2013 Into 2014
What an interesting experiment it will be to come back to this post one year from now and see how the results of my 8 most confident positions wind up yielding me.
While some of this article might be repetitive for readers who read me often, I'm writing this article specifically to share what I think are 8 stocks that I'm confident will move in one direction or the other. Also, by presenting some long and some short, it's an instant way to hedge yourself against macro market moves in one direction or the other.
So, without further ado, here's a review of some of my major points about these companies - and the eight positions I'm confident in heading into 2014.
4 To Buy In 2014
General Motors (GM)
- With Ford (F) having paved the path to the U.S. auto recovery, General Motors stands to be the next to offer a lucrative investment to those who go long.
- The U.S. Government is set to exit the company in early 2014 and it's likely going to prove to be a large catalyst upward for the stock.
- GM is likely to unlock some of its cash once the government does exit. They've been stockpiling cash for years, compiling a reserve of nearly $27 billion.
- GM offers warrants (as part of its restructuring) that trade dollar for dollar with the current stock price, but offer significantly more potential for gains over the next year. More on that in my article here.
Bank of America (BAC)
- With continued cost cutting that's going to run into 2014, Bank of America is set to continue producing an improving bottom line, regardless of possible stagnant revenues.
- Although legal issues remain the Bank's biggest caveat, BAC continues to settle litigation relating to the subprime crisis one at a time and will continue to do so in 2014.
- CEO Brian Moynihan remains focused on the fundamentals, leading with a clear head, and is the backbone of the bank's lucrative performance in 2013.
- Warren Buffett, already yielding a $5 billion profit on paper in his Bank of America investment, remains satisfied in the company and hasn't sold his position.
- Bank of America dividends are expected to rise in 2014.
- Microsoft's CEO search will finally end, allowing the spotlight be on the business of the company, as opposed to the search for a new executive.
- Microsoft's Surface 2, an outstanding product, will continue to catch the eye of reviewers and become second in command firmly to Apple's (AAPL) iPad.
- The Xbox One, as I've predicted, will act as a gateway into the living rooms of millions of families, allowing Microsoft to monetize supplemental items that come with it being your home media hub (i.e. movies, music, downloads).
- Microsoft pays dividends that continue to increase consistently on a yearly basis.
Potash Corp. (POT)
- Cheap long term calls make for an inexpensive way to leverage a long investment in this potash staple.
- As Uralkali uncertainty continues to wane, confidence in the ongoing stability and demand of the sector could push Potash Corp back to it's pre-volatility levels of $40.
- Negative catalysts of lowered guidance, as well as Uralkali volatility, will be left behind in 2013.
- Potash continues to pay an attractive dividend.
4 To Short in 2014
Diebold Corp. (DBD)
- As a company whose main appeal as an investment has been its consistent dividends, slowing growth in dividends is likely forecasting a slow 2014.
- The company's CFO, Brad Richardson, is leaving after a Q3 loss and a settlement with the SEC - likely to drag on the stock in 2014 as the company transitions.
- The company is trading at around 17 times forward earnings and is telegraphing a slowdown, making it susceptible to macro market pullbacks.
- Pandora will be facing increased pressure from iTunes Radio moving into 2014.
- Pandora's audience metrics to end the year - the catalyst for the stock for most of the end of 2013 - were an illusion of sorts.
- Pandora is losing the race to both iTunes Radio and Spotify for international markets.
- Pandora is severely overvalued with a $5 billion market cap and a P/E of over 100 - making it one of the first stocks to be susceptible to macro market corrections of any sort.
- Despite the stock's amazing 2013, 2014 is likely the year that the fundamentals of the business catch up to the stock price.
- Herbalife has telegraphed slowing revenue growth in its last quarter's earnings.
- The question of distributor sales versus retail sales remains unanswered and the main crucial point in determining whether or not the company is an illegal pyramid scheme, as defined by the FTC and SEC.
- The company starts 2014 under review from several regulatory and government agencies with regards to promotional practices.
- Scrutiny on the company's one product, Acthar Gel, leaves it susceptible to having "all of its eggs in one basket".
- Questcor is already at the upper end of its all time highs, trading near a $3.6 billion market cap.
- 38% of the float is held short and there's a significant amount of short interest and bearish arguments in the public domain with regards to the company.
- The company is being looked at under a microscope for its questionable relationship with the Chronic Disease Fund.
In addition to these trades, there's several other vehicles that I think will prove to be lucrative in 2014 - most notably, the recovery of the housing market.
From a precious metals standpoint, both silver and gold remain at attractive prices for any investor that wants to make a contrarian buy and take advantage of a confident market and cheap prices. Then again, I almost always advocate holding and purchasing of precious metals, due to their non-renewable nature.
As you can see from the disclosure, being short HLF is the only position out of these that I'm holding at the time. I've liquidated a fair bit heading towards the end of the year, and will look to dig in for 2014 after the turn of the new year.
No matter what vehicles you choose, I wish you the best of luck and prosperity going forward in 2014.