This article comes as an addendum to my previous article, "8 Attractive Trades for 2014," where I laid out my condensed case for going long General Motors (GM), Bank of America (BAC), Microsoft (MSFT) and Potash Corp (POT) in 2014. In addition, I also advocated short positions in Diebold (DBD), Pandora (P), Herbalife (HLF) and Questcor (QCOR).
To read the reasoning and rhyme behind those selections, you can read a copy of that article here. This is simply a "Part 2" to that article. As I started to identify how I want to diversify myself heading into 2014, I picked up on seven additional companies that I've spend the better part of 2013 analyzing and could likely stake positions on heading into 2014.
6 More to Go Long
- Ford is spearheading the U.S. auto turnaround and had a record 2013 across the board, even with slightly less confidence about 2014 recently.
- Ford's Fusion is expected to go head to head with the Toyota Camry for the best selling sedan in the U.S. in 2014.
- Ford is likely to raise its dividends in 2014.
- Ford will be positively impacted by the European auto markets having bottomed and turning around.
Tesla Motors Corp. (TSLA)
- Despite its high valuation, Tesla is a company that has continued to execute the goals it sets out for itself.
- Expansion of SuperCharger stations through 2014 will give Tesla a much larger footprint in Europe.
- Tesla is a buy and hold for me, despite its valuation, as I truly believe it's not going to be bought out and will be a paradigm shifting, large scale success in the world of automobiles.
- Increasing short position to start 2014 makes the company susceptible to a short squeeze in the coming year if you believe like I do that Musk is the kind of guy that always has something up his sleeve.
- This is strictly a short-term call to go long on Crocs as I actually think the company is destined to swirl the bowl in the long-term.
- Blackstone's involvement on the Board and with the new CEO coming on board are likely to result in some "shareholder first, fundamentals second" decision making - which will drive the price up in the short-term, but screw Crocs in the long term. (i.e. a $350 million stock buyback when the company is posting negative earnings)
- Go long, but be hyper-vigilant about taking profits off the table as soon as they can be realized - this is by no means a multi-year hold.
- Read my recent writeup on the Blackstone investment for details on this trade.
- Apple will likely find success in its ploy to get Carl Icahn off of their backs regarding an increased share buyback.
- Apple will continue to grow across the board as the "tablet effect" on PC sales starts to wane and Mac, iTunes and iPhone continue to break records and post fantastic numbers. Apple will continue to gain PC market share.
- iTunes Radio, Chinese infiltration into mobile and good coming 2013 holiday sales should all catalyze a strong year for the company.
- Apple will be releasing new products in 2014, a watch and some type of TV-related product are the two top contenders.
REITs and Housing Related Companies like Home Depot (HD)
- (AGNC) and other dividend heavy REITs have been hit since the Fed's comments all the way back in May of 2013, so they're cheap.
- I'm expecting "normal" increases in housing prices and rent rates across the board.
- REIT concerns surrounding rising interest rates are overblown and not likely to stand in the way of a coming bullish year for the housing sector.
- Bank owned home sales continue to generate more bang for their bucks as housing prices continue to rise, telegraphing a bullish 2014.
- Companies like Home Depot and Lowe's (LOW) will benefit from another good housing market year.
- Read my full write-up on the housing market for 2014 here.
- Other REITs to consider: American Capital Mortgage Investment Corp. (MTGE), Cypress Sharpridge Investments, Inc. (CYS), Invesco Mortgage Capital, Inc. (IVR), Chimera Investment Corp. (CIM)
1 More to Short for 2014
- Twitter is finally starting to correct after screaming upwards to the tune of 40% post-IPO.
- Company supports an extremely aggressive $37 billion market cap - For social media comparisons in market cap, LinkedIn (LNKD) currently supports a market cap of $24 billion, Yelp (YELP) $4 billion.
- Recent analyst sentiment, led by Macquarie, heading into the new year is bearish.
- Twitter's traffic volumes in certain countries are in question, a far cry from the aggressive growth necessary to support such a major valuation.
- High P/E social media stocks could be the first to be susceptible to a macro market correction, I've often argued, and high valuation ones make for good hedges into the new year.
When combined with my last article, linked in the top paragraph, these are my definitive 15 trades heading into the new year. At the end of the day, it's 11 long positions and 5 short positions - which should be enough for a hedge.
We'll look back in a few months to see how this portfolio has performed. I wish all investors the best of luck heading into the new year.