What to Buy and Why: Barron's 2009 Roundtable, Part I

It's that time of year - Barron's Roundtable - the 10 "investment experts" who generously share their investment ideas for the coming year.

"For those who care to keep score" (now why would anyone care about something so trivial as that?), Barron's tracks last year's picks. Let's see - it doesn't look like any of them made money in 2008, but then again who did? Still, you have to wonder if Mario Gabelli dreamed he'd drop 90.5% on Lin TV (TVL) or if Archie MacAllaster thought he'd lose 65% on Bank of America (BAC). On the other hand, some of last year's shorts were no less than prescient: Marc Faber shorted DryShips (DRYS) (-85%), emerging markets and China (hmm... maybe Faber did make money); Fred Hickey shorted Research In Motion (RIMM) (-61%) and Amazon.com (AMZN) (-42%).

Consensus is that 2009 will be horrid for the economy, but may be an exciting year for stockpickers who have an unprecedented opportunity to bargain shop. Barron's splits up the Roundtable's stock picks into three issues - this week we get Meryl Witmer and Fred Hickey. But first, a few snippets from the bunch on the big picture:

The stock market has rallied about 20%, and could go up 40% or 50%, as the little bull market did. Then reality is going to set in -- the reality that the economy is terrible, the unemployment rate is going to rise, the Fed's policies are imprecise. The dollar could get killed sometime this year, causing all kinds of problems. We have a more protectionist Congress. Deficit spending is unlikely to work. In sum, we have a date with more traditional bear-market levels. You'll see the single-digit P/Es [price/earnings multiples] that were typical in 1982, '74 even 1930 and '32. The market will go down significantly, and then make a bottom. - Fred Hickey

Giving a tax cut to people who spend the money at Wal-Mart on products made in China isn't going to do it. - Scott Black

Around the world, governments are throwing money at the system to revitalize debt growth. When an economy is credit-addicted and debt growth slows, it is a catastrophe. With the Fed buying up everything and boosting the federal deficit, hyperinflation will be the result down the line. - Marc Faber

We were all children of the bull market, but the bull market is over. Deleveraging will become the context for the next five to 10 years. It will lead to lower profit margins and higher interest rates. - Bill Gross

I can't believe you people can't find one good thing to say about the market, and at its low last year the market was down more than 50%. The bad news is in the market. - Archie MacAllaster

Come April or May, the numbers will be a lot better than in the fourth quarter. Car dealers tell us they are starting to sell cars, but the buyers still need financing... But once a new president comes in and enacts fiscal stimulus and promises tax cuts, things will start changing. - Mario Gabelli

Meryl Witmer's Picks

• Kaiser Aluminum (KALU): The new trend toward lighter aircraft is being enabled by a process called monolithic construction, which has created a "sea of change" in demand for KALU's product. Kaiser's the only mill with excess capacity.
• Allegheny Energy (AYE): Already cemented rate-increases will boost EPS, and Obama's new grid system should help things along.
• Assurant (AIZ): Its lucrative creditor-placed home insurance policies - which are guaranteed by the lenders - will benefit from people falling behind in their standard mortgage payments, forcing them to shift to Assurant's plan.
• Discover Financial Services (DFS): Despite the inherent risks in credit cards, DFS will emerge as a winner because of its exceptional risk management.

Fred Hickey's Picks

• Microsoft (MSFT): At $20, it's lower than 10 years ago, when the company did $12B in revenue. Now it does $60 billion.
• Cadence (CDNS): Gross margins are 78%, and it has lots of flexibility.
• Market Vectors Gold Miners ETF (GDX): Lower crude prices will make gold production cheaper. The ETF fell 26% last year while gold held up. Gold could go to $2,000 an ounce this year or next.
• Agnico-Eagle Mines (AEM): It will quadruple production by 2010 even as capex declines. Production costs: $300/ounce. (Felix Zulauf agrees vehemently.)
• PowerShares DB Agriculture Fund (DBA): Another inflation hedge: buy now and sell when commodities double.
• iShares Trust FTSE-Xinhua China 25 Index Fund (FXI): "As the world emerges from recession, I want to be invested in China. Unlike the West, it isn't burdened by massive debts."

That's all for this week, but before we go, here's what some other stockpickers are looking at this year:

• Prudent Speculations: 10 Most Interesting Stocks for 2009
• Jeff Miller: What to Do in 2009
• J Clinton Hill: 17 Stocks to Smooth the Bumpy Road
• Doug Kass: 20 Surprises for 2009.

Comments

[mkreisel:]

Eli, did you read the score card at all? Some of them made big money last year, contrary to your "let's see - it doesn't look like any of them made money in 2008"!

MARC FABER'S Picks:
Company Ticker 1/4/08 12/31/08 Change
Currency Pair Trades
Short the British pound/Buy the Yen £1=¥211.97 £1=¥131.99
Short the Euro/Buy the Yen €=¥160.09 €1=¥126.70
Buy the U.S. Dollar/Sell the Euro €1=$1.47 €1=$1.40
Investments
Short: Emerging Markets
Buy: ProShares Short MSCI Emerging Mkt. EUM $75.40 $78.60 4.2%
Short: iShares FTSE/Xinhua China 25 Idx FXI 54.54 29.09 -46.7
Buy: ProShares UltraSht FTSE/Xinhua China 25 FXP 82.51 35.35 -57.2
Buy: iShares MSCI Japan Small Cap ! SCJ 49.94 39.95 -9.8
Short: DryShips DRYS 73.17 10.66 -85.4

FRED HICKEY'S Picks
Company Ticker 1/4/08 12/31/08 Change
SPDR Gold Shares GLD $85.13 $86.52 1.6%
Agnico-Eagle Mines AEM 57.93 51.33 -11.4
CURRENCY PAIR TRADE: Long
CurrencyShares Jap Yen Tr FXY $92.11 $110.09 19.5
CURRENCY PAIR TRADE: Short
British Pound £1= $1.97 £1=$1.46
Short (Buy Puts)
Research In Motion RIMM $103.35 $40.58 -60.7
Amazon.com AMZN 88.79 51.28 -42.2

FELIX ZULAUF'S Picks
Company Ticker 1/4/08 12/31/08 Change
Short
Consumer Discretionary SPDR XLY $30.84 $21.57 -30.1%
iShares DJ Stoxx 600 Auto & Parts SXAPEX.Germany €33.27 €19.81 -40.5
British Pound/U.S. Dollar £1= $1.97 £1=$1.46
British Pound/Swiss Franc £1=2.19 CHF £1=1.56 CHF
Long
Gold (per ounce) (spot) $859.60 $882.05 2.6
Sugar (per pound) (Mar '08/Mar '09) 0.11 0.12 9.1
Cotton (per pound) (Mar '08/Mar '09) 0.69 0.49 -29.0

Jan 11 05:21 PM

[sr9web:]

Hey - the DRYS short was a big winner - you've got it posted as a loser


On Jan 11 05:21 PM mkreisel wrote:

> Eli, did you read the score card at all? Some of them made big money
> last year, contrary to your "let's see - it doesn't look like any
> of them made money in 2008"!
>
> MARC FABER'S Picks:
> Company Ticker 1/4/08 12/31/08 Change
> Currency Pair Trades
> Short the British pound/Buy the Yen £1=¥211.97 £1=¥131.99
> Short the Euro/Buy the Yen €=¥160.09 €1=¥126.70
> Buy the U.S. Dollar/Sell the Euro €1=$1.47 €1=$1.40
> Investments
> Short: Emerging Markets
> Buy: ProShares Short MSCI Emerging Mkt. EUM $75.40 $78.60 4.2%<br/>Short:
> iShares FTSE/Xinhua China 25 Idx FXI 54.54 29.09 -46.7
> Buy: ProShares UltraSht FTSE/Xinhua China 25 FXP 82.51 35.35 -57.2
>
> Buy: iShares MSCI Japan Small Cap ! SCJ 49.94 39.95 -9.8
> Short: DryShips DRYS 73.17 10.66 -85.4
>
> FRED HICKEY'S Picks
> Company Ticker 1/4/08 12/31/08 Change
> SPDR Gold Shares GLD $85.13 $86.52 1.6%
> Agnico-Eagle Mines AEM 57.93 51.33 -11.4
> CURRENCY PAIR TRADE: Long
> CurrencyShares Jap Yen Tr FXY $92.11 $110.09 19.5
> CURRENCY PAIR TRADE: Short
> British Pound £1= $1.97 £1=$1.46
> Short (Buy Puts)
> Research In Motion RIMM $103.35 $40.58 -60.7
> Amazon.com AMZN 88.79 51.28 -42.2
>
> FELIX ZULAUF'S Picks
> Company Ticker 1/4/08 12/31/08 Change
> Short
> Consumer Discretionary SPDR XLY $30.84 $21.57 -30.1%
> iShares DJ Stoxx 600 Auto &amp; Parts SXAPEX.Germany €33.27 €19.81
> -40.5
> British Pound/U.S. Dollar £1= $1.97 £1=$1.46
> British Pound/Swiss Franc £1=2.19 CHF £1=1.56 CHF
> Long
> Gold (per ounce) (spot) $859.60 $882.05 2.6
> Sugar (per pound) (Mar '08/Mar '09) 0.11 0.12 9.1
> Cotton (per pound) (Mar '08/Mar '09) 0.69 0.49 -29.0

Jan 12 01:41 AM

[PeteK:]

Anyone who buys MSFT must have different thoughts.
It's been pain in the neck for years.

Jan 12 01:51 AM

[Anthony Alfidi:]

Is anybody looking at financials? Schwab's (SCHW) market cap has been trading almost at the value of its cash on hand in recent months.

Jan 12 02:26 AM

[Homer II:]

MSFT can literally feel the squeeze internationally: one by one, countries are eschewing M$ and moving towards Linux and the BSD FOSS platforms. And in the US, the more savvy corporations and IT experts are becoming resigned to the dismal record of M$ OSes and are starting to do the same.

Only the paid shills are still hawking and boosting MSFT. Baldmer will soon squander the remaining cash on the balance sheet. The low $20s is about as high as this stock can go and it is already there.

Jan 12 02:30 AM

[punk_ash:]

Hey did you forget Bill Gates the genius is taking online physics classes and he might come up with a new breakthrough. MSFT has a very good product with lately except VISTA, but I don't see the need to upgrade. Do they expect us to pay $100s every year per family to Bill just because Bill and his programmers have come up with a new version of Windows which does the same tasks that Windows 3.1 did of 20 years ago


On Jan 12 02:30 AM Homer II wrote:

> MSFT can literally feel the squeeze internationally: one by one,
> countries are eschewing M$ and moving towards Linux and the BSD FOSS
> platforms. And in the US, the more savvy corporations and IT experts
> are becoming resigned to the dismal record of M$ OSes and are starting
> to do the same.
>
> Only the paid shills are still hawking and boosting MSFT. Baldmer
> will soon squander the remaining cash on the balance sheet. The
> low $20s is about as high as this stock can go and it is already
> there.

Jan 12 03:12 AM

[Ishortyou:]

I agree DFS will probably do well due to its risk management skills.

Jan 12 07:51 AM

[Ishortyou:]

I also agree that Microsoft is doom their business model ceased to work years ago, the churning era is over and they failed to adapt. RIP Microsoft.

Jan 12 07:52 AM

[Sacandaga:]

"Giving a tax cut to people who spend the money at Wal-Mart on products made in China isn't going to do it. - Scott Black"

So, things will be much better if we give tax cuts to rich people who will spend it on products made in (or travel to) Germany, France or Italy?

Jan 12 03:27 PM

[Chuch:]

A common misconception about China is that there better off because their lower debt, so better to invest in tough times. This isnt the case, anyone who is familiar with chinese culture knows that during tough times, there is zero spending. This is how they save their money. At least in the US we pile on debt and still move products. I would stay away from china and FXI

Great read on it at crashmarketstocks.com

Jan 12 05:06 PM

[bigbwe:]

Where is Art Samberg this year?

Jan 13 03:52 PM

[loquitur:]

On Jan 13 03:52 PM bigbwe wrote:

> Where is Art Samberg this year?

For possible reasons why he isn't a Roundtable contributor, see:

www.signonsandiego.com...

about an influence-peddling scandal motivated by allegations
of insider trading involving Pequot Capital's Samberg.

www.deepcapture.com/94.../

further elucidates -- Samberg appears to be at the nexus
of an insider trading scandal with Pequot Capital and Microsoft
(choice quote:'The day after Microsoft’s earnings announcement, Samberg emailed Zilkha: “I shouldn’t say this, but you probably have paid for yourself already.”')

Somehow, the Pequot investigation rose to the level of attention of SEC's Chairman Cox as well as Senator Charles Grassley ... Inveterate followers know that the testimony of Gary Aguirre is damning:

www.whistleblower.org/...

This seems to be enough for persona-non-grata status.

Feb 03 02:27 AM