I'm making a New Year's resolution. I want to take a bit more of the edge off in 2012 by skewing my trading/investing style slightly to the conservative side.
This does not mean I intend to go all dull and boring on you. I'm only 36 with about 10 years before I expect to send somebody off to college and consider retirement. Plus, I have a healthy appetite for risk.
The following excerpt from my last $10,000 portfolio update nicely summarizes my planned approach. Here I refer to my decision to not add to my rather aggressive OTM put position on Netflix (NASDAQ:NFLX):
In the present article, I focus on four stocks that will likely serve as cornerstones in my real-life and simulated portfolios in 2012. Later this week, I will position each in the $10,000 portfolio, which now sports a value of more than $32,000. Between the two articles, I'll add color to each of the above-mentioned bullet points.
Verizon (NYSE:VZ). For several years, I invested in quite a few dividend-paying stocks. And, for some reason, I moved away from that approach in recent years. In 2012, I'm headed back in that direction. In fact, I've already started.
You will not, however, find me chasing yield. I want companies with stable and/or moderate-to-rapid growth. They also must be among the leaders in their space(s) or be in the competitive position to get there. The dividend represents icing on the cake. There's nothing quite like the power of reinvesting free shares over a long-term time horizon.
It's quite clear that if you want growth and innovation (i.e., the future), you go with Verizon. If you want old guard nostalgia - and a company that still derives roughly 20% of its revenue from the dying landline business - you go with AT&T (NYSE:T).
Not only is Verizon doing a much more graceful job of exiting traditional businesses, it's also out-innovating companies like AT&T with its excellent, forward-looking FIOS service, entrance into the cloud and rumored video streaming ambitions. Bottom line, AT&T lags Verizon with respect to replacing lost voice-related revenue.
There's not much I can add to Katje's review. As an unofficial honorary Canadian, I've had RCI on my radar for some time. When Rogers teamed up with Bell Canada (NYSE:BCE) to purchase Maple Leaf Sports and Entertainment (Katje provides an excellent synopsis of the deal), I knew it was time to pull the trigger.
Katje's right. RCI is undervalued. The company sees the future. U.S. companies with their hands in wireless, cable, satellite and such should take note. Rogers took control of some of the most valuable content in Canada. Investors have yet to price the synergistic power of that in-progress paradigm shift into the stock. It would make a world of sense for a company like Verizon to find a way to become the American version of the telco/media hybrid Rogers is.
It continues to become more clear that content providers have no real use for middlemen like Netflix. If you own content, you should create your own platform to deliver it (see, e.g., HBO GO). If you deliver content like Verizon does, you should strive to be like Rogers and take ownership of programming you now must pay rights' fees for.
As a foreign investor, I would rather hold RCI in an IRA. Therefore, I plan to officially add the stock in 2012.
HCP, Inc. (NYSE:HCP). I wanted a fast-growing REIT in my portfolio for 2012. I narrowed it down to two sectors - healthcare and apartment REITs. While I will likely hop into UDR, Inc. (NYSE:UDR), a company transitioning itself into a major urban landlord, I felt more comfortable opting initially for the stable dividend and robust growth HCP should deliver over the mid- to long-term.
HCP caters to the nation's aging population. You can have a look at its nicely-diversified portfolio at its website. As Seeking Alpha contributor Kapitall notes, the stock is a short squeeze candidate that institutional money has been gravitating toward at this time.
Pandora (NYSE:P). I said "somewhat less stressful." I also noted that I'm not morphing into the "dull and boring." Thus, Pandora will continue to have a foothold on the speculative portion of my real-life portfolio for 2012.
If you're bullish on Pandora - and yes, some people actually are - a certain "us-against-them" mentality forms. That's why I'm a bit surprised that Sirius XM (NASDAQ:SIRI) investors do not show more empathy toward Pandora. Just as many bears never thought Sirius XM could avoid bankruptcy, quite a few held tight to the belief that Pandora could never turn a profit. We know what happened there.
Like the other three stocks I plan to accumulate in 2012, I consider Pandora a long-term hold. By long-term, I mean 5, 10, 15 years, assuming nothing major changes along the way. While I will still speculate and offer ideas of trades to get in and out of over the short-term, I do not consider buy-and-hold investing dead.
If, over time, you can build positions in strong, relatively stable companies that pay a nice dividend alongside solid growth prospects, there's no reason not to go into retirement with the stock. For me, VZ, RCI and HCP represent three stocks fitting that bill as 2012 nears. Pandora comes in on the other end of the buy-and-hold spectrum.
It's wholly speculative, but is rapidly developing a business model I believe in. At ad agencies, it's quickly becoming a radio buyer's dream. Pandora can deliver targeted ad campaigns via multiple platforms to an audience that rivals what top terrestrial stations in the nation's largest markets command. If you believe not only in this model, but in Pandora's ability to implement and execute it, regularly-scheduled purchases of the stock make sense.
That approach worked wonders for Sirius XM investors who believed in the company when it was beaten down. There's a big difference between the two stocks, however. Consistent profits and slow-but-stable growing revenues have not translated into the next leg up for SIRI, as it stagnates, by and large, below $2.00 per share. Not only does P not have the overhang of considerable debt and a massive number of outstanding shares, but it's growing revenues at a rapid clip as its business explodes.
Later this week, I will take the $32,000-plus that sits in the $10,000 portfolio and invest it in VZ, RCI, HCP, P and maybe a few other short- or long-term trades. I intend to expand the exercise this time around, comparing the effects of investing the entire nest egg all at once in a lump sum or dollar cost averaging into the positions over time. I've won my bragging rights with the triple, now I think we spend better time focusing on strategy and long-term performance, rather than short-term speculation.
Disclosure: I am long HCP, P, VZ.
Additional disclosure: I am long NFLX June $40 put options. I may initiate a long position in RCI in the month of January 2012.