Stock Ideas for 2014

[medinaj2160]

https://forum.mrmoneymustache.com/investor-alley/stock-ideas/50/

Here is the thread from 2013. Any suggestions for 2014?

[moneetalks]

Broken Record but - AAPL ultralong.  Diversified tech and perhaps the greatest retail company in the world.  They have so much cash that regardless of what happens to the shareprice, they'll be raising dividends and buying back stock for the rest of our lives at least.  All that and a decent dividend yield.   

[the fixer]

I'm not a stock picker but I figured I'd ask and maybe learn something:

Your analysis of AAPL suggests that it's a good buy because of an attractive price to book value if you're basing the decision on having a high amount of cash to ensure future dividend payouts. Its price to book value is currently around 4, which seems average for the past five years. http://ycharts.com/companies/AAPL/price_to_book_value

Compare that to XOM, a similarly high market cap stock that pays dividends and similar P/E, but you get a price to book value that's pretty consistently around 2-3. http://ycharts.com/companies/XOM/price_to_book_value

I definitely think your analysis had some merit earlier this year when AAPL was doing really poorly, but at the moment it seems less attractive based on the above. Thoughts?

[moneetalks]

Fixer, I agree with what you're saying and agree that XOM is another very solid pick.  I am not an economist or a stock picker either.  At some point in my financial education, it became a priority for me to own large positions in proven safe solid "best in class" companies.  I learned early not to chase the next high flyer. 

For any younger investors out there, try to learn early the value of owning the simple boring blue chips - like XOM, GE, JNJ, AAPL, MO, etc.  It's amazing what these do if you buy them and ignore them (except for reinvesting dividends). 

For several years I bought and sold AAPL, because it always seems to have come too far too fast.  If I'd have just held it - of course I'd have done exponentially better! 

I am looking for stocks with solid dividends that are likely to increase and who are buying back stock or are likely to do so for the foreseeable future.  That's AAPL if it's anybody.     

[the fixer]

Fixer, I agree with what you're saying and agree that XOM is another very solid pick.  I am not an economist or a stock picker either.  At some point in my financial education, it became a priority for me to own large positions in proven safe solid "best in class" companies.  I learned early not to chase the next high flyer. 

For any younger investors out there, try to learn early the value of owning the simple boring blue chips - like XOM, GE, JNJ, AAPL, MO, etc.  It's amazing what these do if you buy them and ignore them (except for reinvesting dividends). 

For several years I bought and sold AAPL, because it always seems to have come too far too fast.  If I'd have just held it - of course I'd have done exponentially better! 

I am looking for stocks with solid dividends that are likely to increase and who are buying back stock or are likely to do so for the foreseeable future.  That's AAPL if it's anybody.     

Thanks for the insight.

As for the blue chips, I'll throw out this caution: they're not always guaranteed to be good buys. https://en.wikipedia.org/wiki/Nifty_Fifty It seems like it's impossible to make any hard-and-fast rules in this game. That's why I think it's interesting from an academic point of view, without putting any of my own money in.

[sol]

I'm long VTSAX for 2014, despite the recent runup.  The dividend is less than 2% but the market cap is amazing.  Talk about a diversified revenue stream.

[KingCoin]

I'm long VTSAX for 2014, despite the recent runup.  The dividend is less than 2% but the market cap is amazing.  Talk about a diversified revenue stream.

+1

If you're primarily looking at mega-cap stocks, you might as well just buy the S&P500. The stocks mentioned so far are among the most scrutinized in the world. Expecting to have any kind of edge by looking at basic valuation metrics is incredibly hopeful.

I recently started a "Trade Idea Thread" looking for thoughts on off-the-beaten-path securities where some brass-tacks research might yield some alpha, but so far it's been crickets.

[moneetalks]

Fixer, I hear you loud and clear.  Blue chips are by no means a GUARANTEED safety net.  Like most of you, I cannot help but chase alpha.  I have money in techs, small caps, occasionally sell options, and  am just as  susceptible as the next guy to an intriguing story.  All that being said....I'd be WAY better off if I had just been blindly pouring money into solid dividend payers all these years. 

Remember as an investor there are always going to be BIG things you missed out on - and my philosophy kind of guarantees I'm never going to hit a lot of home runs....but I hit a lot of singles and THAT wins games too!!! 

I think of it as much more mustachian to follow a steady and reasonably safe investment strategy - and one that does not require many hours of "due diligence". 

While some guys are pouring over earnings reports, reading charts, and wringing their hands.....I prefer to be out golfing, hiking, boating, etc. with my free time.  And believe me - I learned this the hard way!  I can't tell you how nice it is to have no idea what most of my holding have done in the past few months! 

As Buffett said, "Don't lose money" and I forget the name of his colleague who said, "Buy great companies and you can sit on your ass"

CERTAINLY aapl seems ripe for pullback, a regression to the mean.  It may wallow for years....But what do you think the chances are it will be worth less than it is now (including dividends) in ten or fifteen years?  I like my chances. 

[KingCoin]

CERTAINLY aapl seems ripe for pullback, a regression to the mean.

Individual stocks don't regress to a mean, and even if they did, regressing to the mean could be a very bad thing depending on the time period used.

But what do you think the chances are it will be worth less than it is now (including dividends) in ten or fifteen years?  I like my chances.

It's not too hard to imagine really. Apple's success was the result of a visionary and iconic founder who is now gone.  Its valuation relies on charging very high premiums for increasingly commodified products. The tech landscape is littered with former best-of-breed leaders who are now limping along or gone altogether. Maybe it's likely to not return 0% over the next 10-15 years, but that's a pretty low hurdle. The operative question is whether or not it returns more than the stock market as a whole.

[wtjbatman]

One of my favorite resources for reading about individual stocks (and REITs, and ETFs, and MLPs, and...) is http://www.seekingalpha.com

Just wanted to throw that out there for anyone who doesn't have it bookmarked yet.

[Khan]

I can't go into AAPL for the reasons KingCoin noted. Yeah it has an amazing stash of cash. Yes it has a huge buyback program in place, and an almost guarenteed DGR.

But that's all predicated on it continuing to make massive amounts of profits off it's phone's(and other products...), which are coming under increasing pressure from all angles, have trouble entering emerging markets because of the AAPL premium, and have a lackluster amount of innovation.

I have an iPhone 4, because at the time Android lag was a terrible thing. When I switched from Verizon to Virgin Mobile, I got an iPhone 4 as well, but I even ended up going down from (I think) the 32GB to the 8GB model.


Anyways, as far as stock ideas go...
I'm in on FSLR(First Solar), strong pipeline, continued decreasing costs, an attractive P/E after the bubble collapsed, and a good amount of backorders.

I'm in on SIRI(SiriusXM), strong buyback program, increasing FCF and subscriber growth. The downside of it(or upside, depending on your viewpoint), is it's majority owned by LMCA, which is controlling the buyback, and will most likely look to perform a Reverse Morris Trust spinoff in the future.

I'm still in on AIG and BAC, I think public sentiment on BAC is a little too negative, the headwinds against it(SEC) are not as bad as the bears would like to make it out, and it pays a very low dividend and has a buyback program in place to capitalize on it's low valuation. Pretty much the same story at AIG, which has no dividend atm.

F(Ford), current bear arguments are lowballed guidance, where's Mulally heading, and Europe losses(restructuring). Bull arguments are F gives conservative guidance's, Mulally doesn't matter if he does leave, and Europe is almost to profitability, combined with huge demand for the Fusion, car sales growth in the US and abroad, the new F150 and all the other models coming out in 2014(most new model releases in Ford's history), and nobody even talks about the possibility of Lincoln being at all additive to that fact, ever(so any growth there is not accounted for at all).

Seekingalpha is a great resource, I'd also recommend checking out Fool's resources in the CAPS community. But SeekingAlpha is really the best site there is.

[lano]

...

I am looking for stocks with solid dividends that are likely to increase and who are buying back stock or are likely to do so for the foreseeable future.  That's AAPL if it's anybody.     

I would disagree with this statement.  Apple is a great company, but it is not a poster child for guaranteed or "likely" return of cash it currently generates.

http://www.businessinsider.com/apple-responds-to-carl-icahn-2013-12

Read the response from the board in the article.  What does it tell you when the board says that
they must keep a big portion of your money?  Any money the that company "must" keep for current and future investment is money that it cannot give back to you in the form of buyback or dividend.

Here is an interesting question -- how much money did Apple spend to design the first iphone?

http://www.businessinsider.com/apple-spent-over-150-million-to-create-the-original-iphone-2013-10

http://www.nytimes.com/2013/10/06/magazine/and-then-steve-said-let-there-be-an-iphone.html?pagewanted=all&_r=2&

150 million?

How much "capital" is needed to design the next iphone type product?

These are the questions that you as an owner should be asking.  The buybacks and dividends are a symptom, not a cause. You care about the symptoms, which is great -- the symptoms make us wealthy -- but you need to question their ability to continue.

Apple board said that they payed out about 44 billion in 2013, 17 billion of it was financed by debt, so long term investors really got back only 27.  You can buy Apple now for 500 billion.  That is not a great payout -- you can get much more now from say IBM.

Is Icahn right in asking for more?

The way to answer all of this, and to circle back to my original premise on top, is to identify two types of companies:

1. There are companies that can generate the same amount of cash with less investment. 

2. There are companies that can generate more cash with more investment. 

The two are not the same thing.

A more correct statement on your part would be this:

Apple did not payout well in the past, in fact it payed out nothing really.  This year it did give shareholders money, and although on a absolute basis the number is large, on a relative basis it is not. It has in the past generated revenue and profits at phenomenal rates.  And a not so great payout from phenomenal growth is really good.  I believe that Apple will take my money and invest it in itself.  This will cause it to generate more cash, and although the payout percent will always be small, the large revenue and profit growth will  continue to make the absolute payout that I get in the end quite attractive, which will make the investment good.

What I think Icahn is saying:  Um it cost you guys 150 million to create the iphone.  Hire more creative technologists, and give me back my share of the 150 billion you are hording.   

Apples board thinks that Apple is company type 2, Icahn thinks that it is or should be company type 1.

Personally I like putting my money into type 1 companies.  One last analogy example that might relate more to people on this forum.

Type 1 companies are Mr. Money Mustache.  They have the ability to generate amazing results.  But there is a limit to the amount of "pure money/ capital" that they can invest in themselves -- that is why they return a good deal of it to shareholders. 

Type 2 companies are companies that can take large amounts of money and at times, but not always, generate amazing results.  Say, a person who took out 200k to go to an elite school, and afterwards got a very high paying job.  She then spends even more to open a business, etc, etc.

If you could buy the "after expense and capital investment earnings" of either one -- who would you choose?  Who do you think would produce more stable earnings for the price paid? 

[moneetalks]

Khanjar,

I absolutely love your picks.  AIG and BAC are on the road to recovery and its just a matter of jumping on board. 

BUY: aapl, bac, qcom, mo, ge, jnj, vod.....and wait ten years.  You will not be sorry

[wtjbatman]

Khanjar,

I absolutely love your picks.  AIG and BAC are on the road to recovery and its just a matter of jumping on board. 

BUY: aapl, bac, qcom, mo, ge, jnj, vod.....and wait ten years.  You will not be sorry

Long MO and JNJ, would love to get in on GE now while it's in the middle of its recovery.

[Khan]

I'm also long GE(tiny 100 shares), but I'm not sure how much positive stuff I can say at this point in time, I like that it's re-industrializing itself, but it just experienced a P/E expansion, so it's a little more rich then it was when I bought in.

I'm also long INTC, but I work there, and thus get EPP, and I can't honestly say how into the bull thesis I am. I can say though, that it pays a very hearty dividend, and has great management from a stockholders perspective. I view it as more of a rock in my portfolio then anything, and is how I can say that I fully support value and dividend growth DRIP strategies. If it surprises to the upside, all the better. If not, well, hearty dividends and buybacks.

[pac_NW]

I recommend the Stock Advisor and Income Investor newsletters from the Motley Fool. Well researched, great way to learn about stocks and how to select them, offers advice on stock picks with reasoning, been using for many years.

[Khan]

I'm also subscribed to the Income Investor service. I like it's low cost(I locked it in I think at 40$/year for 2 years), especially compared to other Fool services, which become excessively expensive, and it's investment thesis/tilt, but I don't think I'll be refreshing it after it expires.

Ouch, just looked at prices, 150$/year. Yup, definitely not.

[pac_NW]

Yes, wait for the deals on Motley if you choose to subscribe.

[pom]

I keep 80% of my money in boring index funds so this is just for play money but my best bet for 2014: emerging market (VWO).

Definitely a risky play but when did you last see emerging markets with a dividend above 2,5%? A lot of bad news makes me greedy.

Other stock that I have good hopes for: GE, BAC, C, GDF Suez (France) and Deutsche Telekom (Germany).

[Khan]

Well my thesis on SIRI(SiriusXM) has been turned absolutely on it's head overnight. Liberty Media, instead of the plan that was in place, is looking to absorb SiriusXM wholesale, trading new equities  to current Sirius shareholders for the current shares.

I will watch this play out, but I have no interest in the Liberty plans with respect to Charter and Time Warner Cable.

On the bright side, whenever I cut out, I'll be able to properly balance my portfolio since Sirius was the one standout that didn't match the rest of my investments. I'll probably put the proceeds into VIG/VTV.

[wtjbatman]

Looking hard at Realty Income Corp (O). I want more exposure to REITs, and from everything I've been reading lately, the monthly dividend company is one of the best options. Researching it for my blog, I like what I see and it's at a good price point, but haven't pulled the trigger yet.

[daverobev]

Khanjar,

I absolutely love your picks.  AIG and BAC are on the road to recovery and its just a matter of jumping on board. 

BUY: aapl, bac, qcom, mo, ge, jnj, vod.....and wait ten years.  You will not be sorry

Not sure why you'd go VOD? Half is going to get given back (Verizon Wireless being sold to Verizon Comms in entirety, in exchange for cash and VZ shares...), the other half might be bought by AT&T. Yuck. I have some at the moment but I'm hoping to sell (at the right price)... will probably reinvest in an index, not sure yet.

[wtjbatman]

VZ and AT&T are both strong buy and holds. Not sure the problem with that deal.

[sdp]

just to throw it out there.....
But the nifty fifty bubble in the 70's bid up the P/E ratios of thos companies some over 40 times to some in the 90's!!!

[daverobev]

VZ and AT&T are both strong buy and holds. Not sure the problem with that deal.

Debt, p/e. Everyone has a phone; people are to some degree wising up and going for cheaper plans.

Sure, there'll be growth in many places, but not in the West - no idea about the US but in the EU at least, there are all sorts of caps on roaming fees and so on. Building infrastructure is expensive.

/shrug. As a VOD holder I wouldn't want the non-Verizon Wireless part of Verizon Communications at all, and AT&T are reviled are they not..?

Well anyway - I'm mostly into passive stuff. Though I do have some BCE (Bell, Canada), which is also a universally hated company, so I can't talk I guess.

[sdp]

um... should we just put 100% into MMM? I mean we are reading the blog and all.... how did we get this awesome blog and forum from scotch tape anyway?? well I guess it doesn't matter MMM is up up up this past year!! yeah baby!

[wtjbatman]

VZ and AT&T are both strong buy and holds. Not sure the problem with that deal.

Debt, p/e. Everyone has a phone; people are to some degree wising up and going for cheaper plans.

Sure, there'll be growth in many places, but not in the West - no idea about the US but in the EU at least, there are all sorts of caps on roaming fees and so on. Building infrastructure is expensive.

/shrug. As a VOD holder I wouldn't want the non-Verizon Wireless part of Verizon Communications at all, and AT&T are reviled are they not..?

Well anyway - I'm mostly into passive stuff. Though I do have some BCE (Bell, Canada), which is also a universally hated company, so I can't talk I guess.

I'm definitely biased since I have both VZ and T in my personal portfolio. I'd like to think I'm a fairly unemotional investor, so hopefully I made good choices when I invested in them. If not... well I guess I'll find out.

[daverobev]

VZ and AT&T are both strong buy and holds. Not sure the problem with that deal.

Debt, p/e. Everyone has a phone; people are to some degree wising up and going for cheaper plans.

Sure, there'll be growth in many places, but not in the West - no idea about the US but in the EU at least, there are all sorts of caps on roaming fees and so on. Building infrastructure is expensive.

/shrug. As a VOD holder I wouldn't want the non-Verizon Wireless part of Verizon Communications at all, and AT&T are reviled are they not..?

Well anyway - I'm mostly into passive stuff. Though I do have some BCE (Bell, Canada), which is also a universally hated company, so I can't talk I guess.

I'm definitely biased since I have both VZ and T in my personal portfolio. I'd like to think I'm a fairly unemotional investor, so hopefully I made good choices when I invested in them. If not... well I guess I'll find out.

I'm far from an expert ;) Unfortunately I'm in the 'I know I'm not <adjective> enough, but ooh maybe I'll just buy some of this stock anyway' camp... (clever/intelligent/smart.. or some other adjective that describes a person able to invest in a manner as to make more money than the index).