Stock Selections for 2015

Attached are the stock selections for 2015.  We are expanding the list slightly because most of the funds not only have new cash to invest for 2015 but we also did a recent round of selling that needs to be re-invested.

US Stocks

  1. Box (BOX) – $13, 52 week range $11-$24, $1.5B market cap, no dividend, little debt.  Box provides a cloud-based document storage and governance capability and is growing rapidly among Fortune 500 corporations
  2. Mastercard (MA) – $101, 52 week range $75-$101, $114B market cap, 0.7% yield, $1.5B debt.  Mastercard is a global credit card brand that benefits from the long-term migration of cash and checks to credit.  Their biggest competitor, Visa, recently announced a merger with Visa Europe which likely will distract that company for several years and give Mastercard an opportunity to pick up market share
  3. ConocoPhillips (COP) – $55, 52 week range $41-$74, $68B market cap, 6% yield, $25B debt.  ConocoPhillips is an oil and gas exploration company that is a major bet on future price rises for natural gas and oil with technical knowhow and efficient production.  They recently made major cuts in response to the commodity price collapse
  4. Union Pacific (UNP) – $86, 52 week range $79-$124, $73B market cap, 2.6% yield, $13B debt.  Union Pacific operates a massive US rail network and has been hit recently by reductions in the industrial and commodity economies.  However, they are highly efficient and represent a solid long term bet on industrial growth and recovery

Foreign Stocks

  1. Tata Motors (TTM) – $30, 52 week range $21-$51, $19B market cap, no dividend, $11B.  Tata Motors is an Indian based company that benefits from low costs and growth in the Indian car market and also owns Jaguar and Land Rover.  The stock will be down a bit early next week because they just released earnings and showed an unexpected loss due to a one time event
  2. China Eastern Airlines (CEA) – $30, 52 week range $20-$50, $8B market cap, no dividend, $6B debt.  China Eastern Airlines can benefit from the growth in outbound Chinese tourism and investment as well as potential government mandated consolidation in the airlines sector which could result in higher profits and reduced competition
  3. Alibaba (BABA) – $83, 52 week range $57-$120, $207B market cap, no dividend, $8B debt.  Alibaba is a major web commerce / mobile player in China.  Much of Yahoo’s value was based on an ownership stake in this entity (we recently sold off Yahoo)
  4. Novartis (NVS) – $89, 52 week range $88-$106, $214B market cap, 2.7% yield, $22B debt.  Novartis is a major Swiss based drug maker


This is a new section.  These are some riskier stocks either because of high prices or uncertain outcomes.

  1. Tesla (TSLA) – $232, 52 week range $181-$286, $30B market cap, no dividend, $2.6B debt.  Tesla is a maker of electric cars led by the charismatic Elon Musk.  Their valuation is very high considering that they lose money, gas prices are low which reduces the savings from electricity, and they deliver a fraction of the cars that a “major” automotive giant would.  On the other hand, their fan base is passionate and their design is praised
  2. Facebook (FB) – $107, 52 week range $72-$110, $301B market cap, no dividend, little debt.  Facebook is the ubiquitous social media presence with a huge and growing global and mobile footprint and messaging.  Their market cap has almost tripled since their IPO and are led by the charismatic Mark Zuckerberg
  3. Cheniere (LNG) – $46, 52 week range $43-$82, $11B market cap, no dividend, $16B debt.  Cheniere is a long term bet on liquified natural gas, which takes (relatively) cheap US gas and ships it to offshore countries seeking clean energy and diversified energy sources.  This is a risky but possible bet because the facilities are mostly built but yet to ship gas and prices are falling, but the long term upside is also large if they can survive and prosper

Long Term Bets

I like buying things at a discount.  The stock market is funny because most of the high flying buying action takes place when things seem to be trending upward.  I tend to work against that flow and wait for down days, weeks and months, then attempt to swoop in for my purchases.

Of course by that point I typically know what I want.  Being an investor, rather than a trader, I make long term plans, swallow as much good information as I can, make a plan, and stick to it.  It seems to work well.  Being an investor, time is on my side – I can beat up any trader as long as I have a long time horizon.

Which brings me to a couple of sectors that have been beaten to hell lately, biotech and energy.

My biotech plan was relatively simple.  These companies mostly operate in spaces that I don’t have any knowledge in, so I went searching for a CEF to do what I wanted.  My FA found what I think is a good one in TLF.  It is run by a bunch of PhD’s, many of which are MD’s as well.  Doctors should know as well as anyone if these biotech companies are on the right track or not.  I jumped in.  This CEF has a nice yield and I got in with a NAV discount of about 10%.  As our population ages, many of the companies in the fund will do well.

Natural gas is another beaten up space that I have recently piled into.  Prices on NG have plummeted to a three year low (as of this writing).  But there are a few factors that I feel make these long term bets profit centers in the future.

In the short term, there is a hurricane getting ready to completely destroy parts of Mexico.  That is no lie.  Patricia is the strongest hurricane EVER MEASURED.  That is going to tighten up supplies a bit for the short term and I would expect to see prices jump in the short term.

Longer term, there are many countries that are looking to gas for the future.  After Fukushima, Japan will be looking to gas for power and they are already importing LNG.  The US is getting ready to start exporting gas to the East and many other markets.

But my method of cashing in isn’t exactly price dependent.  I am piling into the shippers of LNG.  My list:

GLOG (Gaslog)
GLOP (Gaslog Partners)

COP (Conoco Phillips)

GLNG (Golar LNG)

GMLP (Golar LNG Partners)

PAA (Plains All American)

TGP (Teekay LNG Partners)

Gaslog and Golar are basically logistics companies.  The partners are the companies that they “drop down” the LNG ships into.  So as you can see this method, along with Teekay, gives (hopefully) good results no matter the NG price.  The top line will suffer, however margins should stay.  The ships themselves are amazing technical marvels in and of themselves and make for great reading if you have a few moments.  All of these shipping companies have fantastic yields.

Plains All American is a straight up pipeline company in the US.  It was beaten to hell recently and their yield made it too attractive to pass up.   Their stock price suffers along with the Nat Gas price, however again, their margins stay firm as they are a delivery company.

COP is an integrated company that is involved in many markets, however they are firmly entrenched in the gas markets as well.  They have some technological plays that are going to come to fruition in the coming years and are fully involved in the nat gas market.

I can’t see gas prices going too much lower, even with the mild winter that is forecasted.  Yes, supply is increasing and we have a massive amount of gas stored, but global demand will ramp up (one example is the LNG terminal in Lithuania, which will help break their dependence on Gazprom – there are many others) and when the US starts exporting that may affect the Henry Hub price in an upward direction as well.

I don’t have the cahones to make the ultimate bet on LNG, which of course is Cheniere.  Their massive amount of debt scares me a bit, however some of my plays here are sort of a side play on Cheniere (I have to admit) as these companies work with Cheniere on different projects.