Investing in common stock can be a very lucrative activity; it can also be a disaster. The chances of making money are enhanced by knowledge and research (all legal, involving no inside information), economic developments, and pure luck.
No doubt, if an investor picks the right stocks and maintains a long-term investment strategy, he can earn a lot of money. Here are the 10 best equity investments over the last 10 years. A $1,000 investment in these stocks would have resulted in the following returns.
% Change Dividend Adj.
Cliffs Natural Res.
purses and accessories
used car retailer
oil and gas
The aforementioned list includes four energy, two high tech, one fashion, one real estate, one used car, and one engine company. One comment relating to this list is that non-diversified energy exploration related stocks have high potential, but also have significant operating risks.
A plethora of advice and recommendations is available to investors ,and this piece will present an overview of the stock investment environment, a strategy that investors might consider in 2013, and 10 recommendations by a well-known analyst. The latter will afford investors a sense of what issues make stocks attractive. Please keep in mind, that if you asked 100 advisers for their top picks for 2013, you would receive a wide range of suggestions.
Warning: The writer is not making any stock recommendations. You should conduct your own research and consult with a licensed financial advisor before making security investments. The information provided herein is barely a microcosm of the information available to investors.
2013 has the potential to be a very volatile year for investors. This does not mean that one cannot make money during the next 12 months. The shorter your investment horizon, the more volatility you will likely experience. Really good companies with outstanding fundamentals that have excellent long-term growth potential can vacillate wildly in the short-term based upon external factors including political and macroeconomic events.
The most important issues are fairly obvious: the fiscal cliff, the debt ceiling issue, jobs growth, overall global economic activity, Chinese economic expansion, the Euro crisis, political turmoil abroad, etc. As these situations subside, the market will produce gains. If they increase, the opposite will occur.
Currently, excluding the fiscal cliff, market analysts believe there is some reason for optimism. A large component is the expectation that China will grow at a 10% rate in 2013. Nevertheless, the issues mentioned above can cause drastic movements in the market by the hour, day, or week.
As a general strategy, one analyst recommends a three-prong approach to stock investment. Invest one-third in each of the following:
1. Stocks that you expect will do well in the current environment (i.e. defense and energy).
2. Stocks that are creating their own trends no matter what the news brings (Apple, Google, and Facebook).
3. A few risky bets that could pay off big because their expectations are so low.
James K. Glassman is the founding executive director of the George W. Bush Institute. He also is a contributing editor to Kiplinger’s “Personal Finance.” Glassman has selected 10 stocks from a “selection of experts he admires.” Using this system, he has beaten the Standard & Poors 500-week index by an average of three points per year over the past nine years. He does not own any of the stocks recommended below. Here are his top 10 stock picks for 2013.
Market Cap: $166 million
Revenues (4th quarter): $451 million
Net Income: $4.8 million
Business: Diversified printing company
Analyst Ratings: Favorable
Glassman: Speculative stock, downside limited, upside substantial.
My comments: Relatively small company with historical problems. Favorable analyst reports. High upside.
Market Cap: $20 billion
Revenues: $8.5 billion
Net Income: $1.4 billion
Business: Medical tech reconstruction, medical/surgical
Analyst Ratings: Mixed, trend towards upside
Glassman: Put stock in IRA for a few decades.
My comments: Profitable, good long-term business, could be acquired.
3. New Oriental Education
Market Cap: $2.9 billion
Revenues: $840 million
Net Income: $137 million
Business: Education serving China
Analyst Ratings: Mixed positive
Glassman: Suffered with Chinese problems, will respond favorably if Chinese economy prospers again.
My comments: Relatively small in overall Chinese economy, Chinese bet a good one.
Market Cap: $32 billion
Revenues: $20 billion
Net Income: $1.88 billion
Business: Diversified consumer products
Analyst Ratings: Mixed
Glassman: Solid performer, good stock yield.
My comments: Great foundation stock for portfolio.
5. US Bancorp
Market Cap: $59 billion
Revenues: $18 billion
Net Income: $5.3 billion
Business: Bank holding company
Analyst Ratings: Mixed neutral
Glassman: One of the best-managed banks in the U.S.
My comments: Excellent financial asset investment.
Market Cap: $17 billion
Revenues: $59 billion
Net Income: $2.6 billion
Business: Integrated computer company
Analyst Ratings: Mixed, several new ratings recently
Glassman: Lost half of its value in eight months, real gamble.
My comments: Real problem competing against Apple, other competition very strong as well.
Market Cap: $97 billion
Revenues: $61 billion
Net Income: $6 billion
Business: Entertainment company including cable and NBC
Analyst Ratings: Mixed positive
Glassman: Nation’s largest cable network, good projected earnings.
My comments: Very sound choice in the entertainment space.
Market Cap: $445 million
Revenues: $139 million
Net Income: $2 million
Business: Enterprise management
Analyst Ratings: Just initiated
Glassman: Likes prospects of this industry.
My comments: Way too small for my taste, speculative.
Market Cap: $12 billion
Net Income: $784 million
Business: Science and tech research
Analyst Ratings: Little coverage
Glassman: Strong balance sheet, very little competition.
My comments: Not very exciting.
Market Cap: $49 billion
Revenues: $132 billion
Net Income: $17 billion
Business: Car company
Analyst Ratings: Fairly good, broad coverage
Glassman: Consistent profits, stock dropped 40% since early 2011, many do not believe company can sustain high profits.
My comments: Very competitive industry, high operating leverage, difficult union relationships, industry has taken a beating.
The companies selected by Glassman would not have popped up on my screen with the exception of Kimberly-Clark and Comcast. Several of the companies are small in revenues and profits and some are esoteric. Nevertheless, Glassman has a good track record and time will tell whether he is on the money.