My Top 10 Stock Picks for 2011

by: David Braunstein, CFA

As I've noted in a previous post, 2011 will be the year for stock pickers. The market will likely be flat to up slightly. The following companies are my top picks for 2011:

  1. Ntelos Holdings Corp (NASDAQ:NTLS) - Ntelos is a backdoor play on Sprint (NYSE:S) as they have independent Sprint franchises. The company also has high ROE and great management, as well as a low cash flow of 5.8X; high yield at 5.9%. The company is splitting off its wireline business with several hungry buyers after the spinoff.
  2. Teva Pharmaceutical Industries Ltd (NASDAQ:TEVA) - I think pharma/biotechs will be the clear winners in 2011. TEVA is not only the largest generic pharma, it also is the largest company in the Israel Index. From previous posts, I'm bearish on the third world except India and Israel. TEVA makes a great "double play" in 2011.
  3. Devon Energy Corporation (NYSE:DVN) - This is a quality cheap company and a play on the Mississippian formation in the Permia Basin, soon to be more exciting than the Balken Shale. This is also a play on rising natural gas prices longer term, since the company is small enough to be a takeover target.
  4. Capital One Financial Corp. (NYSE:COF) - Credit card companies typically benefit from rising interest rates because they quickly adjust the rates charged to consumers to offset the higher cost of funds. Additionally, because rate increases generally accompany a strong economy, credit losses usually decrease.
  5. Activision Blizzard Inc. (NASDAQ:ATVI) - A new 10-year exclusive publishing deal with Bungie could deliver new hit games.
  6. Ford Motor Company (NYSE:F) - The revamped Focus and Taurus show that Ford can make quality, fuel-efficient vehicles to compete with Toyota (NYSE:TM) and Honda (NYSE:HMC).
  7. Wal Mart Stores Inc. (NYSE:WMT) - International growth in high-growth markets such as Mexico, China and Brazil is becoming an increasingly critical component of analyst valuation assumptions. Should the acquisition of South African based Massmart be consummated, it would give Wal Mart an important foothold in a rapidly developing South African economy and open the door for even greater African expansion opportunities.
  8. Nestle SA (OTCPK:NSRGY) - Nestle, known for its chocolate, has realigned its product portfolio to focus on health and wellness products, and it should benefit from increasing consumer spendings on these products. This company is also the largest component of the Swiss Stock Index and therefore makes a good play on a declining euro and USD since the stock is priced in Swissfrancs.
  9. Occidental Petroleum Corp (NYSE:OXY) - Recent exploration successes in California have proved promising and will likely lead to significant low-cost production.
  10. Apple Inc. (NASDAQ:AAPL) - The iOS has likely escaped the reach of any potential competitor and as the smartphone and smart pad markets shake out, Apple will likely capture significant markeshare. The stock is cheap selling at a PEG of 1.

These are my top picks and top holdings for 2011.

Happy New Year and good luck in 2011!