This annual roundup of stock gurus and money managers might not get every stock right, but it does usually pick the trends for the new year, observes Steven Halpern of TheStockAdvisors.com.
Gregg Early: I'm here with Steven Halpern, editor of TheStockAdvisors.com, and also editor of the annual report, the Top Stocks for 2013 report, where Steven talks to dozens of the nation's top gurus each year at the beginning of the year to see what they expect for the year, and some of their favorite stocks.
Stephen, since you've been doing this so long, I know that you also track from year to year who the winners and losers were of the last year. Perhaps that might be the best place to start. Who came out on top in 2012?
Steven Halpern: When we covered the three top winners from last year, in third place was Vivian Lewis, who is the editor of a newsletter called Global Investing. She really went out the limb last year with a speculative play on Royal Bank of Scotland (RBS), the preferred shares, that during the course of 2012 rose 90%.
This year she's looking to Australia as her new top pick, and she's recommending Aberdeen Asia Pacific Income (FAX). It's play on a stronger Aussie dollar, a weaker US dollar, and she also points out that this is the longest-standing personal position in her own portfolio.
She also recommends for speculators a position in Canada-based Bombardier (Toronto: BBD.B), which is a business aircraft manufacturer. She notes that they make rail systems and airplanes, and because of being in two industries, the company doesn't get coverage that would be typical of a company that's only in one industry. As a result of that, she calls it grossly undervalued.
Gregg Early: I'm assuming that they're both currency plays as well. You have a strong Canadian dollar and a strengthening Australian dollar.
Steven Halpern: Correct. And the second top performer last year was Mike Cintolo, who is the editor of the Cabot Market Letter. Last year, he went with another out of favor play, which was Lennar (LEN), the homebuilding company, which rose to almost 100%.
This year, he says he's going with an equally out of favor sector, and it's financials. Also, this is similar in terms of being a play on a rebound in housing, because he's going with Bank of America (BAC), which is very dependent on the mortgage market. He thinks that the company has gone through its rough spots, and after the past five years of difficulties, they're now in a position to not only increase earnings, but to boost dividends and possibly share repurchases.
The top performer in last year's report was George Putnam, who writes a newsletter called The Turnaround Letter. His pick last year was the office products retailer OfficeMax (OMX), and it rose 105%. This year he's going with two picks, one speculative and one conservative.
His speculative pick is MGIC Investment (MTG),
which, similar to Mike Cintolo's pick Bank of America, is very dependent on the
housing market. They're the largest insurer of mortgages outside of the US
government. A turnaround in housing would be a boon to this
His conservative pick is Cisco (CSCO), which he points out has an impeccable balance sheet. Management is committed to returning 50% of cash flow to shareholders through either dividends or share repurchases. That's his topic for the coming year.
Gregg Early: It sounds like there seems to be, among at least the leaders from last year, a trend toward housing, and at least improvement in domestic housing in the US. Are you seeing that through most of the gurus that you've talked to, or are there other trends in place, other sectors that people have been talking about?
Steven Halpern: Yes, indirectly. Not as much mortgage, but finance in general. In fact, in last year's report there wasn't a single recommendation for a bank or a financial services firm, and this year there are ten.
Along with Bank of America, which is Cintolo's pick, we've got picks for Bank of Montreal (BMO), we've got picks for Wells Fargo (WFC), and New York-based M&T Bank (MTB) was picked by both Jack Adamo and Bernie Schaeffer.
M&T has got two advisors selecting it as their top pick, and they both point out that this is a bank that did not need any help during the financial crisis. It didn't cut its dividend in 2000 and 2009 when other banks did, and they've reported quarterly profits every quarter for 37 ongoing years. That's a standout in the banking sector.
As you point out, it's interesting that the advisors in general are moving toward a position where they're starting to take a bullish long-term view of the banking sector.
Gregg Early: It's been quite a long time since something like that has happened.
Steven Halpern: Four or five years since the stocks have risen up on the top picks list.
Gregg Early: Is there anything noticeably absent from the list this year?
Steven Halpern: Yes. In fact, it was interesting: I went through last year's list to try to compare it with this year's, and the No. 1 sectors on last year's list were retail and consumer products, and the advisors were correctly forecasting that there would be a rebound in consumer activity, but those stocks are gone from the list now.
I looked through and there wasn't a single recommendation for a retailing outfit or a consumer products company. What we have seen though is that maybe what the advisors are portending is that there's been a shift from strength in the consumer sector to that now being reflected in the overall corporate sector.
This year, we're seeing a huge move in the advisors toward large-cap technology, which would indicate a strengthening overall corporate sector. Here we're seeing picks for Cisco, Google (GOOG), Intel (INTC), IBM (IBM), Oracle (ORCL), Yahoo (YHOO). Really a wide list of top-tier large-cap technology stocks that were absent from last year's list, but now are popping up as favorites of the advisors.
I'd also add to that that Apple (AAPL) is a recommendation of two of the advisors despite negative press that Apple has gotten lately and the pullback in price. Two advisors are picking it as their top play for 2013.
Gregg Early: Yeah, it's still early for Apple. We'll see. We'll see how far that goes. It sounds like there's a trend-I mean it sounds like a lot of the advisors are expecting capital expenditures to be up, which would be an improving economy to a certain extent.
Steven Halpern: Yes, yes. So it looks like they went from the level of improving consumer to an actual improvement overall in the corporate outlook.