Top Stocks to Buy in 2009 25 comments
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2008 was perhaps one of the worst years for most investors in their lifetimes. One can safely look back and be thankful that the year is over. Of course, 2009 might not exactly be a rebound year, but at least one can assume that equity markets don't have much further to fall. I won't waste your time recapping 2008 at this point, well, I already kind of did that in my post titled "Top 5 Life Changing Events in 2008".
Before we move to 2009, let me just say that while it sucks to lose money, there is no shame in having 50% of your portfolio shaved off. If you find yourself thinking this game is not for you, I urge you to reconsider. Many of the pundits of the investment and economic world got it wrong last year. T. Boone Pickens thought the year would end with oil at $150, Jim Cramer recommended Wachovia right before it went belly up and Bernanke, Barney Frank and President George Bush were all wrong about the economy and the extent of the financial crisis. So if you lost money, know that most professionals who make a living doing this, lost money too, and lots of it.
Looking forward to 2009, the landscape looks full of stocks that fell from grace. Those that belong to the half-off discount club include Wall Street darlings and my favorites Potash (POT), Apple (AAPL), Google (GOOG), Priceline (PCLN), Visa (V), Mastercard (MA), Monsanto (MON), Mosaic (MOS), Flowserve (FLS), Research in Motion (RIMM), Abercrombie (ANF), Transocean (RIG), Gamestop (GME), China Mobile (CHL), CVRD .... the list goes on. But how can one identify the stocks that have hit the ground and are starting to shake off the fall? Which ones have further to go? Are financials ready for a comeback? Bank of America (BAC), Goldman Sachs (GS), Citi (C) - are these stocks ready to rise again?
Is it better to just buy ETFs? I mean if the markets remain flat, or rise 10% as most experts predict, isn't it better to just buy S&P Ultra funds like SSO? And isn't it worth it to bet on the dollar now that the whole world is reeling and looking to the US to lead them out of a recession? And what about USO, which is at all time lows?
Lets examine some of my picks for 2009.
Potash (POT): Potash is a fertilizer company. They produce and sell animal feed and nitrogen fertilizers for the agriculture industry. The price of commodities did run away from us, but now prices are down. However, just as the upside was blown out of proportion, so is the downside. Potash company has been making money hand over fist and has fallen from a perch of $240 just last summer to less than $53 in December, a loss of 78%. During the same time, earnings have continued to soar at triple digits. Demand is weaker, but not by much, according to Potash CEO William Doyle. Now back at over $70, Potash still trades at less than 6 times next year's earnings and is expected to make almost $13 per share in 2009. The company is expected to release earnings on Jan 22, so I recommend picking up some Potash ahead of the earnings, specially on a weak tape.
Oil (USO): I never thought oil would be in the 30's just a few short months after almost hitting $150. And just like no amount of good or bad news deterred this once hot commodity to creep up, it seems that no amount of news, good or bad is able to prevent it from further declines. Down 75% from its high of around $120, USO sits right under $30. Israel attacked Gaza, the Saudis cut production more than once, but nothing seems to have an impact on oil prices. The markets are afraid of the lack of consumer spending, the democratic agenda which has historically been unfavorable toward oil companies and I guess other factors beyond my comprehension. Regardless, if there is one thing you should buy today, that is oil. I can't say where it will bottom or if it will go higher this year, but the prices you will get this year will certainly be good entry points over the course of your investment. One thing I can tell you. Until oil goes up, the markets will remain depressed. For more on the potential direction of oil, check out this Reuter's post on Goldman's prediction.
Abercrombie and Fitch (ANF): Retailers have been the worst performers of 2008 and there is no end in sight for the carnage. But ANF is not your average retailer. They are the most popular teen apparel brand in the US, with Hollister, Ruehl and Abercrombie stores holding up relatively well compared to other retailers like the Limited and Gap. Some people like American Eagle (AE) and Urban Outfitters (URBN) in this space, but ANF trades at a PEG ratio of 0.65, and sits on a good amount of cash. In the teen retailing space, they are the trend setters. The stock traded in the seventies and eighties for most of 2007 and took a nose-dive in 2008. In November, the stock dipped below $15, but at a little over $20, it is still a good stock to own for the long haul.
The rest of my picks for 2009 will be posted soon.
Full Disclosure: I do not own USO, POT or ANF, but my position can change anytime without notice.
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This article has 25 comments:
The takeaway, as I see it, comes to this: for most small investors, (1) it is better to just buy ETFs, and (2) unless you're playing with other people's money, it's best to invest in personal income skills - that is, self-training, education, job path - and leave stock speculation to folks with time and money to burn.
Unless of course, stocks provide some sort of entertainment (there's no rollercoasters over where I'm living - so equities offer adrenaline rushes).
Although my feeling is that ANF will come out of this whole mess as a winner, I would rather let Jefferies Michaels tell me when, for this CEO has an uncanny ability to trade his company's stocks at the right time. On Dec 23 however, he disposed 419500 shares of ANF at $23.07.
Is he just blowing smoke to appear in print?
Have you ever read the "top Gurus" prognosticate? They have at their beck and call huge research departments to back their stories...And at the end of the year---they don't fare any better than an average investor.
What a racket !!!
POT may be a value now. Who knows, since fundamentals don't seem to mean anything anymore.
As far as ANF, they lease some pretty expensive real estate in ritzy malls.
Expect many of those stores to close.
Retail is not coming back for some time. When a country pursues "free trade" policies that self-decimate its manufacturing sector, the first result is a consumer enjoying low prices.
The later result, which we now see, is that consumer no longer working.
No great economy can lose its manufacturing base and prosper.
Yes, I know that 99 percent of economists disagree with this economist.
Another reason to abolish academic tenure.
On Jan 21 03:48 PM User 271917 wrote:
> last comment spelled thiefs wrong.
Background...I don't have 10 doctorate degrees but am pretty good...at least I think so.
Let me just state some facts:
-Oil supply is higher...extremely higher than expected.
-Imports are very very high.
-SUPER CANTANGO exists
-Trillions of dollars will be spent worldwide to stimulate growth especially here in the US
-Everyone who can is leasing tankers to store oil.
-OPEC and all oil producing are losing trillions..not just on production but also their investments (Dubai!!!)
Now, just a Keynesian perspective (which for the most part has been working since the 40's after the "classical economists" killed us during the depression), oversupply leads to a cut in supply, that eventually leads to a rise in demand b/c of no more production, that leads to a rise in price.
Am I wrong? Are things really that bad that will kill oil and growth for the next 4-6 quarters like most analysts write about??
It just makes common sense that with all this "stimulus", contango, hording...that a price increase in oil isn't a far out thing. It's here. It's now.
No doubt oil was way to high...and if you got suckered in to buy (or write about it at $120-140)...it was common sense that it shouldn't have been there. Just like now...at least in my opinion...it should not be this low.
What do you think? Am I way off??
I use only direct stock purchase plans, invest for dividend income in companies with low to moderate debt and good prospects for maintaining or increasing their dividend (PG, CLX, PEP, MO, etc.) and don't consider myself to have lost a dime unless and until I sell (which I don't plan on ever doing, really). So instead of posting about how intelligently I've limited my losses I don't consider myself to have lost any money. It has, however, become cheaper and cheaper to increase my dividend income. In this I am delighted. Well... waddya think?
On Jan 23 05:25 PM Richard Collins; Claremont, CA wrote:
> consumeronstrike
> you are 100% correct and doing the right thing. Buy and Hold is the
> only way to invest. It's unfortuanate that clowns like Cramer jump
> up and down telling people to sell which in turn do more harm than
> good.
>
> Before I invest in a stock I always check to see what percentage
> the insiders own and how wealthy they are. example: Sheldon Adleson
> is a multibillionaire and owns 70% of Las Vegas Sands(seekingalpha.com/symbo...)
> and overextended himself to where his stock went down from 148. to
> 3. a share. He had to borrow money from himself and did.
> What surprises me is the fact the corp. continued to make profits
> but building the new casinos in Singapre and etc was eating up the
> profits and the banks weren't lending. They have the financing under
> control and going back up. Same true for MGM and WYNN.
>
> Dan Kowkabany
I wrote a post on my site called "This Stock Will Make Your Portfolio Healthy" and it's published on SeekingAlpha as "eHealth: Road to Recovery".
Please people, watch out for Charlatans masquerading as stock analysts.
Stocks picks now are worthless, as all have been hit hard and are a long way from turning around. The ones that have held up better than most, wartime and medical stocks, will be hit hard later when their propped-up market finally collapses. When all are on the bottom, then talk about stock picks. Until then, do something else.
On Jan 22 06:09 PM FierceAmbition wrote:
> It's "thieves" not "thiefs"
good luck to all.
Procter & Gamble Currently pays almost a 3% dividend and has increased its dividend every year for 55 years. Anyone wanna bet against 'em?
Clorox yields about 3.5% now and has seen annual dividend increases for each of the last 31 years.
Pepsico has increased its dividend every year for more than 25 years.
Altria's dividend is covered very well and the company has paid dividends for decades. And currenly yields 7.5%.
Personally, I hope people do continue to stay out. It's causing garage-sale prices on reliable dividend-paying stocks!
>
> oversupply leads to a cut in supply, that
> eventually leads to a rise in demand b/c of no more production, that
> leads to a rise in price.
>
> Am I wrong?
Keynesian or Classical, a cut in supply does not lead to a rise in demand. Says Law that "demand is a function of supply" is largely discredited. Generally, supply and demand are two different curves. A cut in supply (shifts the demand curve) will increase price, for most given demand curves.
Generally speaking and within normal ranges, demand is independent of supply. There will be cases where this fails: a concern over falling supply sparks investment demand and/or hoarding. At the other end, an inconsistent supply may reduce demand as substitutes are found. But, in your explanation above, just say "a cut in supply should lead to a rise in price."
Getting to your true question, your logic excludes "game theory" considerations; individual producers have incentives to cheat, and asymmetric information, etc. These real-world realities (that game theory tries to model) lead to real failures of the simple supply-demand analysis, and conclusions should be hedged to recognize this.
Right now, the oil supply curve appears to be completely vertical, and a shifting demand curve is moving the market price. Oil producers are receiving less revenue per barrel and are paralyzed at the thought of reducing the number of barrels. Fixed costs are often high, and in the short run it may be more profitable (less losses) to continue production even though the marginal revenue is short of marginal costs. Without looking at oil producers' cost structures, one cannot even say whether these producers are better off with lower volumes and higher prices, or higher volumes and lower prices.
With any luck, the U.S. Government will finally get serious about alternative energy and shift the U.S. demand curve for oil. This will be a long, slow process. But, so might be the economic recovery.
Now I don't invest DRIp mainly b/c tax reasons ( dividends taxed higher rate than capital gains) ETFs are my favorites. The current Mkt is kind of treacherous ons b/c we are in unprecedented secular BEAR Mkt ! I was in JPM drip plan and made a lot of money. Now I won't touch it. Look what happened to dividend of C cut to 1 cent!
If you choose strong Cos with low or no debt, wide moat and stay with them for at least 10-15 yrs, you may do ok. Only 2 companies survived in Great depression - GE and GM . Now GM is almost bankrupt and GE is on shaking ground. Buy and Hold(Hope) has become Buy and FOLD! Definition of long term used to be at least 10 yrs. But between 1998-2008 mkt went nowhere! Now, the new LONG TERM is 20 + years. GOOD LUCK!
On Jan 23 02:27 PM consumeronstrike wrote:
> Many posters on these boards sound so much more knowledgeable than
> I am. So how about some opinions on my strategy? No one's about
> to change my mind but maybe this will ellicit some interesting responses.
>
> I use only direct stock purchase plans, invest for dividend income
> in companies with low to moderate debt and good prospects for maintaining
> or increasing their dividend (PG, CLX, PEP, MO, etc.) and don't
> consider myself to have lost a dime unless and until I sell (which
> I don't plan on ever doing, really). So instead of posting about
> how intelligently I've limited my losses I don't consider myself
> to have lost any money. It has, however, become cheaper and cheaper
> to increase my dividend income. In this I am delighted. Well...
> waddya think?
On Jan 25 04:36 PM sunny12945 wrote:
> You are describing DRIP Plan. It works wonderful in secular BULL
> Mkt interspersed with short Bear Mkts. I followed this in 1980s and
> 90's and was successful not b/c I was smart. I just happened to ride
> one of the most wild BULL Mkts of 20th century.
>
> Now I don't invest DRIp mainly b/c tax reasons ( dividends taxed
> higher rate than capital gains) ETFs are my favorites. The current
> Mkt is kind of treacherous ons b/c we are in unprecedented secular
> BEAR Mkt ! I was in JPM drip plan and made a lot of money. Now I
> won't touch it. Look what happened to dividend of C cut to 1 cent!
>
>
> If you choose strong Cos with low or no debt, wide moat and stay
> with them for at least 10-15 yrs, you may do ok. Only 2 companies
> survived in Great depression - GE and GM . Now GM is almost bankrupt
> and GE is on shaking ground. Buy and Hold(Hope) has become Buy and
> FOLD! Definition of long term used to be at least 10 yrs. But between
> 1998-2008 mkt went nowhere! Now, the new LONG TERM is 20 + years.
> GOOD LUCK!