3 Trades For 2013
Callum is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
We had a rocky 2012, with the S&P 500 seesawing from 1,278 to 1,465 back down to 1,400 to end the year. We have several major political hurdles coming up, but let's look past that and try to find the horizon of market beating returns. What lays on the horizon?
Kinder Morgan Energy Partners (NYSE: KMP)
KMP operates 75,000 miles of pipelines and 180 storage facilities for oil and natural gas. The stock also yields a fat 6.44% dividend, which is up 17.1% since Q4 2009. The reason why KMP will beat the market is because of rising US energy production and its big dividend. Right now daily US oil production is 6.7 million bpd, but that is expected to go over 11 million bpd by 2020 according to the EIA. The average daily oil production rate in the US was 6.4 million bpd, and the EIA sees that rising to 7.1 million bpd by 2013 (it will be higher than 7.1 million bpd by the end of 2013 as this is the average production throughout the year), which is 200,000 barrels higher than previously estimated.
As more oil is pumped out of the ground, the more oil there is for KMP to transport for a fee. The price of oil is irrelevant for KMP, the only thing that matters is volume. The same goes for natural gas. Right now natural gas prices are in the gutter, but KMP still is profitable moving the gas around the US. The US Energy Information Administration predicts that natural gas production will rise by 0.4 bcf/d in 2013, up from 69.2 bcf/d in 2012. Once the US starts exporting LNG (which won't happen in 2013 but will by 2015) KMP will be a bigger winner as US production increases to supply demand in both Asia and Europe where natural gas prices are much higher. In Europe the average price for natural gas is $11-13 mmbtu and in Asia it is even higher at $15-17 mmbtu, which is significantly more expensive than $3.50 in America. Rising US energy production means more oil and gas for KMP to transport, and a nice growing dividend will enable you to safely ride out 2013 with strong returns.
Apple (NASDAQ: AAPL)
Is this pick original? By no means of course not. But Apple is positioned to outperform the market in 2013 for several reasons. One, the stock has been heavily sold off going in to 2013 and a considerable amount of that selling is for tax purposes. Expect a bounce after the new year as those investors buy back in. Two, the tablet and smartphone markest continue to grow like gangbusters, so regardless if the iPhone 5 isn't all it was supposed to be, it will still see 20% growth in sales in the iPhone and even stronger growth in iPad sales. Three, as far as valuation goes Apple is dirt cheap. With a PE (TTM) of 11.54, if you subtract the cash out ($125 a share) you get a PE of 8.71. Four, 2013 will probably see the launch of an iTV and a new iPhone, which will cause a jump in Apple's stock price. Five, the iPad mini is being received very well. DisplaySearch sees iPad mini sales hitting 50 million in 2013, which is a lot more than the 6 million Apple originally ordered for 2012. Apple is a good safe bet for strong returns in 2013, and you get a 2% dividend yield.
eBay (NASDAQ: EBAY)
eBay is a great company with the ability to change. Its online retail business used to be old and clunky, but now they have renovated it and made it much better and user friendly. eBay's online retail space is expected to grow at high single digits going forward for both revenue and EPS, which is a big improvement from the near stagnant growth before. Expectations are for eBay to grow its EPS by 16% next year, and with a 17 PE this stock is reasonably priced. The biggest reason to be bullish on eBay is because of PayPal. PayPal's revenue has been growing by over 25% for the past several years. Plus PayPal's registered user base has been growing at a 3.8% rate every 3 months since 2010. Now PayPal makes up 40.1% of eBay's revenue. PayPal's strong growth coupled with the new and improved online retail service makes eBay a buy.
These are 3 quality stocks for 2013 that should outperform the market in 2013. KMP will give you a big dividend while you sit back and watch the US production and transport more and more oil and natural gas. Apple will keep chugging on upwards as the tablet and smartphone market continue to boom. eBay's PayPal division is on fire and with a new and improved online retail website it has 2 sources for strong growth going forward. I'm bullish on all 3 of these stocks.
callumturcan owns shares of Apple. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!