resume their upward trajectory. The shares are valued at a trailing PE of 31. Production should continue to grow, and if the global stirs back to life, oil prices will remain firm, making EC keep climbing. This stock is not risk-free: a drop in oil prices or an unexpected deterioration of the security situation in Colombia could punish the stock."
Best Stocks 2011: Equity Residential
by Amy Calistri, editor The Daily Paycheck
With fewer people tapping the housing market, apartments are filling up fast. That's one big reason I like Equity Residential (EQR) for 2011. Equity Residential is an S&P 500 company and the largest real estate investment trust (REIT) of its kind.
We grew up with the perception that buying a home was a dependable and savvy investment. But in reality, from 1940 to 2004, housing prices only appreciated an average of 2% annually, according to data from the US Census.
And according to a recent report released by Ned Davis Research, that's probably the best we can hope for in the foreseeable future. In the near term, prices might not rise at all until unemployment drops to 6%.
Would we have made the same decision to leverage ourselves with 30 years of debt for an investment that, after in?ation, was barely a break-even proposition? As we learned from our parents' experience, the next generation of potential home buyers will be colored by our experience.
Roughly 20% of them see their parents with a home that is worth less than when they bought it -- and not worth as much as the debt their parents owe. In other words, this is the start of a long-term shift in behavior -- one where people are more inclined to rent than own. Apartment real estate did su"er during the recession. But occupancy is starting to rise to meet the existing supply.
Equity Residential owns or has investments in more than 470 apartment complexes in 18 states and the District of Columbia.
Even in this environment of historically high unemployment, EQR is making modest headway. In the third quarter of 2010, EQR's rental revenue grew 1.3% for the units it held more than one year. And funds from operations (FFO) rose to $0.55 per share, compared with $0.53 from a year earlier.
The trend for occupancy was also positive. In the third quarter 2010, occupancy was 95%, up from 93.7% in the same period a year ago. Real estate has already shown it is no stranger to risk. But I believe EQR's upside potential outweighs the potential downside risk.
Founded in 1966, EQR has demonstrated it knows how to handle the ebbs and tows in its market. It is well positioned to take advantage of the new demand for apartments. And if unemployment shows even modest improvement, EQR could provide some sweet gains in 2011.
Best Stocks 2011: ProShares UltraShort Yen
by Keith Fitz-Gerald, editor The New China Trader
Bloomberg recently reported that China has recorded two straight months of reducing its holdings of Japanese debt. This suggests that the Japanese yen has reached the point where it's become too "strong" for its own good - or at least for China's taste. Considering China has become the world's de facto financier, we'd be wise to pay attention.
Savvy top-tier traders know that we saw China taking similar actions a few years ago with regard to dollar-based holdings... right before the dollar began its most recent slide and other "currencies," like oil, gold, silver, and rare earths, began their appreciation.
My guess, based on 20+ years of experience, is that the yen is now in the crosshairs. We haven't seen similar pricing since April 19th, 1995, when it traded at 79.95 to the U.S. dollar.
I believe that with Japanese debt at 253% of GDP (more by some estimates), the yen is likely to fall, if not because it's risen too high too fast, then because countries like China have decided they want to take profits.
Here's what to do now if you want to play along: Buy ProShares UltraShort Yen (YCS) at market. This is my top speculation for the new year. Or, if you want an even more speculative play, try purchasing YCS call options. Let's talk brie?y about my expectations.
This is a trade that could take a while to come to life so patience is clearly in order. We are, after all, dealing with governmental policy as the catalyst. Normally that's a problem, but in this case, I think it's the fuel we're looking for. Even if the Japanese government doesn't want to bring its currency into line with historical averages, the markets will if given enough time.
Best Stocks 2011: RealD
by Mike Cintolo, editor Cabot Market Letter
To choose my top stock pick of the year, I looked for new stocks (recent IPOs are usually under-owned by institutions, which can help the stock price) with big ideas. It's hard to find an idea much bigger than RealD (RLD), a play on the popularity of 3D movies.
The company is the leading provider of 3D technology to theaters and TV makers. At the end of September, 9,300 movie screens were using its technology.
In addition, another 2,000 movie screen are likely to be converted in the fourth quarter. Yet RealD is just scratching the surface of its potential, as tens of thousands of screens around the world are likely to move to 3D in the quarters to come, and since the firm gets paid on a per-ticket or per-movie basis, each installation creates a huge stream of income.
RealD isn't making money yet (though it's close), but revenues are ramping at 50%-plus rates as the company concentrates on grabbing as much market share as it can. And, longer-term, the 3D TV market could be a huge boost as well. As we said, it's a big idea, and the stock, which just came public in July, is o" to a good start. We think it will have a great 2011.
by Dennis Slothower, editor Stealth Stocks
Last year for my favorite stock pick, I recommended IMAX which more than doubled. This year I would like to recommend Siga Technologies Inc. (SIGA), a bio-defense company that o"ers the same kind of upside potential for 2011.
In 2004, the US started an initiative called Project BioShield, which gave the government the right to purchase and stockpile vaccines and drugs to fight anthrax, smallpox and other potential agents of bio-terror.
SIGA is a leader in the development of pharmaceutical agents to fight potential bio-warfare pathogens and their ST-246 drug is considered to be the only known cure for smallpox, which the government is keenly interested in.
Permalink: [631] Top Stocks To Buy - Best Stocks 2011
Recently, BARDA has stated their intent to award SIGA a $500 million contract, with options that potentially could be as high as $2.8 billion in orders. However, SIGA is being challenged in court by a competitor as being too big as a company to qualify for the government contract.
In fairness, BARDA has announced plans for a market survey to determine, whether there are any qualified small businesses with the capacity to produce an adequate supply of smallpox antiviral medication for the National Strategic Stockpile. It is unlikely that a small company will be able to meet the government's needs as the drugs expire and need to be constantly replaced.
It is expected that SIGA will win this contract and if so investors could be rewarded with a double or triple in appreciation.
Best Stocks 2011: Timberline Resources
by Gene Arensberg, editor Got Gold Report
Timberline Resources (TLR) is a soon-to-be gold producer that we believe has been overlooked by the market. However, we doubt it will remain overlooked for much longer.
Overall, I consider this a strongly undervalued stock that is highly likely to have a string of excellent news in 2011.
Not exactly a household name, Timberline's management teamed up with the premier underground mining and development company in North America, Small Mine Development (SMD), to develop the Butte Highlands gold deposit just south of Butte, Montana.
Timberline provided the project; SMD provides the development funding and knowhow to bring the gold ore out from under Nevin Hill.
When we visited the future mine in June of 2010, the 16-foot tall and 14-foot wide development ramp had already been excavated nearly 1,000 feet down. Timberline shareholders benefit from the SMD partnership because the company did not have to heavily dilute the share structure in order to raise the development capital
to get the gold ore out of the ground.
In addition, the company will spare investors the cost of building an expensive processing mill because the ore can be hauled to nearby existing third-party processing facilities already permitted and operational in Montana. Once the development capital has been recovered through production, the partners will share the net proceeds of the gold mined at Butte on a 50/50 basis.
Timberline estimated in 2010 that the cost of production for the gold would be less than U.S. $500 the ounce given the richness (high grade) of the deposit. With gold above $1,300 the ounce that means that the Butte Highlands project should enjoy significant positive cash ?ow once production, estimated to be about 50,000 to 70,000 ounces per year, begins.
The mine could be operational for approximately ten years at that production level, perhaps longer if there are additional resources discovered just ahead.
Best Stocks 2011: Yongye International
by Jim Trippon, editor Global Profits Alert
Yongye International (YONG) is a leading developer, manufacturer, and distributor of plant and animal nutrient products in the People's Republic of China.
Its plant nutrient product can significantly increase the plant's output and nutritional value and improve its taste.
As a result of receiving greater value in the marketplace, Yongye says its product helps increase farmers' incomes and improves their living standards. Directly addressing the need for greater e#ciency and more environmentally friendly require?
ments in the agricultural sector, Yongye's products dramatically increase the quality of crops and yields, and improve the health of livestock, according to the firm. The company is striking for its valuation with a bargain basement PEG ratio of only 0.15 Yongye has impressive financials with gross margins above 57 percent and a profit margin of 24.86 percent. Earnings per share are expected to climb 43 percent next year.
While the company has only been in operation a short amount of time, its predecessor, Inner Mongolia Yongye Company, had over 15 years' operational history which it has passed on to Yongye.
From this experience, Yongye International says it aims to inherit its predecessor com?pany's managerial experience and corporate culture to continue emulating its long-term success.
Learn more about this financial newsletter at Jim Trippon's Global Profits Alert.
Best Stocks 2011: Aastrom Biosciences
by John McCamant, editor The Medical Technology Stock Letter
We are recommending Aastrom Biosciences (ASTM) as our top stock recommendation for 2011 because we believe that they are the clear leader in the regenerative stem cell space.
The company is focused on the development of autologous cellular therapies for the treatment of cardiovascular diseases utilizing its Tissue Repair Cell (TRC) technology. We are impressed with the Phase II clinical data sets we have seen in Critical Limb Ischemia (CLI) and ASTM will start a Phase III development program to treat CLI patients in 2011.
More importantly, we believe that ASTM has the experienced and motivated management team with a proven track record of creating shareholder value. Tissue repair cell (TRC) technology is ASTM's platform for processing a patient's bone marrow cells into a therapeutic treatment. The collected sample of bone marrow will contain mostly hematopoietic and endothelial stem cells.
Simply put, ASTM's technology increases the amounts of other types of cells in a way that mimics the response to a wound, increasing the sample's regenerative properties. When the cells are re-inserted into the patient they act in harmony to regenerate the vasculature (in the case of CLI).
ASTM has published convincing research, corroborated by independent experts, that a mixed population of stem and progenitor cells is optimal for regenerating tissue, and it makes sense intuitively that many cells will work better than a single type since the body naturally uses many di"erent cell types acting in concert. In addition to the CLI clinical program, ASTM also has an ongoing program to use the TRC technology to treat dilated cardiomyopaty (DCM).
DCM is an enlargement of the heart due to weakening, leading to further degradation of cardiac function and associated with end- stage heart failure.
The only option left for these patients is a heart transplant, but ASTM's technology may help to regenerate the heart and add time and quality to these patient's lives. Both of these clinical programs and ASTM's TRC technology are protected by a strong intellectual property portfolio.
We are very familiar with ASTM's new CEO, Tim Mayleben, who took over the reins at the Company late last year.
Mr. Mayleben served as COO of Esperion Therapeutics, where he led the raising of more than $200 million in venture capital and institutional equity funding. On top of that, far and away his most impressive achievement was when Tim led the negotiations that triggered the acquisition of Esperion by Pfizer in December 2003 at a huge premium.
Tim has significant operations experience and has no pie-in-the-sky illusions regarding the di#culty of navigating new technologies through the FDA gauntlet. We have found through the years that it is much harder to get new technologies to market than anyone has forecasted.
This puts an even higher premium on quality management, as the promise of a technology is not enough in the hands of poor leadership. The upcoming year is shaping up to be an excellent time for ASTM. The company has recently raised cash that will enable them to start their Phase III progrma for CLI patients in 2011. We could also see the CLI Phase II data published in a peer-reviewed medical journal, which would be an important validatation of the Company's technologies and drug dvelopment candidates.
Interestingly, publication of Phase II data was one of the main drivers that got Esperion bought by Pfizer for a huge premium.
We have been impressed with ASTM's management team and have growing confidence that they will continue to deliver and create value for their shareholders. With the recent financing out of the way we believe the stock is poised to regain momentum. We are recommending ASTM as a buy under $3.50 with a one year target of $7.
Best Stocks 2011: Canadian Oil Sands Trust
by David Dittman, contributing editor Canadian Edge
Canadian Oil Sands Trust (COSWF) has clearly lagged broad-based and energy-sector benchmarks alike over the trailing 12 months. A series of unplanned turnarounds at the Syncrude operation, of which Canadian Oil Sands owns 36.7 percent, have analysts questioning whether rising costs will ever allow Canadian Oil Sands to really benefit from elevated oil prices.
And the very skeptical wonder if actual output will ever match Syncrude's capacity potential. All in all, after years of hype and outperformance the bar is now set rather low for Canadian Oil Sands. The stock is likely to revert back to its usual pattern of trading in sympathy with crude oil prices, a relationship that did break down in 2010.
New demand from Asia, old demand in the developed world and a desire from investor for hard assets will keep the per barrel price of oil elevated over the next 12 months.
Canadian Oil Sands will restrain the excruciating growth of unplanned turnaround costs, and Syncrude will get on the path to realizing its potential.
At the new rate of CAD0.20 per share per quarter, the stock will yield about 3 percent. The stock has taken a hit in the second half of 2010, and management has shown it will boost the payout to re?ect upside oil-price surprises. Soon-to-convert Canadian Oil Sands Trust is a solid total return play on one of the world's most intriguing resource stories, set up for capital appreciation as well as dividend growth. Buy it up to $28.
Best Stocks 2011: Catlin Group
by Vivian Lewis, editor Global Investing
Insurers benefit when things go wrong. That explains our latest pick, Catlin Group (CNGRY). Incorporated and regulated in Bermuda, listed primarily in London as CGL, the stock's ADR is equal to two British shares.
It is the largest syndicator at Lloyd's of London, the reinsurance business. It's also a favorite holding of institutional investors.
It very conservatively invests its premiums, in cash and fixed income with only 2.5% in hedge funds, yet it managed to produce a return on equity of 1.8% in H1 and of 2.9% in 2009 and Q3.
It keeps raising its dividend, more steadily if you buy in sterling than the ADR. Given its current yield of 6% I'm satisfied with the payout but Citigroup analysts say it will go to 7.7%..
It's a family businees, under CEO Steve Catlin, established as a Lloyd's underwriter in 1984.
It's green, funding the Catlin Arctic Survey to measures the thickness and density of ice foes in the Arctic Sea and carbon dioxide absorption (ocean acidification). Nice but not why to buy.
Rather, you should buy because Catlin is a globally diversified insurance business operating 88-89% in US dollars. It is quick to develop new businesses to benefit from macro-economic trends.
It shifted its casualty lines from insuring British solicitors and surveyors, to hot button more profitable US insurance lines: medical malpractice; directors and o#cers (D&O) insurance; cover for architects, engineers, and construction and design professions; and environment risk.
Catlin justifies these new lines (priced by its experienced actuaries) as "short tail" controlled latent risk cover for underserved niches.
Longer-tail risk is very selectively underwritten by Catlin based on claims made. (Tails refer to the extremes of a normal curve, the unexpected events. Longer-tails mean unexpected payouts.)
"Crysalis" is innovative oil production insurance, launched in Feb for oil and gas drillers. New business is booming post-Gulf of Mexico, and not just from US drillers.
BP's disaster explains the rush for Crysalis cover. BP had a Bermuda "captive" (self-financed) insurance firm.
What it will be able to collect for its captive, say industry sources, is $1.5-3.5 bn. Against this, the economic loss from the Gulf disaster is $40 bn. And since the Macondo sank, BP shareholders losses from the stock's drop topped $73 bn, a compelling argument for buying insurance. Crysalis standard contracts cap the amount of cover per event at $200 mn, and per company at $100 mn, shortening the tail.
Not everything went Catlin's way. Its first half earnings were nipped 8% from prior year by Chilean earthquake claims and the Gulf of Mexico. However, we had a benign hurricane season.
And for all the dollar's appeal, getting a decent investment return is not easy in the present QE2 environment.
If in?ation takes o", claims will be higher and coverage from investment income lower. But then Catlin can raise its premiums. And it may have shifted the policies it o"ers into another currency.
Citi expects the total payout next year for this "undervalued" (rated low risk, high return) share to come to 23.4% in sterling, and 16.6% in dollars at its target price of $12.80. Citi's 2010 profit forecast is $369 million, vs $243.8 million in 2009 and $384.9 million in 2008. (Per share, the hit was even greater in 2009 because Catlin did a rights o "ering to invest more during the crisis.).
Its Sept. quarter saw Catlin premium income up 9% and earned income up 13%. Market cap is $1.982 billion, with the ADR stock at $11.50. It has an A.M. Best A rating from the insurance watchdog.
Its combined ratio, a key metric, is 97% -- meaning expenses are 97% of premium income so underwriting was 3% to the good before any investment income. Buy CNGRY.
Best Stocks 2011: Ecopetrol
by Frida Ghitis, contributing editor Global Investing
Back in the days when Colombia was a political and military battleground, and leftist rebels regularly bombed the oil pipelines, investing in Colombian oil was only for people prepared to take enormous risks.
Now the landscape has changed considerably. Indeed our top stock idea for 2011 is now Columbian oil firm Ecopetrol (EC). To be sure, the war is not over. Colombian soldiers still fight leftist guerrillas, and drug money still fuels the fight.
But the tide has turned and now oil is ?owing fast through those rebuilt pipelines. Better yet, Colombia's fast-growing oil industry is welcoming investors.
The primary vehicle for investing in Colombia's booming oil business is Ecopetrol, which started decades ago as a government-owned monopoly.
In 2003, when the country had already embarked on its own reinvention, the so-called 'economic security' plan, Ecopetrol was restructured by a government that wanted it to become internationally competitive.
Colombia's oil output has grown 50% since just 2006. That's not all EC, because other companies participate in what is an increasingly more market-friendly economy. Ecopetrol produces about 60% of Colombia's total output. In fact, however, EC's production has left the national numbers in the dust. Heavy crude production jumped 111% from 2006 to 2009. And the numbers have continued gushing skywards in 2010.
Almost all the company is still owned by the government, but the push is on to sell larger pieces of it. The latest plan is to sell stock worth 10 percent of the company. Exploration is moving at a fast clip, with new and large finds coming on a regular basis. Widening its horizons, EC has joined a number of partnerships and is now exploring in the US Gulf of Mexico, Brazil and Peru.
At the end of Q2, EC announced stellar results; Q2 income jumped 137% y-o-y to $940 million. But the real news was the plans for the future. Ecopetrol announced plans to invest a staggering $80 billion during this decade, with most of it going towards exploration and production.
EC shares have climbed more than 70% over the past year, pointing to a possible drop before the shares resume their upward trajectory. The shares are valued at a trailing PE of 31. Production should continue to grow, and if the global stirs back to life, oil prices will remain firm, making EC keep climbing. This stock is not risk-free: a drop in oil prices or an unexpected deterioration of the security situation in Colombia could punish the stock."
Best Stocks 2011: Equity Residential
by Amy Calistri, editor The Daily Paycheck
With fewer people tapping the housing market, apartments are filling up fast. That's one big reason I like Equity Residential (EQR) for 2011. Equity Residential is an S&P 500 company and the largest real estate investment trust (REIT) of its kind.
We grew up with the perception that buying a home was a dependable and savvy investment. But in reality, from 1940 to 2004, housing prices only appreciated an average of 2% annually, according to data from the US Census.
And according to a recent report released by Ned Davis Research, that's probably the best we can hope for in the foreseeable future. In the near term, prices might not rise at all until unemployment drops to 6%.
Would we have made the same decision to leverage ourselves with 30 years of debt for an investment that, after in?ation, was barely a break-even proposition? As we learned from our parents' experience, the next generation of potential home buyers will be colored by our experience.
Roughly 20% of them see their parents with a home that is worth less than when they bought it -- and not worth as much as the debt their parents owe. In other words, this is the start of a long-term shift in behavior -- one where people are more inclined to rent than own. Apartment real estate did su"er during the recession. But occupancy is starting to rise to meet the existing supply.
Equity Residential owns or has investments in more than 470 apartment complexes in 18 states and the District of Columbia.
Even in this environment of historically high unemployment, EQR is making modest headway. In the third quarter of 2010, EQR's rental revenue grew 1.3% for the units it held more than one year. And funds from operations (FFO) rose to $0.55 per share, compared with $0.53 from a year earlier.
The trend for occupancy was also positive. In the third quarter 2010, occupancy was 95%, up from 93.7% in the same period a year ago. Real estate has already shown it is no stranger to risk. But I believe EQR's upside potential outweighs the potential downside risk.
Founded in 1966, EQR has demonstrated it knows how to handle the ebbs and tows in its market. It is well positioned to take advantage of the new demand for apartments. And if unemployment shows even modest improvement, EQR could provide some sweet gains in 2011.
Best Stocks 2011: ProShares UltraShort Yen
by Keith Fitz-Gerald, editor The New China Trader
Bloomberg recently reported that China has recorded two straight months of reducing its holdings of Japanese debt. This suggests that the Japanese yen has reached the point where it's become too "strong" for its own good - or at least for China's taste. Considering China has become the world's de facto financier, we'd be wise to pay attention.
Savvy top-tier traders know that we saw China taking similar actions a few years ago with regard to dollar-based holdings... right before the dollar began its most recent slide and other "currencies," like oil, gold, silver, and rare earths, began their appreciation.
My guess, based on 20+ years of experience, is that the yen is now in the crosshairs. We haven't seen similar pricing since April 19th, 1995, when it traded at 79.95 to the U.S. dollar.
I believe that with Japanese debt at 253% of GDP (more by some estimates), the yen is likely to fall, if not because it's risen too high too fast, then because countries like China have decided they want to take profits.
Here's what to do now if you want to play along: Buy ProShares UltraShort Yen (YCS) at market. This is my top speculation for the new year. Or, if you want an even more speculative play, try purchasing YCS call options. Let's talk brie?y about my expectations.
This is a trade that could take a while to come to life so patience is clearly in order. We are, after all, dealing with governmental policy as the catalyst. Normally that's a problem, but in this case, I think it's the fuel we're looking for. Even if the Japanese government doesn't want to bring its currency into line with historical averages, the markets will if given enough time.
Best Stocks 2011: RealD
by Mike Cintolo, editor Cabot Market Letter
To choose my top stock pick of the year, I looked for new stocks (recent IPOs are usually under-owned by institutions, which can help the stock price) with big ideas. It's hard to find an idea much bigger than RealD (RLD), a play on the popularity of 3D movies.
The company is the leading provider of 3D technology to theaters and TV makers. At the end of September, 9,300 movie screens were using its technology.
In addition, another 2,000 movie screen are likely to be converted in the fourth quarter. Yet RealD is just scratching the surface of its potential, as tens of thousands of screens around the world are likely to move to 3D in the quarters to come, and since the firm gets paid on a per-ticket or per-movie basis, each installation creates a huge stream of income.
RealD isn't making money yet (though it's close), but revenues are ramping at 50%-plus rates as the company concentrates on grabbing as much market share as it can. And, longer-term, the 3D TV market could be a huge boost as well. As we said, it's a big idea, and the stock, which just came public in July, is o" to a good start. We think it will have a great 2011.
Subscribe to:
Posts (Atom)