13 for '13 (Part 3 of 3): Thirteen Market-Beating Investments for the New Year
Jeff is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The New Year has now fully arrived and your portfolio is ready to take a serious turn for the better. 2013 promises to be difficult for many traditional investments, with the Biggest Loser being U.S. Treasurys. Remarkably, as with most secular markets, the great horde of less astute investors continues to pile into Treasurys at exactly the wrong moment, at the tail-end of its 30+ year bull market. While they may not lose money in 2013, their time is coming as hyperinflation necessarily lurks around some future corner, thanks to Ben Bernanke and his gargantuan money printing policies. Until then, I'm predicting that the following year(s) will bring nothing but stagnation for Treasury-owners. You, the wiser investor, will do well to avoid them.
Moving on, we now turn to the final five of Thirteen Market-Beating Investments for the New Year. We covered the first three in Part One, which you can read here. The middle five were covered in Part Two, which you are welcome to read here. For your convenience, I will list all 13 investment opportunities at the end of this third--and final--article.
9. British Petroleum (NYSE: BP)
Possibly the safest mid- to long-term stock you can own, I think of BP more like an ultra-safe bond that will increase its "interest" (i.e., dividend) over the next several years from an already robust 5%. There are many haters of BP, the company, because of the worst-ever oil spill in 2010 that stained the Gulf of Mexico as well as our memories.
One of the great things about owning a hated stock is that most of the bad news (lower earnings, higher expenses for clean-up, anticipated lawsuits, etc.) is already "priced into" the stock. That is, when bad news comes, the stock price barely budges lower. Conversely, if any good news trickles in unexpectedly, the stock tends to soar since it is interpreted as light at the end of a long, dark tunnel.
I've already extolled the virtues (ad nauseum) of owning BP in a previous article, which I trust you will enjoy reading here. To whet your appetite, I compare this down, out and unloved stock to the great American fighter: Rocky Balboa. The harder he gets hit, the more strength he seems to draw. Put BP in your portfolio, reinvest the dividends, then make a note on your smart phone calendar to send me a thank-you letter in 10 years for the contrarian advice that made you wealthier.
10. The Blackstone Group L.P. (NYSE: BX)
One of my favorite macro-trends in the U.S. economy for 2013 and beyond is the recovering housing market. The best way to invest is to purchase foreclosed or highly undervalued properties in desirable locations. Unfortunately, if you are unmotivated, underfunded, or both, you probably did not go out and buy any houses or apartments in the last few years. Fortuitously, Blackstone provides you with an additional lucrative opportunity to place in your portfolio alongside of Two Harbors Investment and Silver Bay Realty Trust (described in 13 for '13, Part 1).
An international alternative asset management company, Blackstone has $54 billion--fully 25%--of its current assets in private equity real estate. Already the global leader in this arena, Blackstone is prepared to invest an additional $13 billion in similar opportunities. In layman's terms: this is some serious moola. More importantly, these guys really know what they are doing in the real estate world. In a recent conference call, co-founder, Chairman and CEO, Stephen A. Schwarzman stated this about his company, "Over our 27-year history, we've generated net annualized returns [of] 28% in our global real estate business, which dwarfs performance of virtually any other investment class."
Well ahead of their competition in the U.S., Blackstone has created a national single-family rental home platform called "Invitation Homes." This entity, the largest of its kind, will purchase, refurbish, lease and maintain rental properties in some of the nation's hardest hit cities. In addition, Blackstone Group is also buying, fixing and selling distressed or foreclosed properties for a tidy profit. Sound like a good business to own? I think so.
Crunching some basic numbers makes the story even better. Analysts predict dividends of $1.38 per share in 2014. At the current share price of around $16.50, that equals a yield of 8.4%. Analysts also estimate earnings of $2.85 per share in 2014, which means that BX is trading at a forward P/E of less than 6. That is a crazy-low valuation for a company that is poised to make huge profits on the recovering housing market! Invest in Blackstone before the rest of the market catches on to its breath-taking potential.
11. Apple (NASDAQ: AAPL)
I know, I know. What's the point of even talking about Apple? Doesn't everyone own some AAPL shares already? I can't count the number of people (and I'm good at counting) who want to show-off their investment prowess to me by saying, "I bought Apple at $11." "I bought Apple at $37.50." etc., etc. Yes, you are incredible. And no, I did not buy Apple shares in 2000 or 2002 or 2004. In fact, I was in residency at the time, was having several small children, was chronically sleep-deprived, and was really poor. I was out of popular culture for so many years that I thought Apple computers were still made just for playing Oregon Trail as a reward for finishing your school work before class ended.
So what should an unfortunate sap like me (and maybe you) do today, as Apple now sits at a price of greater than $500? Has the sun set on this behemoth of a company? Has the ship sailed? Shall we go to the grave sullen and wistful of what we should have purchased a decade ago?
Alas, no. Here's why . . .
Any way you look at it, Apple remains an incredible growth AND value investment today. Minus Steve Jobs, it still has a forward P/E of 9, a Return on Assets (ROA) of 24%, a Return on Equity (ROE) of 43%, a Profit Margin of 27%, an Operating Margin of 35%, a 2% dividend, a mountain of cash (you could literally make a mountain if you piled-up their cash hoard), and no debt. These numbers make the Scandinavian boy in me want to say, "Uff da!"
So quit with your, "It's just not the same company without Steve Jobs." Or, "The iPhone has lost its magic." Or some other nonsensical dribble. The truth is--and the facts remain--that Apple is an absolutely incredible company, and AAPL remains a strong buy for you and for me in 2013.
12. V.F. Corp. (NYSE: VFC)
Sitting now in the middle of its 52-week range ($128.92-169.82) at around $149, VFC just broke through to the downside of its 200-day moving average. While momentum traders shudder at this kind of news and rush to place their sell or short orders, fundamental value investors like us should start drooling at the thought of an even better price entry point. (Okay, my wife thinks that "drooling" is a little strong and an especially gross descriptor. Granted. But when a fantastic growth stock plunges you should crunch some numbers, make sure that the investment story is still intact, then start buying more shares hand over fist.)
If you've read my recent analysis of VFC (check it out here), then you know that it continues to be the premier growth stock of the Textiles, Apparel and Luxury Goods industry. Recent quarter earnings grew by 27% year-over-year, revenue increased by 14%, and V.F. Corp. recently raised its dividend by 21%! When a growth story this solid takes a breather--like it is doing right now--jump on board.
13. Teekay LNG Partners L.P. (NYSE: TGP)
The American shale revolution is changing the international energy landscape. Control of--and access to--energy is the political equivalent of power in the modern age. As I stated in Part One of this 3-part series, the USA is set to become the leading producer of natural gas and oil by at least 2020, thanks to hydraulic fracturing and other modern extraction techniques.
This is absolutely stunning. Especially since every one of us has been taught since toddler-hood that we will soon be running out of oil, gas and water and need to begin preparing for solar-powered cars, airplanes and other imaginary, pseudo-scientific ideas. Now with "peak oil" theorists and their textbooks nearly drowning in a literal over-supply (yes, you read that correctly) of natural gas and oil, things are also changing for investors. So, in 2 minutes or less, let's try to wrap our heads around what this means for us.
The inevitable consequence of over supply and stable demand for natural gas and oil is that prices will fall, as they have already started doing.
In light of this, there will be massive changes in the way money is made in the world of energy extraction, delivery and usage. In a nutshell, I think that the profits of oil-majors and other large holders of natural gas and oil reserves will actually suffer from the lower prices. Numerous "picks-and-shovels" outfits could benefit. Refineries, chemical companies, infrastructure and energy transportation companies should also benefit. Got it?
Today I will quickly introduce you to one beneficiary: Teekay LNG Partners L.P. (TGP).
TGP transports liquefied natural gas (LNG), liquefied petroleum gas (LPG), and crude oil worldwide. It has 1,336 full-time employees managing/operating a fleet of 27 LNG carriers, 5 LPG/Multigas carriers, and 11 conventional tankers. Importantly, unlike most shipping businesses these days, Teekay is quite profitable. TGP boasts a Profit Margin of 35%, an Operating Margin of 47%, a Quarterly Revenue Growth of 2%, and a Quarterly Earnings Growth of 20%. Happily, TGP also pays an annual dividend of $2.70, for a current yield of 6.8%.
If you are just learning about the world-changing increase in natural gas and oil coming out of the U.S., I recommend becoming a shareholder of Teekay LNG Partners as a great place to start.
In conclusion, thanks for sticking with me through this three-part article as we discussed Thirteen Market-Beating Investments for the New Year. I hope you find the following summary table helpful.
JeffRossMD has long position in BP, Blackstone, Apple, VF Corp, and Teekay LNG Partners. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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!