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5 Top Stocks From 2011 Forecasts - 45565 views
MINNEAPOLIS (Stockpickr) -- The beautiful thing about the stock market is that everyone has an opinion. At this time of year, the opinions turn to the year ahead. Yes, experts and amateurs alike are out in force with their predictions for 2011.
I do the same thing. Over the last four years I have published my own list of top picks for the coming year. These 10 top stocks to buy have beaten the market substantially in three out of the last four years.
This year I thought I'd take a different approach. Oh, for sure, I have my own ideas for what stocks will do well next year, but I wanted to see what others were thinking first. What stocks stand out from the seemingly never-ending lists of top stocks to buy?
Let’s start with the venerable Goldman Sachs. Everyone wants to hear what this all-powerful investment bank has to say about the markets for the coming year. In early December, Goldman announced its 2011 forecast.
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The Wall Street firm expects a blow-off rally in 2011, with the S&P 500 gaining 25%. Fueling those gains will be acceleration in economic growth. It recommends that investors increase exposure to cyclical stocks or those stocks that gain value during economic expansions.
Goldman also suggests that investors move to an overweight position in financials and energy and to stay overweight in the technology sector. It then goes on to tell investors to be underweight defensive stocks including health care, utilities and consumer staples.
There is nothing earth shattering in the Goldman view, but it is noteworthy how bullish the company is regarding the market. The trick, of course, is with individual names. There Goldman leaves us wanting a bit more.
What are some of the top names being bandied about in other top-stocks-for-2011 lists?
First up is Fortune's list of top 10 stocks for 2011. I was much impressed with the basic premise of how the magazine compiled its list. Key to its approach was to identify companies that are growing rapidly and yet trading for reasonable prices.
That is a rational approach indeed. One of the names jumping out from Fortune's list is Mosaic (MOS), which is one of my favorite stocks for 2011 as well. The fertilizer company formerly owned by Cargill plays a huge role in maximizing agricultural yields necessary to feed the global economy and is poised for significant growth.
Analysts expect the company to make $3.80 per share in the 2011 year ending in May and $4.80 per share in the following year. You can buy that 25% growth at a multiple of 13 times the 2012 estimate. That is incredibly cheap and explains why the stock is a top pick at Fortune.
Highbridge Capital Management would probably agree with Fortune's pick, seeing as Mosaic is its second-largest holding, making up 3.15% of its total portfolio.
Another interesting name on the list is Transocean (RIG). The offshore oil driller that was front and center of the British Petroleum oil spill is expected to continue its recovery from the post-spill hangover.
More important, the company will benefit from rising oil prices and demand for more oil domestically. Current analyst estimates are for one-year growth in 2011 of 10%.With the stock trading for 9.5 times 2011 estimates of $7.28 the stock looks to be cheap.
The play here is that if those estimates are too low, the stock moves up significantly next year. It’s a great thesis, but with no offense to Fortune, I prefer Atwood Oceanics (ATW) in the oil drilling space. Transocean may have some residual hangover from the BP oil spill, so I would ook elsewhere in the group.
CBS MoneyWatch turned to Tom Forester to come up with 5 value stocks for 2011. Generally speaking I think growth stocks will significantly outperform value stocks in the coming year, but there are names on the Forester list worthy of consideration.
One of my favorites is Chevron (CVX). The huge oil company just missed the cut to be one of my favorite stocks for 2011, but it was a finalist for a good reason. The company pays a fat dividend of 3.3% and is likely to print money next year if oil busts through $100. I guess you could say there is growth in value.
Chevron's most famous holder is probably T. Boone Pickens. The stock makes up 2.8% of his total portfolio as of the most recent filing. Chevron also appeared on Jake Lynch's list of the
10 best Dow dividend stocks for 2011.
Specifically, the name to get here is Cummins (CMI). Despite the engine maker being up some 130% in 2010, shares are still cheap. Analysts expect the company to make $5.03 in the current year ending at the end of December. The profit estimate jumps to $6.75 in the next year.
You can buy that 34% growth for just 16 times the 2011 earnings estimate. Birinyi believes that Cummins is in the sweet spot of the economy and will benefit from multiple quarters of positive earnings momentum. I would agree.
Other fans of Cummins include Ken Heebner at Capital Growth Management, where the stock makes up 4% of the total portfolio, and CGM Focus Fund. The stock was one of the 10 best-performing S&P 500 stocks of the year.
The final top list to examine is a bold prediction from InvestorPlace, which offers up stocks that could double in value in 2011. While I’ve had stock picks that have doubled in less than a year’s time, I am generally skeptical of such bombastic claims.
That said, there is a name here that might very well double in 2011. Duoyuan Global Water (DGW) is a Chinese company that manufactures and sells water treatment equipment. The stock trades for less than 10 times this year’s earnings as well as next year’s.
One of my own general themes for 2011 was to look at Chinese stocks trading at cheap valuations. The idea is that private equity funds will find these companies attractive. The buyout prices are likely to be significantly higher than current prices.
Duoyuan Global fits that bill and could make for a great play for 2011.
The stock also fits Chase Coleman's bill at Tiger Global Management, comprising 0.3% of the total portfolio.
-- Written by Jamie Dlugosch in Minneapolis.
At the time of publication, author had no positios in stocks mentioned.
Jamie Dlugosch is a founder and contributor to MainStreet Investor and MainStreet Accredited Investor. Formerly, he was president and CEO of Al Frank Asset Management. He has contributed editorially to The Rational Investor, The Prudent Speculator, Penny Stock Winners and InvestorPlace Media.