"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.
