2009 Stock Picks

Every year I provide six stocks for selection for each trust fund. Generally each trust fund selects 2 stocks, in amounts of $700 – $1000 depending on available cash (some cash accumulates from dividends and prior sales).

1) WMT – Wal-Mart. Retailer from US.
Wal-Mart benefited from the recession which drives a focus on price and value. WMT is tweaking their international strategy to produce better results and is a well run company. WMT also provides a dividend of 2.2% and is trading not too far off its 52 week low

2) TEVA – Teva Pharmaceutical Industries (ADR). Generic drug manufacturer from Israel (and ADR traded on US exchanges).
Teva is another well run company that could do well in most scenarios involving potential health care reform, as well. This stock also provides some international exposure. They have a 1.1% dividend yield.

3) SI – Siemens (ADR). A German industrial conglomerate, Siemens seems to have put much of the scandals behind them and is poised to grow as Europe comes out of a recession. Siemens is also very active in the green energy business. SI is often thought of as a European GE, for better or worse.

4) NUE – Nucor. A US steel manufacturer. Nucor is an extremely well run company that has thrived amongst a difficult environment for US steel manufacturers (pretty much everyone else state side went bankrupt over the years, killed by unions and a lack of investment). There is competition at home and abroad (Ross bought up most of the bankrupt company’s capacities and fashioned them into a new company). Nucor also has a 2.8% dividend yield.

5) SNP – China Petroleum and Chemical Corp (ADR) (also known as SINOPEC) – A massive Chinese oil and chemical company. China requires significant resource growth to power their growing economy. Chinese companies are also better able to work in some developing nations that have dodgy human rights records, where US and European countries would face legal difficulties. This stock is an ADR and has a 1.5% dividend yield

6) ADBE – Adobe Software – US software company. Adobe has a franchise with the PDF technology and graphical tools. Adobe has a strong software business with low debt and cash on hand. Adobe does not pay a dividend.

For the stock selections wanted to attempt to balance:

US vs. non-US stocks – much of the future growth will take place outside of the USA, so limiting the portfolio to US stocks seems foolish. In order to ease difficulties on investing, only foreign ADR’s (which is when the stock trades on US markets like NASDAQ and the NYSE, mimicking the home market) are put on the list
Limited / manageable debt load – many companies were burned when the thought that they could easily use the debt markets to refinance debt at reasonable rates, which turned out not to be the case in the latest recession. For the purposes of this trust fund I would like to stay away from companies with significant risk on debt; at various times I have sold stock because of looming debt maturities (CX)
Small and large company sizes – while none of these are “small” or even “mid-sized” companies, I wanted to give some selections that weren’t absolute giants. Different sectors of the market behave differently in times of crisis and during a market advance