These strategies, built on growing domestic trends in the US, are likely to be the best bets for strong profit this year, says Neil George.
So Neil, you have some investment ideas for 2013. Where do we put our money?
I think, Charles, you want to look at some of the major trends that are going to be occurring with involvement of government in the economy, and some of the changes they are focusing on.
My first thing is looking at some of the big changes happening with pension management for public employees. The idea is seeing more participation and moving from defined benefit into defined contribution, and the company that basically is the primary provider of retirement investment services for the federal government is a company called Blackrock (BLK).
Blackrock, of course, is well known elsewhere. They have been liberated by Bank of America (BAC) and Merrill Lynch in the past, and now they are basically on their own. They are one of the largest asset managers.
They are already generating a lot of revenue in their ETF market and everything else, but they really dominate federal government pensions, and they are now getting even more from some of these further changes on the federal and state level.
Another area I think you want to look at, again from a government standpoint, is looking at some of the health-care changes. A lot of people might have a different opinion...
What kind of changes?
Well, you have heard about Obamacare, of course, and so you have mandated health exchanges and mandated insurance. Now, some people are complaining, some people are suing over it, other people are cheering.
Let’s put all that aside and look at the companies that are going to make some money on this. One company in particular has very much of an inside track. It is a company called United Health (UNH).
United Health basically has an inside track on all the federally mandated exchanges, because right before the election, Health Services Secretary Sebelius effectively was shopping some of the technology providers to actually build the exchanges. She came across a smaller private company, and basically she was part and parcel the engineer of the deal that United Health bought this company
So they basically now control the company, and are building the technology and backbone for the exchanges. They will know exactly how the things will work and will have detailed information about the participants. As far as the leaders, they are going to be able to cash in on the whole federally mandated exchanges. United Health is the ultimate play.
Great idea; got another one?
I think the other one to look at is what is happening on college campuses. We just got finished having another record year of high school graduates that are heading off to college, and at the same time, colleges are really overstressed at the seams when it comes to housing and dorms. Arizona State alone has a deficiency amounting to some 17,000 students that don’t have any place to live and are having to seek out places on their own, and it is a problem affecting a lot of state schools and even private institutions.
At the same time, a lot of these schools don’t have a lot of money and are kind of strapped as far as trying to raise tuition or seek out the funding to build all these things. So what we are seeing now is the private sector is starting to step in and build or transform existing or new dorms to meet this growing demand.
You have got two companies I would like people to focus on. One has done a very good job with us for a long period of time. It is called American Campus Communities (ACC). It is structured as a pass through. The dividend is not that great, but there is some really good growth there that I think you are going to see.
So they are finding properties to develop near colleges and doing a co-op with the universities directly. So they have...they already are sort of preselling their projects.
Yes, marketing is good.
And another one which is newer to this marketplace is called Campus Crest Group (CCG)—and what I suggest there is actually their preferred rather than their common share. It pays a dividend yield, which has some tax advantages, of about 7%.
Again, both of these companies are well placed to take advantage of this growing trend of colleges wanting to offload some of this capital requirement while meeting the needs for this fast inswell of incoming college students.