Arne Alsin's Investing Themes For 2013

by: Arne Alsin

In David Weidner's column in The Wall Street Journal last month, "2012 Was Good for Stocks, Bad for Stock Pundits," he said that the "median accuracy for market calls" by pundits was 47%. "The record speaks for itself," Weidner said. "Most of the smartest guys in the room are usually about as reliable as a coin flip."

Fair enough. If that's the rule, I don't mind being the exception. I'll be the data point in the distribution that makes no sense whatsoever (take that any way you'd like). I'm closing the books on my Top 10 list for 2012 and, as you can see below, 10 out of 10 picks outperformed by a wide margin, with four up more than 100%.

If you'd like to review my prior top 10s, click here to see the record. The names you see on the 2012 list above were culled from three themes: a rebound in housing, infrastructure, and the fact that financials had been "crushed beyond all reason" and were poised to rebound.

Now it's time to turn the page and look forward to 2013. I'll discuss my themes for 2013 below, but first, here's a look at my Top 10 list for 2013, rolled out to readers of Seeking Alpha over the last couple of months of 2012.

Theme No. 1: Efficiency-Enablers (Picks: NCR, NCR, AMZN)

My first theme for 2013 (and beyond) is efficiency -- or, more specifically, companies whose products are so efficiency-enabling that they literally sell themselves. NCR (NYSE:NCR), my one and only double pick in four years of top 10s, is such a company. It's a No. 1 player in all three of its verticals: banks, retail, restaurants, and a leader in mobile transaction processing. (Note: I'm speaking about NCR in a live online presentation on Wednesday; see for more information.) Amazon (NASDAQ:AMZN) is also a pick based on the efficiency theme. It's building multiple efficiency-enabling platforms, in fulfillment, for third-party resellers and through the cloud (Amazon Web Services).

Themes Nos. 2 and 3: Continuation of Homebuilding (Picks: HOV, DHI, MWA) and Infrastructure (MTW, GE) Themes From 2012

Housing has elongated cycles -- unlike the stock market -- and that makes it easy to invest in when you get that rare opportunity. Though I'm proud of my call on real estate one year ago, I played it too conservatively. I should have included a homebuilder or two in the 2012 list. With my homebuilder picks Hovnanian (NYSE:HOV) and D.R. Horton (NYSE:DHI), I'm making a clear statement: The housing cycle has several years to go, perhaps to 2020 and beyond. Infrastructure is also a multiyear theme, and Manitowoc (NYSE:MTW) and General Electric (NYSE:GE) are excellent ways to participate, as is Terex (NYSE:TEX) from my 2012 list.

I made a couple additional picks for the 2013 list that were not thematic: MGM Resorts (NYSE:MGM) and Berkshire Hathaway (NYSE:BRK.B). MGM is easy to explain: The equity was undervalued with clear catalysts in place to drive it higher, beginning with a suddenly lighter debt load (refinanced 13% debt to less than 6.5%). Las Vegas as a destination is undervalued by the stock market. It's still attracting record numbers of tourists, and as the economy picks up, tourist spending will pick up as well.

I might as well 'fess up with respect to the Berkshire pick: After nine picks, I was pretty confident I had designed a portfolio that would beat the S&P 500 by a wide margin. So why risk it? Warren Buffett has been buying back stock at 120% of book value. The stock is trading near 120% of book value. Since Buffett only buys stock when it's bargain-priced, now you know what he thinks of Berkshire stock.

Disclosure: I am long GE, MTW, TEX, WHR, MWA, AMZN, HOV, NCR, DHI, MGM, BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.