Potential Stock Selections for the 2011 List

Every year I select a list of six stocks and then each beneficiary selects two from the list.  I try to provide selections that cover larger and smaller companies, companies from different types of industries, and companies from within the US and outside the US.  My goal for each of them is to select a stock that seems reasonably priced, with a good upside, and preferably a decent dividend.  Dividend growth is a strong contributor to the long term financial performance of these portfolios.

This isn’t the final list, but these are companies that I am considering.  I will gladly listen to opinions of others such as Dan, as well.  This list will be cut down to six stocks soon.

  1. Texas Instruments (TI) – $25, down from 52 week high of $36, 2% dividend yield.  US company, $30B market cap, semiconductors.  The chip manufacturer is reasonably well run and took a hit with recent earnings guidance which makes them a better buy.
  2. Bancolombia S.A. (ADR: CIB) – $61, down from 52 week high of $69, 2.2% dividend yield.  Colombian company, $12B market cap, banking.  This Colombian bank provides a window into a growing Latin America market.
  3. Anadarko (APC) – $69, down from 52 week high of $85, 0.5% dividend yield (low).  US company, $34B market cap, oil & gas exploration.  Anadarko is riding the wave of US oil and gas as well as making many overseas discoveries in markets such as Ghana.  A play on the growing natural gas solution.
  4.  Wynn Resorts (WYNN) – $140, down from 52 week high of $172, 1.4% dividend.  US company with majority Chinese operations, $17B market cap, gambling & hotels.  Wynn Resorts now makes most of its money in China, although it does have high end properties on the Las Vegas strip.
  5. Statoil (ADR: STL) – $23, down from 52 week high of $29, 4.9% dividend.  Norwegian company, $74B market cap, oil & gas.  Norwegian oil and gas company recently found new fields and is well run and not as subject to Geo-political risk as the other oil “majors”.
  6. Bank of America (BAC) – $7, down from 52 week high of $15, 0.5% dividend (low).  US company, $78B market cap, banking.  Warren Buffett recently invested in their preferred stock, a sign of stability.  The bank is under pressure due to their purchase of Countrywide but if they can turn it around they have big earnings upside.  It is unlikely that the US government will let something terrible drag BAC down because of its giant impact on the US economy (much bigger than Lehman in practical terms)
  7. Philip Morris International (PM) – $69, not far from 52 week high of $72, 3.7% dividend.  International (non-US) company, $121B market cap, cigarettes.  This company does not cell cigarettes in the US (that is Altria) but sells them overseas (Marlboro) where it is very strong in many markets and growing in China
  8. Westpac Banking Corporation (ADR: WBK) – $107, down from 52 week high of $138, 7.2% dividend (very high).  Australian company, $64B market cap, banking.  Westpac is poised to boom along with the Australian economy based on their strong currency, relatively improved financial position (compared to US and Europe), and of course their huge mineral resources which they can sell to all the Asian economies
  9. Riverbed Technology (RVBD) – $22, down from 52 week high of $44, no dividend.  US company, $3B market cap, technology.  This company makes products for security and switching for data centers and cloud computing.  Companies of this size are potential acquisition candidates given the large amounts of cash held in Silicon Valley
  10. Canadian National Railway (ADR: CNI) – $71, down from 52 week high of $81, 1.9% dividend.  Canadian company, $32B market cap, railways.  Canadian company poised to benefit long term from huge natural resources in country, also US operations.
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5 thoughts on “Potential Stock Selections for the 2011 List”

  1. What do you mean by x% dividend? I assume you are talking about the yield?

    Also, why are you messing around with PM when you can have MO or RAI at a much higher yield? PM as of this writing is 3.7%, MO 5.8% and RAI at 5.8%. Unless you are going after international exposure, which is a different story. It is literally impossible for anyone to come up with a competing smoke to the MO portfolio in the US and that is why that stock is KING. I also just “dipped” into a block of RAI a few weeks ago when the market tanked, making my yield well over 6% on both MO and RAI.

    If you buy B of A I will never talk to you again.

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  2. You hit it on the head – picking PM because it gives overseas exposure rather than being paid in the US peso. Also from a “moral” perspective it makes more sense to provide a toxic death to overseas people than US people in the stock portfolio. But also you hit it on the head that MO and RAI are great stocks now that the US government has given up doing anything about smoking and is content just to get their “cut” in terms of taxes. Maybe recommend PM and MO or RAI. Don’t know.

    Ha ha BAC is pretty much a “moral hazard” play. Will the US government let the largest servicer of mortgages go broke? Probably not. Sadly enough a huge chunk of the US stock market is now dependent on moral hazard issues now. We let Fannie and Freddie go but saved Citicorp. Why? Who the heck knows. Other ones in that bucket:
    – solar power (waiting on subsidies)
    – Ethanol (see above)
    – all the for-profit colleges that feast on guaranteed loans (until that dries up)
    – cigs (first we sue them, then we settle for a “cut”)
    – half the health care / insurance industry

    Yes will cut BAC off the list would recommend one of the other overseas banks, instead.

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  3. Also yes I was meaning dividend as a proxy for yield.

    I was trying to pick stocks with steady or growing dividends, all else being equal.

    As you know obviously this is a huge portion of total return.

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  4. You raise an interesting point with the US peso but in the end, where else is anyone gonna go? The Euro will be gone within a decade, and now everyone is pouring asset holdings into the Swiss Franc and Yen. Really?

    Anyway I get the PM play better if you are going after international exposure.

    As for moral hazards, I stopped getting those long ago. It is my job to keep my money and improve on it as best I can. I can’t make decisions for others. If they want to smoke, go for it, not my problem. I just have to invest in good companies that are well run and in today’s climate, provide big dividend payments. In fact most of my analysis on stocks is how/if they will keep their div payments coming, rather than actual appreciation. Those target pickers are like dinosaurs. Who gives a crap if stock x has a price target of y in z years? I need my money to keep up with inflation NOW and I need to get paid to wait. But I am preaching to the choir I suppose.

    Thank got you cut BoA off the list.

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