Stock Selections for 2018

Stocks to choose from for 2018:

US Stocks

  • CME Group (CME) – a financial firm that trades and clears futures products and has a high dividend (they have an annual dividend plus a special year end dividend of 3.5%+ in total).  They make money from trade volume which tends to increase in times of volatility or disruption in the markets, and are thus kind of a “hedge”
  • PayPal (PYPL) – PayPal spun off from eBay and makes more money as the world moves to digital payment methods from cash.  They also own Venmo which they have yet to monetize (existing stock owned by Portfolio One)
  • Union Pacific (UNP) – Union Pacific is a large and well-run railroad company (existing stock owned by Portfolios Five and Six)
  • Electronic Arts (EA) – An American video game developer that has been hit lately but could be a bet on the potential of this sector and streaming

Foreign Stocks

  • Inditex (IDEXY) – this Spanish company is known in the USA as “Zara” and is a leader in “fast fashion” and integrating e-commerce with direct retail
  • Alibaba (BABA) – the Chinese e-commerce giant has been growing and expanding into different domains (existing stock owned by Portfolios Three and Seven)
  • Taiwan Semiconductor Manufacturing Company (TSM) – this manufacturer of semiconductors counts Apple as a large customer and has been doing very well for many years (existing stock owned by Portfolio One)
  • Infosys (INFY) – Indian outsourcer and technology company has been doing well and benefits from the weaker Indian currency (existing stock owned by Portfolios One and Three).  Note – this stock just split 2/1 effective 9/12 so the price history will look strange if you see it online

Other

  • Gold ETF (IAU) – this ETF tracks the price of gold.  Gold does not provide a dividend but could be a hedge against inflation or disruption

Between the eight portfolios, there are almost 40 different stocks to follow.  Generally, we select “new” stocks rather than re-recommend existing stocks.  However, for this round, we will have some “new” stocks but also continue to recommend some existing stocks that the portfolios can choose from.  This will slow the overall growth of stocks across all the portfolios which will make it simpler to track.

We will continue to recommend a mix of US and foreign stocks to choose from, although each portfolio can select whatever they’d like (they don’t have to split their investments equally between both).  Recently the US dollar has gone up, resulting in (relatively) poorer performance for foreign stocks.  However, this can change and these are long-term portfolios so we recommend US and foreign stocks rather than taking an effective “position” on the future direction of US currency (i.e. if you thought the dollar was going up indefinitely you would buy US based assets exclusively).  Folks often fail to remember the past, when the US dollar fell for years against many different currencies.

Portfolio Post Election

After the elections, stocks have generally gone up. Some sectors have done well, and others have fallen. The US dollar is stronger, which means that our overseas stocks have gone down on a relative basis.

We are judicious on selling off stocks here. However, since the election is past it is likely time to make a few moves in some areas.

Portfolio One:

  • Novartis (NVS)– the Swiss drug maker is down about 20% from where we bought it (but has almost a 4% dividend), and drug makers seem to be under pressure with the new administration calling for price reductions. On watch will look at the next earnings release at the end of January
  • Statoil (STO) – the Norwegian oil company is down 20% off our purchase price but has come back significantly with possible increases in oil prices.  They also didn’t cut their dividend which remains a high 6% yield which also is positive for investors.  Will watch and see if it rises further
  • Infosys (INFY) – Infosys has fallen about 25% off its peak.  The company benefits from the declining Indian currency since most of its revenues are earned overseas.  However, the offshore firms have also been hit by the new administration and potential curbs on outsourcing, which they are trying to limit by having more US based staff and less overseas contractors.  The company is on watch
  • Tesla Motors (TSLA) – this is a very speculative stock (little earnings, high valuation) and has high volatility.  We will keep it on watch
  • Anheuser Busch Inbev – the stock has dropped by over 30% recently as they attempt to purchase Miller Coors.  They also have been hit with economic volatility in Brazil.   They are a well run group but these are strong headwinds.  We will put the stock on watch

Portfolio Two:

Portfolio Two moved over to ETF’s and CD’s.  Their ETF’s have been doing well with the exception of the NASDAQ Biotech ETF (IBB) in which we have a relatively small position that is new.  We will continue to watch this sector ETF.

Portfolio Three:

  • Wynn (WYNN) – the casino stock is a major operator in China.  The stock is down over 30% and no longer delivering “special” dividends beyond the regular quarterly dividend.  We will sell the stock now
  • Infosys (INFY) – Infosys has fallen about 25% off its peak.  The company benefits from the declining Indian currency since most of its revenues are earned overseas.  However, the offshore firms have also been hit by the new administration and potential curbs on outsourcing, which they are trying to limit by having more US based staff and less overseas contractors.  The company is on watch

Portfolio Four:

  • Coca-Cola FEMSA (KOF) – the Central American distributor of Coke is 40% off from our purchase price,  been hit by various issues and negative currency fluctuations and now finally the current administration.  We will sell the stock now
  • Tesla Motors (TSLA) – this is a very speculative stock (little earnings, high valuation) and has high volatility.  We will keep it on watch
  • Novartis (NVS)– the Swiss drug maker is down about 20% from where we bought it (but has almost a 4% dividend), and drug makers seem to be under pressure with the new administration calling for price reductions. On watch will look at the next earnings release at the end of January
  • Statoil (STO) – the Norwegian oil company is down 20% off our purchase price but has come back significantly with possible increases in oil prices.  They also didn’t cut their dividend which remains a high 6% yield which also is positive for investors.  Will watch and see if it rises further
  • Royal Dutch Shell (RDS.B) – the European oil company is down almost 20% on price but has been rising and hasn’t cut the over 6% dividend.  Will watch and see if it rises further
  • Devon (DVN) – unlike Statoil and Shell, Devon did cut their dividend and is down about 20% on price.   However, the stock is up almost 2 1/2 times off its low so we will hold it as it keeps recovering.  Will watch and see if it rises further

Portfolio Five:

  • Anheuser Busch Inbev – the stock has dropped by over 30% recently as they attempt to purchase Miller Coors.  They also have been hit with economic volatility in Brazil.   They are a well run group but these are strong headwinds.  We will put the stock on watch
  • Juniper (JNPR) – Juniper had been down significantly but now is above our purchase price.  We will watch this stock as an acquisition candidate and may sell if it stops rising.  This stock is on watch

Portfolio Six:

  • Coca-Cola FEMSA (KOF) – the Central American distributor of Coke is 40% off from our purchase price,  been hit by various issues and negative currency fluctuations and now finally the current administration.  We will sell the stock now

Portfolio Seven:

  • Unilever (UNLV) – Unilever is down about 14% off peak due to the reduction in the value of the British pound and other factors.  This is a recent purchase and a well run company we will put the stock on watch

Portfolio Eight:

  • Unilever (UNLV) – Unilever is down about 14% off peak due to the reduction in the value of the British pound and other factors.  This is a recent purchase and a well run company we will put the stock on watch

 

Stock Selections for Summer 2015

There have been stock sales in some of the portfolios so we will have another round of stock selections.  Here are the choices.

INTERNATIONAL

  1. Vale ADR (VALE) – $7, ($5 – $14 over 52 weeks), $35B market capitalization, 5.5% yield, $35B in debt.  The Brazilian mining giant has been hit hard by the reduction in demand for the commodities that it produces as well as difficulties in Brazil as the economy is stagnant and the currency is falling.  With these factors it is a solid candidate for a rebound in future years if they can continue to focus on efficiency and cost reductions
  2. Alibaba (BABA) – $88, ($77 – $120 over 52 weeks), $220B market capitalization, no dividend, $8B in debt.  Alibaba is a Chinese e-commerce giant.  They are listed directly on the NYSE and not an ADR.  While the Chinese stock market has made a huge advance recently, Alibaba has slowed as the company re-groups and reduces hiring and focuses on execution.  If you already own Yahoo don’t buy Alibaba because Yahoo has ownership of a portion of their stock which is already reflected in Yahoo’s value
  3. Infosys ADR (INFY) – $31, ($25 – $37 over 52 weeks), $35B market capitalization, 1.6% yield, no debt.  The Indian outsourcing and consulting company is poised to grow with India and benefits from the strong dollar since much of its costs are in Indian currency but much of its revenues are received in dollars

US Market

  1. Celgene (CELG) – $115, ($72 – $129 over 52 weeks), $91B market capitalization, no dividend, $7B in debt.     Celgene is a US biotech / drug company with a variety of drugs under patent and a pipeline of many other potential future products
  2. Juniper Networks (JNPR) – $27, ($18 – $27 over 52 weeks), $11B market capitalization, 1.5% yield, $2B in debt. Juniper Networking is a high technology company specializing in fast networking gear.  The company is well run and has beaten analyst profit estimates recently
  3. Dow Chemical (DOW) – $51, ($41 – $54 over 52 weeks), $59B market capitalization, 3.3% yield, $20B in debt.  Dow Chemical provides processed material for manufacturing and agriculture.  The company benefits from lower US natural gas costs which provide advantages since it is a major component of their products.  The company recently fended off an activist investor which reduced their stock price.