The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.
A basket of high yielding-high quality stocks can offer a higher return, better tax advantages, and the potential of significant appreciation for those with a long time horizon. Five year CD earning 4%, or a utility stock? I pick the utility every time.
My wife sent me the following quote from Ambrose Redman that I thought would be worth sharing with readers: "Courage is not the absence of fear but rather the judgment that something else is more important than one's fear."
It seems that might be extended to one's view on investing as well. What is really important, the short term or the long term, growth or value, the promise of riches or the hope for stability? In each case I would favor the latter over the former and this brings to mind one of my pal Warren's lessons: Do not buy a stock unless you would be happy to own it even if the market was closed for ten years.
Every trade publication made mention this week that Huaneng Power International, (ADR) (NYSE: HNP), following the decision by China's National Development and Reform Commission to lift power price tariffs, said it's increased prices by 5.67% in a move effective Aug. 20.
The stock is down from $41.75 in December when I suggested adding it to your watch list, to about $35 ten weeks ago when I last wrote at length about it in Chasing Value: You want power, buy power -- Huaneng Power HNP. It closed today at $28.36, up $0.31(+1.11%) and is paying a 5.78% dividend yield.
The Motley Fools recently reported that the Chinese goverment will be increasing their efforts to clean up the environment. Along those lines Huaneng Power is in the procees of building the first zero-emissions coal-fired power plant. HNP also announced that it is raising generating capacity to 36,993 MW.
HNP remains one of my favorites for the next few decades as China continues to develop. As long as the dividend remains secure it is a very compelling stock to include in a long term diversified portfolio as a core holding.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.DISCLOSURE: I currently own shares of HNP.
After seven months of tracking my 2008 picks -- Wham! -- I went from beating the indices and Berkshire Hathaway (NYSE: BRK.B) to being humbled by the market. However difficult it is to display your failings, once again I will share all. This is the low point since I posted the original story Chasing Value: Final list -- 8 stocks for 2008.
Only Reliance Steel & Aluminum (NYSE: RS) remained in positive territory, down from five stocks that were up in the last report. Sometimes, the reasons for the downslide were more obvious than they were in the cases for my picks. The cutting in half of Valero Energy Corporation (NYSE: VLO) has been reported often, as the largest independent oil refiner in North America has had its profit margins squeezed.
Loews Corporation (NYSE: L) has been hurt by its insurance interests and helped by its holdings -- a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
The Summer Olympics are only days away and what the Chinese had hoped would be their coming out party to celebrate all that is good, may instead become quite the opposite.
The air pollution in Beijing is so bad that even reducing automobile traffic by 50% has not helped much. China is now considering a 90% reduction according to news reports. Athletes are staying in other countries until the games begin so that they may train somewhere they can breathe. There are also reports that many athletes involved in stamina events will be forced to wear masks to protect themselves from the particulates in the air.
Now Reuters is reporting that "Some International Olympic Committee officials cut a deal to let China block sensitive websites despite promises of unrestricted access, a senior IOC official admitted on Wednesday."
So the world media will not be able to do their jobs in a manner they are accustomed to. But who are we actually referring to? Western media, of course, because half the world still limits access to information to some degree.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees.
Many of them were the stocks we might have looked to in the past for stability, so you can be sure I put forward my five candidates with a little trepidation, but forward I go anyway. First a little review is in order.
Citigroup Inc. (NYSE: C) dropped from around $53 per share last year to around $30 in January and we can buy it today for around $17. Even at that price Goldman Sachs (NYSE: GS) has downgraded it to a sell and thinks there is more bad news to come. Citigroup was the largest bank in the world. Not any more.
General Motors (NYSE: GM) was the largest car maker in the world. That was before the stock tumbled from $43 to its current $11 range. A crushing blow to long time investors hoping that someone in the company could stop the ship from sinking.
One of my more avid readers and obviously another believer in Huaneng Power Intl ADS (NYSE: HNP) asked why the stock price was so erratic lately. I find that question strange given the following two year chart that indicates it is not behaving any different than it always has, it fluctuates.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and Berkshire Hathaway (NYSE: BRK.B) too. It has been painful to have to report each month that I was being bested. However, since I have not seen anything contradicting my original rationale for my eight picks I stood my ground.
Moving into positive territory by pennies was Loews Corporation (NYSE: LTR). Among its holdings is a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
Bunge Limited (NYSE: BG) was the other stock to cross the line into the black, while Valero Energy Corp. (NYSE: VLO), although improving, remains my worst performer. It is still down almost 28% after five months.
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
My riskiest stock pick Newcastle Investment Corp (NYSE: NCT) was down the most in March but recovered about 35% of the loss in April leaving Valero Energy Corp. (NYSE: VLO) the dubious honor of being my worst performer, down over 30% in the first four months of the year.
April showed improvement as many companies reported positive earnings reports or beat expectations.
Most of my picks improved. Higher food prices no doubt helped Bunge Limited (NYSE: BG) which recaptured losses moving up 23% from its recent bottom. My two winners Raytheon Co. (NYSE: RTN), the high tech defense contractor, and Reliance Steel & Aluminum (NYSE: RS) were joined by a third, Anglo American plc (ADR) (NASDAQ: AAUK) which had a 10% swing entering positive territory.
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. Huaneng Power ADS (NYSE: HNP) is indeed way down from its high of $57.50. I recommended the stock last year at $26.50 and looked brilliant until last month when it completed retracing its upward trajectory back to that level.
The company reported an 80% drop in earnings attributed to higher coal costs Tuesday. However, today the value buyers must be back in droves because the stock closed up almost 16% as one of the day's big movers. The stock closed at $30.25, up over $4 per share. The following three-year chart captures the drama.
"For global income investing, I ran a screen of Chinese ADRs, and my favorite from the list is Huaneng Power (NYSE: HNP), with an indicated yield of 5.3%," says Nilus Mattive, editor of Dividend Superstars.
"Tons of power is being consumed in China, and Huaneng is right there to serve it up - the company is China's largest independent power producer. All told, Huaneng owns 17 plants outright, controls another 12, and has minority interests in five power companies.
"Profits have been rolling in at a steady clip. However, investors have recently become concerned about shrinking profit margins at Chinese utilities.
"There is certainly cause for concern: Coal is the main power source for utilities' plants, and the price of the raw material has been rising because of increased demand around the world. To make matters worse, the severe winter weather that struck China in January pushed up coal prices even further and created a whole host of other challenges for Chinese utilities.
"However, it looks to me like investors have been far too aggressive in their selling. They're now pricing Huaneng at 10.5 times next year's earnings. The stock is so oversold that it's currently yielding 5.3%.
"What about the coal situation? Well, I think supply and demand will come back in line, and I also think this politically well-connected company will be granted price hikes to compensate for its higher input costs. I recommend income investors buy at the market."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
My riskiest stock pick Newcastle Investment Corp (NYSE:NCT) is down almost 37% this year, and the energy stocks did almost as poorly even though fuel prices are near all-time highs. The downers were not offset by this months' repeat winners.
March was a seesaw battle, but in the end there was not much to show for it. However, unlike the last day of January (down 370 points in the Dow) and February's last trading day (down 315 points), March had a final day of plus 46.49, which is not very meaningful.
Most of my picks sagged a little more, while two remain in positive territory. Raytheon Co. (NYSE: RTN), the high tech defense contractor is up and Reliance Steel & Aluminum (NYSE: RS) is way up.
Two months into the year and investors' true 'metal' was tested, and mine more than most. February showed signs of improvement over January, but the last week ended hopes of any rally. The last day of January saw a 370 point drop in the Dow and February's last trading day closed with similar results, down 315 points.
The soft stock market did display many points worth noting. The Dow Jones Industrial Average was about break even for the month, indicating investors were showing some signs of support for large cap stocks, prompted in part by news of increased profits at Wal-Mart (NYSE: WMT) and share buy-backs at IBM Corp (NYSE: IBM).
Some of my picks also sagged a little more, although not as much, while two turned into positive territory. In January, only Raytheon Co. (NYSE: RTN), the high tech, defense contractor, was up. In February, the weak dollar and inflation concerns boosted Anglo American plc (ADR) and Reliance Steel & Aluminum (NYSE: RS) -- two commodity plays.
January was a wild ride and February holds the promise of more of the same after yesterday's 370 point drop in the Dow. All the major indices were down in January and so were seven of my eight picks. Only Raytheon Co. (NYSE: RTN), the high tech defense contractor, was up. My two high flyers from last year, Huaneng Power International, Inc. (ADR) (NYSE: HNP) and Valero Energy Corp. (NYSE: VLO), were the biggest losers.
Among the indices, the DJIA lost the least and the NASDAQ lost the most. The average return for my eight picks was -7.82%. This underperformed the average of the indices that was -7.58% -- but my new stalking horse Berkshire Hathaway (NYSE: BRK.B) bested both, so Buffett is still the man.
Now including dividends for my picks which average 3.91% divided by 12 for the one month allows for an additional .326%, reducing the loss to -7.494%. Using 1.8% for the average dividend of the indices divided by 12 adds 0.15%, reducing the loss to -7.43%. The dividends tighted things up. BRK.B does not pay a dividend.
The following are my eight picks with the starting share price as of December 28, 2007:
The price-to-cash flow ratio has been repeatedly promoted in various publications as one of the more important metrics to consider when evaluating a stock to buy. Apparently over long periods of time it is more telling than the often quoted price-to-earnings ratio. I have read that cash flow is a key metric that "my pal Warren" looks at for Berkshire Hathaway (NYSE: BRK.B) investments.
Here are the figures for the Chasing Value: Final list -- 8 stocks for 2008 in order from highest to lowest P/CF. The 12/28/08 starting stock price, yesterday's closing price and the current P/CF for the most recent fiscal year (MRFY) are listed. Only two stocks are up, while six are down.
Bunge Limited (NYSE: BG) BG was $119.03, up to $133.00, P/CF 15.99
Raytheon Co. (NYSE: RTN) RTN was $61.51, up to $61.58, P/CF 13.64
The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.
Every trade publication made mention this week that 
After seven months of tracking my 2008 picks -- Wham! -- I went from beating the indices and 
The Summer Olympics are only days away and what the Chinese had hoped would be their coming out party to celebrate all that is good, may instead become quite the opposite.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees. 
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and 
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
Here are some highlights from this past week's 
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. 
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
Dow. All the major indices were down in January and so were seven of my eight picks. Only 
Apple (AAPL) iTunes loses artists - an antitrust problem?
U.S. Q2 GDP of 3.3% likely to be fleeting
Cramer on BloggingStocks: Don't bother with the private-equity chatter 
