Two Stocks For Troubled Times
01/14/2008 12:00 am EST
Mark Skousen, editor of Trader Alert and High-Income Alert, finds two very different stocks that fill investors' needs for growth and stability.
I think 2008 will be another good year for foreign markets, where the growth is more robust and the currencies are strong relative to the dollar.
Today, I'm adding yet another foreign stock to our hedge portfolio: Vimpel-Communications (NYSE: VIP).
In 1996, Vimpel was the first Russian company to list on the Big Board. At the time, it had 50,000 subscribers. Today, it has a subscriber base of more than 51 million.
Vimpel is the number one provider of wireless services in Moscow, with more than half the market. But the company is expanding throughout Russia and beyond.
Wireless usage is booming in Kazakhstan, where VIP is the leading provider. And Vimpel plans to double the 2.2 million subscribers it currently has in Ukraine. Expansion into Southeast Asia is coming this year, too.
Another key is new acquisitions. Two weeks ago, for example, Vimpel bought Russian Internet services company Golden Telecom for $4.3 billion, allowing VIP to offer broadband Internet, as well as wireless services.
I expect Russia's economy to grow 7% this year to make it one of the world's strongest. Rising disposable income is creating a huge market for consumer goods. And Vimpel is taking good advantage. This month, for example, it will start selling Research In Motion's popular BlackBerry devices.
A month ago, the Russian wireless provider reported that third-quarter profits rose 71%. I expect more stellar results in the year ahead. After all, Vimpel has 31% operating margins, a 30% return on equity, and quarterly revenue growth of 43.9%. Revenue has exceeded $6.6 billion during the last 12 months. This is an international growth stock with plenty of staying power.
So pick up Vimpel Communications (NYSE: VIP) market (it closed below $41 Friday), and place a protective stop at $30. If you prefer to play this one more aggressively, try the April $50 calls (VIQ-DL).
American Capital Strategies (NASDAQ: ACAS), the $6-billion, Maryland-based private financing company, paid out a $1.00 a share dividend [last month], a record amount that surpassed its 88-cent dividend of a year ago. ACAS has a rising dividend policy. At its current price, the annual yield is now 12%! (It closed below $32 Friday, not far from an all-tome low-Editor.)
Business development company (BDC) stocks have taken a beating lately amid investors' worries about a potential recession. In the 2002 downturn, American Capital's nonperforming loans rose to as high as 15% of its lending portfolio, but this time around the nonperforming sector is holding steady at 5.5% of the portfolio-near record lows for a BDC.
In sum, I am bullish on American Capital Strategies (ACAS) in a well-diversified portfolio of financial stocks, energy trusts, [and] telecommunication companies, and a high-income global fund selling at a significant discount.