My Top 10 Stocks Pick Up 13.5% In Q1: An Update On 2013 Selections

by: Chris Katje

For the fourth consecutive year, I selected ten stocks on Seeking Alpha ("Top Ten Stocks for 2013") that I believed would outperform the market in 2013. Three of the last four years have produced winning results with +99.9%, +32.9%, and +17.6%. The 2011 results were the only losing year so far with a -11.6% return. With the month of March complete, it's time to check in on the 2013 picks and see what has happened and where the stocks may be headed going forward.

Aflac (NYSE:AFL)

Start: $53.12

End: $52.02 + $0.35 dividend, $52.37

Return: -1.4%


· Fourth quarter revenue was up 6.6% to $6.4 billion.

· Full year revenue increased 14.4% to $25.4 billion

· During the fiscal year, Aflac bought back 1.9 million shares. The company still has 22.4 million remaining under its current repurchase agreement.

· Plans $400-$600 million worth of buybacks in 2013

What to Expect:

Shares continue to be taken downward because of a weakening Japanese market. Aflac shares now trade at only 8.2 times 2013's expected earnings per share. Going forward, Aflac shares are only 7.7 times next year's expected earnings. This insurance company should easily trade for at least 10 times this year's earnings, representing a price of $63.20. This would produce a return of 21% for the rest of the year.

Keep in mind that Aflac will be repurchasing $400 to $600 worth of its own stock. This will retire around 10 million shares and could greatly impact earnings per share.

Blackstone (NYSE:BX)

Start: $15.59

End: $19.78 + $0.42 dividend, $20.20

Return: +29.6%


· Blackstone reported net income up 30% for fiscal 2012.

· Earnings of $1.77 per unit were reported, thanks to increases in all categories. Fee revenue increased 14%, performance fees increased 36% and investment income increased 55%.

· The company saw the successful IPO of Pinnacle Foods (NYSE:PF) and shares continue to rise. Read my preview here and see why it was one of the reasons I picked Blackstone.

What to Expect:

The successful IPO of Pinnacle Foods was only the beginning for this private equity company in 2013. The company will take entertainment company SeaWorld (NYSE:SEAS) public in the next month. In my preview, I highlight the potential success of this IPO and the potential for entertainment company Merlin Entertainment being taken public by Blackstone. Michael's, a leading craft store company, may also be taken public once again by Blackstone. Apart from IPO's, Blackstone has been investing in several companies and has shown interest in Dell (NASDAQ:DELL). The company is also scooping up real estate and continues to have its assets undervalued by investors.

Concur Technologies (NASDAQ:CNQR)

Start: $67.52

End: $68.66

Return: +1.7%


· Acquired conTgo to help the company's expansion into cloud based employee tracking.

· Signed a new agreement with InterContinental Hotels (NYSE:IHG) for travel plans and expenses.

· Reported strong first quarter earnings of $0.30 and a 22% increase in revenue to $122.8 million.

What to Expect:

Concur Technologies is a growing player in the huge travel industry. The company's previous experience in business expense and management will help the company expand into travel smoothly. Japan is the company's next area for advanced growth. Concur plans on rolling out its OpenBooking soon and this could provide a nice boost to revenue and the company's shares. This is one of my favorite long term growth stocks.

Discover Financial Services (NYSE:DFS)

Start: $38.55

End: $44.84

Return: +16.3%


· Launched cashback checking accounts in February. This places Discover further into direct banking, providing additional revenue from its credit card business. Customers get $0.10 for every check, online bill, or debit purchase. The program is starting with current Discover customers with a full rollout planned for 2014.

· Continues to have a strong relationship with Facebook as the partner on the company's gift card program.

· In March, announced a $2.4 billion share buyback purchase and also raised quarterly dividend to $0.20 (from $0.14). Discover continues to be shareholder friendly

What to Expect:

Despite shares being up 16%, Discover has plenty of room to run. Shares still trade at only 9.6x 2013's expected earnings. Shares hit an all time high of $45.38 and I expect to see another new high in a couple of months. The company reports earnings on April 23rd and that could be the beginning of a run to $50. There is still plenty of time to get behind Discover.

HEICO Corporation (NYSE:HEI)

Start: $44.76

End: $43.41

Return: -3.0%


· In its first quarter, Heico reported record sales and net income. Net sales grew 2% to $216.5 million, while net income grew 4% to $20.0 million.

· Heico increased its full year guidance. After a previous forecast of net sales growth of 5.5% to 7%, the company now expects net sales to grow 6 to 8% for the full year. Net income is expected to grow 9 to 11%.

· Heico is continuing its search for acquisitions that will help its growth and expand its areas of service.

· The first quarter showed Heico's diversification among customers. No single customer makes up 10% of net sales and the top ten customers combined made up only 15% of first quarter sales,

What to Expect:

Heico was selected due to its involvement in two sectors I am bullish in, aerospace and technology. The company saw its electronic technologies segment increase 6% to $78.8 million in the first quarter. Flight support made up $139 million of the total $216.5 million in sales and continues to be the most important sector. With shares down 3% on the year, there is time to get into this small growing company.

LeapFrog (NYSE:LF)

Start: $8.63

End: $8.56

Return: -0.8%


· Won several awards for its innovative 2012 year that included the Lap Pad 2. This included the Educational Toy of the Year and People's Choice Toy awards.

· In February, the company launched interactive eBooks for its devices.

· Leapfrog had the #1 selling kids learning tablet, #1 selling learning game system, #1 learn to read system, and #1 selling electronic learning toy in 2012 (Feb Investor Presentation). That's pretty impressive market dominance for the company.

· The company had three of the top four and four of the top ten selling toys for the calendar year 2012.

· Continued to add partners to its app center on Leap Pad 2. This now includes Disney, Mattel, Nickelodeon, Hasbro, and PBSKids.

What to Expect:

Leapfrog will continue to get thrown around as an acquisition target for larger toy companies like Mattel (NASDAQ:MAT) and Hasbro (NASDAQ:HAS). With its dominance in the tablet market for kids, the company could be a target for a larger company like Amazon (NASDAQ:AMZN) or Apple (NASDAQ:AAPL).

In 2012, international sales hit $156 million, making up 27% of the company's total. This is the reason you should get behind this company now. Compare that 27% to 19% back in 2009, or to rival companies like Mattel and Hasbro, who see 44% and 46% of their sales come from international markets. The company saw sales increase in the United Kingdom by 59%, Canada 32%, and France 33% in 2012. Leapfrog had the number one toy in the United Kingdom and the number five toy in Australia. The company is ramping up its international expansion heavily for 2014.

Onyx Pharmaceuticals (NASDAQ:ONXX)

Start: $75.53

End: $88.86

Return: +17.6%


· Highlights from a March presentation include the potential for new drugs.

· Nexavar is seeing growth in emerging markets.

· Kyprolis saw sales of $41 million from September to December, resulting in an $8 million royalty for Onyx.

· Nexavar is approved to treat liver and kidney cancer, but may have further benefits in two huge areas. The company has phase III trials for both thyroid and breast cancer.

· Palbociclib, a partnership drug with Pfizer, is close to phase III trials for breast cancer.

· The company ended the year with $493 million in cash, providing the money needed for research and development. Royalties from Bayer provide an additional cash stream going forward.

What to Expect:

The three reasons I gave for buying Onyx Pharmaceutical shares proves true today. The company will see increased sales of Kyprolis, remains a buyout target, and has a phenomenal pipeline of drugs or potentials for existing drugs. Shares look expensive compared to cheap biotechnology companies, but this is a company with two approved drugs and huge blockbuster potential. Consider going long Onyx and you won't be disappointed.

Pfizer (NYSE:PFE)

Start: $25.08

End: $28.86 + $0.24 dividend, $29.10

Return: +16.0%


· Successful IPO of animal health unit Zoetis (NYSE:ZTS). The company spun off this unit, but still has an 80% ownership stake. Investors continue to take the stock higher and Pfizer will eventually spin off the remaining ownership stake to investors.

· Full year revenue was down 10% to $59.0 billion, but positive results from emerging markets show potential.

· The company's BRIC-MT region was highlighted by growth in Russia (+34%), Brazil (+14%), and China (+32%).

· Pfizer's 2013 guidance of revenue ($56.2 to $58.2 billion) and earnings per share ($2.20 to $2.30) comes in line with analysts.

· Bought back $8.2 billion worth of shares. There is still $11.8 billion remaining on the current plan.

What to Expect:

Pfizer has one of its best pipelines in recent history and will see huge growth going forward. The Zoetis IPO should be a big reason to invest in Pfizer, as shareholders will eventually own a piece of the animal health unit. Share buybacks and a dividend yield north of 3% are another reason to get behind this pharmaceutical giant. Don't let the 16% first quarter gain scare you away, there's plenty more for Pfizer going forward.

Take-Two Interactive (NASDAQ:TTWO)

Start: $11.01

End: $16.15

Return: +46.7%


· Launched "MLB 2K13" along with the annual perfect game challenge.

· New partnership with WWE (NYSE:WWE) for video games.

· Plans for an animated movie on "Borderlands" game franchise could begin movie talk for several franchises.

· Released highly anticipated "Bioshock Infinite" video game. The game continues to sell well and has now sold 915,706 copies on XBOX360, 528,576 copies on Playstation 3, and 212,622 copies for PC. This total of 1.7 million is going to continue to rise and should compete with the 3.6 million sold for "Bioshock 2".

· "NBA 2K13" still selling well (#27 last week) and has passed 2.3 million copies for XBOX360 and 1.8 million copies for Playstation 3.

What to Expect:

Despite being my number one performing stock and a huge 46% gain, I am still recommending shares of Take Two. The company has the huge blockbuster "Grand Theft Auto V" releasing later this year. "XCOM" may also release in 2013. Here is a look at the preorder numbers for those two games:

· "Grand Theft Auto V" (XBOX360): 263,031

· "Grand Theft Auto V" (Playstation 3): 227,724

· "XCOM" (PC): 48,687

· "XCOM" (XBOX360): 23,710

· "XCOM" (Playstation 3): 17,858

Shares hit new fifty two week highs at the end of March. Shares are just now returning to levels seen in early 2012 and still trade down from the $25 seen in 2008. Expect "Grand Theft Auto V" to help send shares higher for the rest of the year.

Titan Machinery (NASDAQ:TITN)

Start: $24.70

End: $27.77

Return: +12.4%


· Acquired Tucson Tractor in February. The company had one location serving a five county area. The Case (NYSE:CNH) reseller had annual revenue of $7 million. Titan believes it will complement the company's existing presence in Arizona.

· Acquired Adobe CE, LLC, a Case reseller in Albuquerque, New Mexico. This acquisition gives Titan its first branch in New Mexico. Last year, Adobe CE had revenue of $8 million.

What to Expect:

The acquisition of Adobe gave Titan a presence in every state from Arizona north to Canada. The company also has 106 North American dealerships and 13 in Europe. Titan has continued to grow through acquisitions and is based in key regions experiencing growth for farming equipment and oil drilling equipment. Consider buying Titan shares on dips and hold for the long term.

The first quarter saw many stocks post gains as the market rallies. These ten stock picks were for the entire year as I believe they are in key sectors or growth markets. Seven of the ten stocks posted positive gains in the first quarter, while three fell less than 3% each and could provide buying opportunities.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LF, TTWO, TITN over the next 72 hours. 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.

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