Shelter from the Storm

01/27/2006 12:00 am EST


Keith Fitz-Gerald

Chief Investment Strategist, The Money Map Report

"Today's markets are more uncertain than ever, with storm clouds looking increasingly nasty on the horizon," says Keith Fitz-Gerald. However, he adds, "That doesn't mean that sticking your head under the ‘proverbial’ mattress." Here are his two top buys.

"I have been concerned with interest rates, trade deficits, energy, and the ‘China Effect’. Nevertheless, my two favorite picks for 2006 offer significant appreciation potential and high current income something most investors don't ordinarily think of in the same sentence. What's more, each is the dominant player in their respective industry and both are growing in ways that continue to build long-term profitability.

"My conservative pick is Citigroup (C NYSE). As I have been expecting, earnings are going to come under pressure from changes in the bankruptcy laws and rising rates. So even though the Street recently made hay over a two cent miss related to these factors, think about it logically. Citi reported earnings of $24.6 billion for the year and 4th quarter earnings of $7 billion both of which are up a staggering 44% and 30% versus a year ago. In the scheme of things, two cents isn't a big deal particularly when you consider what a spectacular farce the whole managed expectations thing is anyway. And that's why I remain excited about this stock.

"Among other things, it is clear that Citi smells the same money in China that we do. To that end, another one of my predictions came true when it was recently disclosed that Citi is trying to buy Guandong Bank for $3 billion. This move, should it go through, will put them squarely on the map in the heart of the Chinese banking industry. All the signs show that Citi is going to play a major role in re-shaping China's fledgling banking industry (and probably the entire Chinese financial structure) before the dust settles.

"My more speculative pick is Deutsche Telekom (DT NYSE). The company operates in 50 countries on six continents, and is a truly global player in many respects. This gives it the size, scope and scale I drool over because all three of these factors scream certainty. In other words, we are not talking a risky flyer here. DT is a proven company, poised for some significant growth and returns in the next few years. This increases our odds of success dramatically! Revenues are a whopping 29.1 billion euros ($34.9 billion), a 3% increase year-over-year. That number may not flip your switch, but that's not the whole story.

"Get this: DT's annualized EPS growth rate is 270.08%. Combined with the fact that DT is trading near the bottom of its range says to me that things look ready to light up. I really like the fact that DT continues to demonstrate leadership in the telecomm sector. Not only is DT's CEO continuing to restructure the company and staff, but he's making significant strides in businesses that build upon their dominant telecomm strengths in particular the wireless spectrum. In addition, DT is offering wireless broadband access on Deutsche Bahn trains. It's something I like to see because it means that DT is not only working with retail consumers, but taking an active role in large government contracts."

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