By Kramer Winingham
Looking for short-term investment ideas? Today we'll look at five stocks to see if any can make you money over the coming six months. As always, use the list below as a starting point for your own due diligence:
Ford Motor Company (F)
Ford makes cars and trucks, and offers financial services to consumers who want to buy cars. Since Ford’s share price reached $18.97 at the beginning of 2011, the share price has been roughly cut in half, falling as low as $9.81. The company is currently trading at 5.6 times forward earnings. This is only slightly more expensive than competitor General Motors (GM), which is trading at 4.9 times forward earnings. However, both of the U.S. car makers look cheap compared to Toyota (TM), which is trading at 13.7 times forward earnings. So the question is: Why buy Ford? Well, it looks like things can’t get any worse. The shares are trading for half of what they were at the beginning of the year. Investors have a long list of reasons not to be involved with Ford. The good news is most of these reasons are priced in. It’s unlikely a company that’s not on the verge of losing money will trade at only five times earnings for very long. Ford issued guidance in July saying the company was on track to grow. Something has got to give. Unless the company’s earnings come in way below expectations, look for Ford’s shares to trade at a higher multiple.
Sirius XM Radio Inc. (SIRI)
Sirius XM offers premium satellite radio services to customers in the United States and Canada. It looks like it’s finally a good time to buy this company. The problem is, investors have been saying this for years now and the company has failed to perform. The company had been losing money for the last decade, until it was finally able to turn a profit in 2010. Earnings have since grown and are expected to come in at $0.05 a share for 2011, up from $0.01 a share in 2010. The company is trading at 33.7 times forward earnings, so these earnings are not necessarily cheap. Many investors still believe this is a fantastic opportunity. These investors will cite the company’s scalability and the fact that it has finally reached a scale of sufficient economy to make real profits. The company has been growing revenues at 63.4% annually over the last five years. Plug that growth into this scalable model and Sirius’ profits should rapidly expand. Another impressive fact is that the company has managed to retain 46% of new customers. It seems as though as long at the company can attract new subscribers, the service can keep them and the company can keep growing.
The common worry is the low switching cost to competing services. Terrestrial radio broadcasters like Cumulus Media Inc. (CMLS) and Westwood One Inc. (WWON) offer similar programming for free. Pandora Media, Inc. (P) is a new subscription based competitor with a unique product offering: customizable radio stations. It will be interesting to see how this affects the market for Sirius XM. That said, for an investor looking for a six-month investment, it might be the right time for Sirius.
Quepasa Corp. (QPSA)
Quepasa Corp owns Quepasa.com, which is a social-networking and gaming site aimed at the Latin community. The company strives to be a leader in “social discovery,” meaning an online portal for meeting people. In July, Quepasa acquired myYearbook.com, which is another portal for online social discovery. The move hopefully will help make Quepasa profitable. Outside of Facebook and LinkedIn (LNKD), the social networking business model doesn’t make for an attractive investment. News Corp. (NWS) dumped MySpace in June for $35 million, just a fraction of the $580 million News Corp. paid for MySpace in 2005. This echoes the story for AOL, Inc. (AOL), which unloaded its social networking site, Bebo, in 2010 for less than $10 million after paying $850 million for the site in 2008.
To put it into context, Quepasa’s market capitalization is $72.1 million. On name recognition alone, is Quepasa twice as valuable as MySpace? While social media tends to get a lot of hype, a profitable business model is still firming itself out. LinkedIn makes money not because of social networking but because of the premium services they offer in conjunction. The shining star of Quepasa is the potential game revenue. Once the merger goes through, QuePasa's books should look a lot better. And the new, larger platform should be conducive to game development and ultimately game sales.
ATP Oil & Gas Corp. (ATPG)
ATP Oil & Gas is a small oil and gas company that is involved in the acquisition, development and production of oil and natural gas. The company operates in the Gulf of Mexico, The United Kingdom and parts of the North Sea. The company has been losing money since early 2009. However, much of the company’s current problems are attributed to the Gulf Oil Spill in 2010. This disaster halted drilling in the Gulf of Mexico at a time when ATP was ready to get back on track. Unfortunatey for the company, ATP didn’t get back on track and losses accelerated. Some investors believe this company will turn around as drilling in the Gulf picks up. However, nearly half of the company’s revenue goes to pay interest. For risk loving investors, we advise picking up shares now. Otherwise stay away, there are much safer oil plays available: Transocean, Ltd. (RIG), Exxon Mobil (XOM), or Chevron (CVX) are all trading under 10 times forward earnings with strong dividends.
Intel Corporation (INTC)
Intel is the world’s largest semiconductor chip manufacturer. Investors can’t stop proclaiming this stock as the next homerun. It has all the characteristics of a great buy. It trades at 8.8 times forward earnings. Shares offer a 4.1% dividend yield that has grown 9.4% a year over the last five. Intel’s closest competitor, Advanced Micro Devices (AMD), is 1/25 the size the Intel, and Intel’s profit margin is twice as large (25.3% vs. 12.9%). So why hasn’t Intel taken off yet? It’s hard to tell. The good news is investors get rewarded pretty handsomely with a great dividend while they wait. For the conservative value investor, Intel is a better pick than any of the risky plays mentioned above.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.