My 2013 picks are final and the resulting return was 41.3%.
Here is a look at returns over the last five years:
· 2009: +99.9%
· 2010: +32.9%
· 2011: -11.3%
· 2012: +17.6%
· 2013: +41.3%
Check out my latest picks for 2014 here.
Investors who followed my picks each year since 2009 would have seen a $10,000 investment turn into $38,389. The 2013 picks returned an average of 41.3%, which marked my second best year in the five year history of the top ten list. I had one stock that doubled, one that was bought out, and five in total that had a positive performance on the year. Here is a look at how the ten selections performed and my prediction of what's in store for 2014.
End: $66.80 plus $1.42 in dividends
Back in August, I showcased a newsworthy game changer for the large insurance company. The company expanded an existing deal to make its cancer insurance plans available for purchase in Japan Post office locations. This deal expanded the number of outlets Aflac was in from 1000 to 20,000 in Japan.
Recently, Aflac added 40 million shares to an already heavy 16.9 million share buyback program. The company now has a total of 56.9 million shares available under a buyback plan, which would retire a substantial amount of shares. In 2014, the company plans on buying back $800 million to $1 billion worth of its own shares. This comes on top of a recent third-quarter dividend raise as well.
This insurance giant continues to be a great play with its success in Japan. The company has a good dividend yield, offering yield to investors. The company also trades as a good value pick, with a price to earnings of around 10 for the current and next fiscal year.
2014 Outlook: Bullish
End: 31.50 plus $1.18 in dividends
Blackstone was my best pick for the 2013 year. The private equity investment company was a doubler with a total return of 109.6% with dividends. The successful 2013 was led by a series of well-timed IPOs. The company took public companies like Pinnacle Foods (PF) (My Preview), SeaWorld (SEAS) (My Preview), Brixmor Property Group (BRX), Hilton Worldwide (HLT), Extended Stay America (STAY), and Merlin Entertainment (London).
Despite the large runup in share price, Blackstone is trading at around 10x the $2.90 earnings per share analysts predict the company will post for fiscal 2014. The company will continue to realize gains through several IPOs and additional funds. Current 2014 IPOs include LaQuinta hotels and Michaels, the craft store retailer.
Blackstone has over $248 billion assets under management. The company's two keys are private equity ($50 billion) and real estate ($69 billion). Real estate continues to be a good place to invest in and Blackstone has a huge presence in that market. I expect more 2014 IPOs to be announced soon, as Blackstone has 76 portfolio companies with $108 billion in revenue in that business segment.
2014 Outlook: Bullish
Concur Technologies (CNQR)
Concur Technologies was a great pick for the year, as analysts and key investors like Jim Cramer started getting behind the name. The company is a growing player in the cloud with the lead in corporate business bookings through mobile and online. In the last fiscal year, the company added key customers to get its customer base over 4000. Bookings were up 40% on the fiscal year. The company reminded investors it has a "clear line of sight to crossing the $1 billion revenue mark in 2016."
Shares continue to trade in the triple digits and come with lofty price to earnings ratios around 90-100 for the current and next fiscal year. While I believe the company is set for further growth ahead, with revenue expected to rise 25% over each of the next two fiscal years, I would wait to buy this high flyer.
2014 Outlook: Hold
Discover Financial Services (DFS)
End: $55.95 plus $0.60 in dividends
Discovers Financial shares caught up to their peers during 2013. At the start of the year, I called valuation the number one reason to invest in Discover shares. Shares were trading at 8.8x projected earnings per share. Now, at the end of 2013, shares are trading at 11 times the projected $5.08 expected in fiscal 2014. To me, that seems like a much better valuation for this credit card company.
The second reason I gave for investing in Discover Financial shares was the it card. Card volume and loans continue to increase thanks to this card. A new feature introduced recently by Discover is the free FICO scores that will be included for all Discover it cardholders. This could be the newest reason for new customers to sign up for the it card or a reason for others to switch to Discover. In the third quarter, total credit card loans increased 4% to $50.4 billion. Chargeoffs also hit new lows during the third quarter.
2014 Outlook: Buy
HEICO Corporation (HEI)
End: $57.95 plus 5/4 split and $0.06 dividend
The aerospace sector continues to be one of my most bullish segments going forward. The current cycle of new planes and increased demand has companies like HEICO benefiting. The company saw increases in both its Flight Support (+17%, $665.1 million) and Electronic Technologies (+6%, $350.0 million) for the full fiscal year.
The company expects to see a revenue increase of 12 to 14% for fiscal 2014. Analysts are forecasting revenue to grow 12.4%, so investors could see an increase in share price throughout earnings seasons. Another huge reason to invest in HEICO is its commitment to returning money to shareholders. The company's dividend remains minimal, but has been raised. Along with the semi-annual dividends, the company issues special dividends and splits shares. In fact, 2013 marked the fourth consecutive year that the company provided shareholders with a 5:4 stock split. During the recent earnings call, HEICO reminded investors that one share bought at $8.38 in 1990 would now be worth $945 thanks to splits and dividends.
2014 Outlook: Buy
LeapFrog Enterprises (LF)
LeapFrog Enterprises was one of my two losers for the 2013 year. Shares were down 8% to finish the year, after trading as high as $11.95 in July. The drop in share price continues to be a buying opportunity for investors who believe this company is not a one-trick wonder and can grow in international markets. In fact, in May I highlighted the possible international expansion and new products for the company.
In the third quarter, net sales increased 4%. This was made up of $146.8 million in the United States, a 1% increase, and $54.2 million in international markets, an increase of 14%. I still believe over time these two numbers will catch up as the company's learning products hit new international markets. The LeapPad 2 was the number one kids tablet in the United States, United Kingdom, Canada, Australia, and South Africa, according to an investor presentation.
Shares were hurt by lowered guidance on the third-quarter call. The company believes it will see a negative impact by the shortened holiday shopping season. LeapFrog did release several new products during the year that I believe could exceed current expectations for the holiday season. The company's LeapPad Ultra allows kid-safe internet surfing and texting. The device was on several holiday hot lists and sold out during initial pre-sales. Other partnerships and bundles should increase sales of previous LeapPad models and the company's new LeapReader.
Analysts see current fiscal earnings per share falling to $0.43, from a total of $0.95 in the last fiscal year. Revenue is expected to increase only 0.2% to $582.7 million. In the next fiscal year, earnings per share are expected to hit $0.54 from a 4.4% increase in revenue to $608.2 million.
2014 Outlook: Buy
Onyx Pharmaceuticals (AMGN)
End: $125.00 (bought out by Amgen)
It's always a good sign to stock selections when one gets bought out. Shares of Onyx Pharmaceuticals were bought out by Amgen for $125 a share. What I am most proud of with this pick was I nailed the three reasons for buying shares: Kyprolis sales, buyout target, and pipeline.
I recently profiled Onyx as my best stock call of 2013. I advised investors to take profits and put them into Amgen shares, as the company has a rich portfolio of drugs and a strong pipeline.
2014 Outlook: Buy Amgen
End: $30.63 plus $0.96 in dividends
Shares of Pfizer had a nice return in 2013 and also saw the successful spin-off of its animal health unit Zoetis (ZTS). However, the company continues to face a patent cliff and declining blockbuster drugs. To make matters worse, one of the company's key pipeline drugs to treat breast cancer recently saw a competitor sneak up on it. The company did recently raise its dividend and offers a yield north of 3% for dividend investors.
In May, I recommended that investors should buy into Zoetis and that the animal health company offered more growth than Pfizer. I still believe that is the case and Pfizer will continue to see earnings per share stall as revenue falls.
2014 Outlook: Sell, Buy Zoetis
Titan Machinery (TITN)
Titan Machinery was my worst pick for the year and ended the year down 27.9%. I highlighted the company's low valuation and attractive location of retail outlets that sell construction and agriculture equipment as reason to invest in the stock. However, the company continues to see lower demand for products and an increase in inventory.
In the third quarter, revenue grew slightly from $582.1 million to $588.0 million. However, equipment sales fell and the difference was made up by parts and services. Operating expenses also increased to 12.7% from a previous 11.0% in the prior year. Same store sales also turned negative.
To make matters worse, Titan dramatically lowered its fiscal 2014 outlook. The company now sees revenue hitting $2.15 to $2.35 billion, from a prior target of $2.25 to $2.45 billion. The company also lowered earnings per share guidance to $0.55 to $0.75, from a prior target of $1.20 to $1.50.
2014 Outlook: Sell
Take-Two Interactive (TTWO)
Take-Two was one of my best performers for the 2013 year. I recommended buying shares at the start of the year due to the blockbuster lineup of games coming during the fiscal year. I also gave investors another recommendation in May to make sure to buy shares of Take-Two before "Grand Theft Auto V" came out.
The blockbuster "Grand Theft Auto V" game did wonders for Take-Two shareholders. The game broke six Guinness World Records, included highest revenue by entertainment product in 24 hours and fastest entertainment property to gross $1 billion. Through the end of the second quarter, the game has sold 29 million copies.
In November, Take-Two used some of its new cash from strong video game sales to buy back activist investor Carl Icahn's stake in the company. The company bought back all of his 12.02 million share stake at an average price of $16.93 for a total of $203.5 million. This share buyback was not part of the company's current plan on 7.5 million shares. This buyback was a great way to reduce the share count and further reward shareholders.
In the second quarter, revenue increased to $1.27 billion. Earnings per share came in at $2.49. These numbers greatly rose from $288 million and $0.11 in the prior year's quarter. Digital sales increased 85% to $105.5 million, representing one of the company's strengths and areas of growth. Going forward, with its strong cash position and pipeline of games the company believes it "will achieve non-GAAP profitability in fiscal 2015 and every year for the foreseeable future."
I still believe Take-Two is positioned well for the future with the launch of Grand Theft Auto Online and rumors of a PC game launch in February of March. However, shares have risen dramatically and should come back down to earth as investors take gains from the success of "Grand Theft Auto V". I recently suggested investors buy shares of Ubisoft (OTCPK:UBSFY) instead, my top video game pick for 2014.
2014 Outlook: Sell