Preliminary Stock Selections for 2010

It is almost the time of year for stock picking for the trust funds that I run.  There are 5 this year, with some as long as 9 years and others on their 2nd year.  The plan is that I recommend 6 stocks and each niece / nephew picks 2 (except for situations where there are buys / sells in the portfolio which may involve more or less money).  The money used comes $500 from them, $500 from me, and $500 as a match for their contribution (else it will just be my base $500 contribution).  This system has worked well for many years.

Given that I want to teach about investing, my goal is to make it simple; we pick stocks.  I realize that a 100% stock portfolio isn’t balanced and there is much research that says that individual stock pickers can’t beat the market (most of my personal money is in ETF passive stock indexes) but since this is not intended to be the primary wealth building vehicle for my nieces and nephews but more of an informed assistance in getting their life started I am sticking with this method.  Dan has joined the blog and since he has helpful comments I wanted to put my preliminary list out for some comments before I cull it down to six.

During the year I track major themes that I want to include in portfolios each year, and then stocks that fit under those themes.  I also want to provide a variety of options in terms of industries, countries, currencies and (ideally) size of companies.  Since my time horizon is 18 months plus I don’t want to pick smaller capitalization companies subject to wide variations; this is my preference; but I don’t want just all giants, either.  For foreign companies I only take those that have US based ADR’s to ease investing challenges.  I also don’t try to “chase” performance, I would rather buy on reasonable valuations or a stock that seems to be a bit “beaten down” recently.

Foreign Companies:

  • VALE (VALE) – Brazilian mining giant, able to take advantage of overseas mining opportunities in continents like Africa that US / European companies cannot because of corruption or political reasons
  • LG Display Company (LGL) – subsidiary of Korean giant LG maker of flat panel displays taking a bigger chunk of that market and poised for future growth
  • ABB (ABB) – Swiss engineering company denominated in strong Swiss Franc and positioned for world wide expansion of infrastructure business tied to growth in developing nations
  • UBS (UBS) – Giant Swiss bank on upswing after various crises also denominated in Swiss Franc
  • Canadian Imperial Bank of Commerce (CM) – Canada has a balanced, well run economy and a good currency and this is a way to play the entire country.  Their banks were not subject to the same boom / bust as US / European banks
  • ENI (E) – Italian energy giant also poised to do well overseas, likely oversold due to Euro crisis
  • Hitachi (HIT) – Japanese technology firm with strong position across a range of areas, including storage which is growing rapidly, also in yen
  • CNOOC (CEO) – Giant Chinese oil company poised for future growth and overseas deals

US Companies:

  • Oracle (ORCL) – strong technology company poised to battle Google and other firms and well run financially
  • Bristol Meyers Squibb (BMY) – well run pharmaceutical company with a high dividend
  • MDU Resources (MDU) – well run, smaller diversified utility and energy company out of North Dakota with high dividend
  • MGE Energy Inc (MGEE) – a smaller utility based out of Madison, Wisconsin with a high dividend and takeover potential (to be acquired)
  • Alcoa (AA) – US based metals company that is efficient and seems reasonably priced and poised to participate in a future upturn in the economy
  • Verizon (VZ) – US cellular and land line company, huge dividends, seem to be reasonably well run not making stupid acquisitions and giving back money to shareholders
  • Hewlett-Packard (HPQ) – a well run technology company that has new disciplined management put in by Hurd, their CEO recently forced out.  Seems like stock has been overly hit due to this change and they can still stay his same course
  • Schlumberger Limited (SLB) – oil field servicing company poised to grow as foreign countries drill for their own resources rather than contracting with major companies; also poised to survive outcome of BP spill.  This type of drilling is not going away but now beaten down
  • DuPont (DD) – Chemical company with strong dividend and well run

I am going to cull this list down to six probably 1/2 US and 1/2 overseas and looking for any input from Dan or informed commenters.  Sadly this doesn’t include the thousands of spam commenters caught by Askimet.

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5 thoughts on “Preliminary Stock Selections for 2010”

  1. I don’t know crap about those foreign companies so I will comment on a few of the domestics.

    MGEE – you know my feelings on this one. I bought it in early June at 34.36 and it sits now at 36.10. It won’t go anywhere fast – either way, but will be a steady performer.

    DD – I bought a block of this in Dec. ’09 at the recommendation of my financial advisor for 32.39 and it now sits at 40.34 – pretty good call. It is pretty close to the 52 week high (42.66) so to me this isn’t a good deal right now. But a lot of people are blowing off the 52 week charts anymore. Still a nice dividend and is basically a nice play “on the world” as I like to say since they are so huge.

    VZ – This thing has been a dog for me. I bought it over a year ago and it is just now starting to get back to even. They are supposedly poised to be the kings in their space, but the market is obviously disagreeing with that.

    You need to put Mighty MO on the list and buy it. Head down to any local bar for my highly scientific market research on that one.

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  2. Agreed that DD has been run up. We buy stocks this month of every year so the kids get to earn $ over the summer but it does seem a bit like we are buying at a recent high on a lot of these stocks. I will consider that for the list.

    VZ is kind of a dog I am hoping that they get the iPhone contract and also that they can make more out of wireless and shed their wire line liabilities. But as you know I never know. They do pay a decent dividend and would claw out their own eyeballs before they’d cut the dividend, although that can only prop up the stock for so long.

    Ha ha maybe MO is big for my personal portfolio (I am thinking about doing that dividend thing with some money) but it would cause howls among the parents if I put it on the list here.

    Thanks for your feedback I appreciate it. I will put up a culled down list in the next week I hope

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  3. Oh brother they have GOT to get over the aversion to the sin stocks. MO with 7.9% yield as of todays price ($1.80/share div., $22.73 price). Even after tax that is WAY more than the parents are going to find in any money market and it is much more solid since if there are no smokes the whole world will explode. But I am preaching to the choir.

    This gives me a good idea, I should probably look at MO paper and/or preferreds, I will let you know what my fin advisor comes up with.

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