Quick, name the investment firm that has had the best annual performance from its "Top Stock Picks" lists over the past decade. Would you guess Merrill Lynch? Credit Suisse? Citi? UBS? Actually it is little known Raymond James. Its annual 'Best Picks' list, has outperformed the S&P 500 by an average of 8.5 percent over the past 10 years including producing a return of 44% in 2013.
The investment firm just released its top 13 picks for the New Year. Here are three of these that look particularly attractive at current levels.
One of Raymond James' top picks for the New Year is an equity most American investors have probably never heard of. It is Copa Holdings, S.A. (CPA). The company provides airline passenger and cargo services in Latin America. It provides services within Colombia, and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, México, Cuba, Guatemala, and Costa Rica.
Copa is a growth play on the expanding economies and air travel demands in Latin America. Earnings are on a significant upwardly trajectory. The company made just over $7.50 a share in FY2012 but is tracking to earnings of over $9.75 a share in just to be completed FY2013. Analysts have ~$11.50 a share penciled in for FY2014.
Copa is experiencing revenue growth in the low teens and the stock sports a five year projected PEG of less than 1 (.63). Given growth prospects, CPA is attractively priced at under 13x forward earnings, a nice discount to our overall market multiple of ~15x forward earnings.
JPMorgan (JPM) also makes the list despite its long list of recent settlements with various federal agencies and regulators. Despite having a target on its back throughout most of 2013, the New Year should be brighter as the bank gets through its litigation challenges over the next twelve months. In addition, it should benefit greatly as the Federal Reserve keeps short rates low while long rates rise as the 'Taper' commences. This will bolster the bank's net interest margin.
The nation's six biggest banks are on track to book $76B in profits as FY2013 closes. This is just below their all-time take in 2006 before the housing/financial crisis. These banks should surpass that level this year. They have managed to do this despite having return on equity levels that are a fraction of their previous peak due to job cuts, operational improvements as well as taking market share despite "Too Big To Fail."
With the economy projected to accelerate in 2014, major banks should have another good year. JPM is still considered one of the best managed big banks in the country despite recent stumbles. The shares are selling at less than 10x forward earnings, are priced at ~20% above book value and the firm has a stellar balance sheet. The stock pays a 2.6% dividend as well and payouts should increase nicely in coming years.
Apple (AAPL) was the most prominent of the 13 names of this year's top picks list from Raymond James. The shares posted a return of less than 10% in 2013 versus the overall market's ~30% gains. Apple is a 2014 story as earnings growth is expected to return for the first time in five quarters when the company next reports earnings around January 27th.
The tech giant should also be propelled by the success of the recent launches of new versions of its iconic iPhone and iPad franchises. Asia will be a big focus of growth in the New Year. Apple concluded distribution deals with both NTT Docomo (DCM) and China Mobile (CHL) towards the last few months of 2013. This gives Apple more than 800mm potential new customers to sell its iPhone to in 2014.
The overall market is selling for just over 15x forward earnings and S&P companies are expected to produce 4% revenue growth in 2014. Apple goes for just over 11x forward earnings and should deliver 8% revenue growth in the coming year. This does not take into account the company's over $140B stash of net cash and marketable securities. The shares yield 2.3% and the company continues to buy back stock at impressive levels.