Thanks for your comment, kolpin. Some picks from 2012 did not make it onto my 2013 list because they appear more fully valued now, such as HRS and HAS you cited, and are less attractive than my new picks for 2013. However, as I emphasize in this article, I believe all my 2012 picks are still suitable for holding and my 2013 recommendations are for new money only. If there is no new money, I would just recommend holding onto the old stock picks because of taxes and commissions. After paying 15% capital gains tax, reinvestment into a new pick would have to outperform the old by a huge margin just to break even (it is a good exercise to do the math yourself to make sure you understand this critical point), which is why I recommend a buy and hold strategy.
Jack Rice: If Warren Buffett, with most of his wealth in Berkshire stock that he has held for decades, is "not making money", I am quite content "not making money" also.
@giorgiolb: True, you can't spend paper gains. When investing in stocks for the long term, however, growth is far more important than income, and unrealized gains more efficient as they compound without taxes taking a huge bite out of them.
@Jack Rice: By your reckoning, Warren Buffett is not so much so a great investor after all, but merely someone good at keeping scores, for much of his gains remain unrealized in long term holdings such as Coca Cola and Washington Post. What are you going to tell me next? That losses don't count unless you realize them??
@J Hannahs: I recommended EXC because it appeared to have a competitive advantage, with a solid track record of above average returns, and selling at very low valuations both in its history and compared to its peers. Value stocks can take many years to bounce back and no one can predict when that will happen. When it happens though, it can bounce back quite unexpectedly and suddenly. You have to be in it to win it.
@chazsf: Normalized PE has been shown to be a much better indicator of value and future return than current PE (look up Robert Shiller's research for example). Yes, companies that grew earnings substantially for the past 10 yrs would have high normalized PE, but I would argue that it is NOT artificially inflated, but these companies are likely to revert to the mean rather than continue to sustain the high growth rate. So I would not try to adjust PE for companies with high past rates of growth, since future growth is unpredictable and likely to revert to the mean, especially for tech stocks. As Graham and Dodd said, investors who consistently pay more than 16 times normalized earnings will very often find themselves with disappointing results. While one may expect higher growth for companies with higher PE, and at times be very well rewarded, such expectations constitute speculation, not investment.
joe kelly: you misunderstood my article. There is a difference between tax efficiency and "not making money" as you charged. Berkshire Hathaway pays no dividend, and people who invested in the company fifty years ago and never sold have yet to pay any tax on it. Would you say it is not making any money?
@giorgiolb: Yes, can-down-the-road kicking, but "crisis" resolved nonetheless!! The market doesn't care. I suppose you would not care about an apocalyse that will take place in 1 billion years from today, either, would you?
@BitterrottBrown: Thanks for your comment and adding insight to this article. Yes, mREITs are already taxed as ordinary income, but they would still be affected when the top income tax rate goes from 35% to 39.5%. I would recommend holding REITs only in tax sheltered accounts such as IRAs.
Please do your due diligence before investing. Most self-repecting books on investing would tell you how to identify high quality stocks. Security Analysis, by Graham and Dodd and Common Stocks and Uncommon Profits, by Fisher are good ones to start. I also touched a bit on how to screen for high quality stocks here: http://seekingalpha.co...
Not a joke at all. CR Bard has maintained a low dividend payout policy, choosing instead to deploy most of its earnings into growth of the company, which has served shareowners very well through the years.
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GM is a speculative cyclical stock.
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