After having gotten too obsessed with the Fed’s taper dance, investors need to get back to the basic business of investing. And that means pure stock picking, or snapping up fundamentally sound and attractively valued stocks. After all, Federal Reserve Chairman Ben Bernanke has put to rest much of the taper worries in part by reassuring investors that interest rates won’t shoot up even as the Fed dials down its bond-buying program.
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That had sent the stock market zooming on Wednesday, to new all-time highs, once again.
So forget about the scare mongers that predictably warn investors about a so-called double or triple peak danger signs every time the equity market surges or hit record highs. To repeat: One important aspect of investing is finding and buying the appropriate stocks for one’s core stock portfolio.
So early this year, on Jan. 28, 2013, I selected 12 stocks to seize the opportunity presented by the start of President Obama’s second four-year term. Year-to-date, the dozens stocks have performed superbly.
With a new year upon us, I would pick the same dozen stocks for 2014, as I expect they will again be standout performers for at least the 12 months. Here are the 12 stock picks:
Apple (AAPL), Bank of America (BAC), Coca-Cola (KO), CVS Caremark (CVS), Facebook (FB), Ford (F), Home Depot (HD), McDonald’s (MCD), Pfizer (PFE), TJX Cos. (TJX), United Health Group (UNH), and Walt Disney (DIS).
1. Apple, which had suffered the biggest price decline in 2012, was trading at $450 a share when I picked it in January 2013 – way down from its high of $705. By the close of trading on Dec. 19, 2013, the stock had jumped to $550.77 a share. The bulls are confident that Apple remains a compelling value and they expect it will again climb to $700 in 12 to 18 months. So don’t count out Apple as the innovative and ahead-of-the-pack technology icon that it is, and expect it to launch new wonder products in 2014.
2. Bank of America is the financial come-back kid, trading at $11.15 a share when I included it in my 2013 favored list, up from a knocked down low of $6.72. It has leaped to $15.69 at the close of trading on Dec. 18, 2013. I expect the bank will be one of the strongest financial stocks in 2014. The bulls see the stock as still way undervalued and expect it to climb to $20 next year.
3. Coca-Cola, definitely a U.S. name that has become a well respected global brand, is the world’s largest soft-drinks company and the biggest producer of juice and juice-related products. It was trading at $36 a share in January 2013, with a dividend yield of 2.75%. The stock has since climbed to $40 as of the market’s closing session on Dec. 18, 2013, after hitting a 52-week high of $43.43. Analysts still consider the stock undervalued for the long term because of its high-quality products and profitability over the years. They expect the stock to climb to the $48-$50 level in 2014.
4. CVS is a dependable, major player in healthcare, operating one of the largest U.S. drugstore chains and pharmacy benefit managers. Trading at $51.41 in January 2013, the stock has since jumped to $69.69 at the close of trading on Dec. 18, 2013. If there’s one major healthcare company that will strongly benefit from the Affordable Care Act, it is CVS. “We expect EPS (earnings per share) growth to benefit over the next three years from the implementation of the Affordable Care Act, specialty pharmacy growth and customer focus on quality as well as cost, of healthcare, offsetting slower generic drug sales and drug reimbursement pressures,” says Joseph Agnese, analyst at S&P Capital IQ. Rating the stock as a strong buy, he has raised by $3 a share his price target, to $79 a share.
5. Facebook. believbe it or not, will be the market’s next wonder stock. Even as it has zoomed higher from a low of $17.55 last year to $55.57 at the close of trading on Dec. 18, 2013, the stock has yet to reflect its potential for enormous growth as the No. 1 social media giant. When I picked out Facebook in January 2013 as a must-buy, the stock was trading at $36 a share, reflecting the company’s steadier footing after its fumbled start when it went public. Facebook has already more than one billion monthly average users, and counting, who have over one trillion connections. Facebook has just began to show its real value and strength.
6. Ford continues to be the auto maker with the greatest potential to benefit from the auto industry’s turnaround and resurging auto and truck sales. Its stock was trading at $13 a share when I recommended it in January 2013. It has since climbed to a 52-week high of $14.30 a share. It closed at $15.65 a share on Dec. 18, 2013. Some analysts see the stock doubling in the next 12 to 18 months as the economy picks up more steam and the company continues to implement its growth program.
7. Home Depot, one of the most attractive bets on the housing recovery, was trading at $67 a share in January 2013, and has since climbed to $80.05. The stock is headed towards $100, according to the bulls, based on the continuing economic recovery which should benefit its 2,200 retail stores that markets a variety of products for the do-it-yourself and home remodeling markets.
8. McDonald’s, the world’s largest fast-food company with about 3,700 restaurants in 119 countries, is one stock that has yet to fully participate in the market’s full-blown rally. The stock was trading at $93 a share last January and has risen since then to $95.93. Analysts high on McDonald’s believe the stock will far exceed its 52-week high of $103.70 by next year. Fierce global competition has hampered sales growth as well as the slower economic growth in Europe and Asia. But McDonald’s potential for long-term expansion and improved sales growth will be fueled mainly by China and the emerging markets, where the fast-food giant still has far fewer restaurants per capita compared to its presence in the U.S.
9.Pfizer, the world’s largest pharmaceutical company, dominates its peers in the nearly $100 billion global pharmaceutical industry. But it still remains one of the undervalued Big Pharma stocks. Pfizer was trading at $26 a share in January 2013 but has since leaped to $30.77 by Dec. 18, 2013, exceeding most analysts’ target for 2013. Its hefty dividend yield of 3.56% adds to the allure of Pfizer, although like McDonald’s, it has yet to fully participate in the robust bull market this year. One likely catalyst for the stock is a recent restructuring that will transform the company into three distinct business segments, which will likely be a prelude for an eventual split-up of the company.
10. TJX, one of the most successful U.S. companies in retailing, operates a number of off-price apparel and home-fashion specialty stores, including T.J. Maxx, Marshalls, and HomeGoods in the U.S., Germany, Canada, United Kingdom, Ireland, and Poland. Shares of TJX were trading at $45 last January, and has since jumped to $62.55, exceeding analysts’ price targets of $50. Now the bulls expect the stock to climb to $70-$80 over the short term.
11. United Health Group is another effective play on ObamaCare: It’s a leading healthcare service company that provides benefit services to more than 36 million individuals across America. Trading at $56 a share last January, the stock has been on the rise since then, closing at $72.39 on Dec. 19, 2013, a new 52-week high. The bulls expect the stock to easily climb to $80-$85 next year.
12. Walt Disney, one of the world’s leading media and entertainment conglomerates, was trading at $54 a share in January 2013. It has been running up since then, to $72.93 on Dec. 19, 2013. Disney bulls cite among the positives the company’s expansive strength with its television, theme parks, films, and licensing businesses. ”We see further upside to Disney’s well-honed multi-platform strategy for content exploitation that’s balanced between organic growth and compelling acquisitions, including Marvel’s superhero and LucasFilm’s Star Wars franchises,” says T. Amobi, analyst at S&P Capital IQ, who rates Disney as a “strong buy.”
Despite the stock market’s ascent to new record highs, some seasoned investment managers remain optimistic about the outlook next year. “The world economy is approaching an inflection point leading to gradually accelerating resynchronized global growth throughout 201,” says Marty Sass, chairman and CEO of asset management firm MD Sass. And inflation will stay low, he adds, due to relative wage stagnation, lower energy prices, and persistent deleveraging.
Sass believes the three sectors that will strongly benefit from the favorable outlook for next year are the airlines, healthcare, and TV broadcasting. Among airlines, Sass is high on Delta Airlines (DAL). In healthcare, his picks are McKesson (MCK), Actavis (ACT), and CVS Caremark (CVS). And in TV broadcasting, Sass favors Sinclair Broadcast Group (SBGI) and Nexstar Broadcasting (NXST).
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