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Thursday, January 1, 2009

My Best Stock Picks For 2009


1. Lowe's Companies ( LOW ) 21.52 a share 1/1/2009 Target price 35.00 a share.
Lowe’s Companies, Inc. is a home improvement retailer, with specific emphasis on retail do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers, who utilize its installation services, and commercial business customers. The Company offers a line of products and services for home decorating, maintenance, repair, remodeling and property maintenance. As of February 1, 2008, it operated 1,534 stores in 50 states and Canada, with 174 million square feet of retail selling space. Lowe’s Companies, Inc. serves homeowners, renters and commercial business customers. Homeowners and renters primarily consist of do-it-yourselves, and others buying for personal and family use. Commercial business customers include repair and remodeling contractors, electricians, landscapers, painters, plumbers, and commercial and residential property maintenance professionals, among others . The latest existing home sales report from the National Association of Realtors showed an increase of 3.1% over the previous month with sales rising to about 5 million units a year annualized. When the last twelve months of data is plotted, there’s a clear bottoming pattern being formed. The report also shows home prices continuing to fall and the inventory of unsold homes increasing. That’s bad news for sellers but good news for buyers since the increasing inventory should continue to put pressure on prices. The AP release listed on MSNBC.com includes this additional information, “Between 33 and 40 percent of sales activity is coming from foreclosures or other distressed properties, estimated Lawrence Yun, chief economist at the Realtors group.” If existing home sales have bottomed, it should be good news for home improvement retailers Home Depot (HD) and Lowes (LOW). The high percentage of sales coming from foreclosures should also be a positive for their business. I haven’t found any data to back this up, but it’s logical that on average a foreclosed home will need more repairs than an owner-to-owner purchase. Granted, logic doesn’t necessarily apply to the stock market.Both companies are profitable even in the current soft housing market. Valuations are similar with both companies trading at about 15.5 times the next 12 months earnings. Cramer did a head-to-head between HD and LOW on Wednesday’s Mad Money and concluded LOW was the better bargain primarily because of better growth prospects. One key difference between the companies is the dividend. HD yields about 3.3% vs about 1.4% for LOW. Obviously, Lowe’s has a much lower payout ratio so more of its earnings are available to invest in expansion. If home sales have bottomed, LOW and HD sales traffic should start increasing, particularly with a high percentage of sales and housing inventory coming from foreclosures. Both companies should benefit from easy same-store-sales comparisons going forward. Analysts’ earnings estimates for both companies have been lowered over the past 90 days. I think that’s a mistake. Cramer based his opinion of the two stocks partly on his prediction that new home sales will start improving late next year. I suspect many analysts are also considering new home sales for their models. They may be overlooking stabilizing and improving existing home sales volume (not necessarily prices) providing a lift to home improvement centers. I believe LOW is a slightly better buy than HD based on better growth prospects and a lower debt ratio. The higher dividend makes HD attractive to income investors and should provide more support to the share price if the thesis is wrong; the dividend is comfortably covered so there isn’t much chance of a cut. If stabilizing home sales drive an increase in traffic, both companies should benefit.Two words CUSTOMER SERVICE! Although HD is geographically closer to my home, I prefer Lowes. The product mix and prices are similar but, Lowes has people that can answer questions and assist the customer, and they even have humans at the cash registers.Cash on hand and cash flow can handle required debt payments. People will continue to maintain and improve their homes as they spend less on other non-essentials .

2. The Kroger Co. ( KR ) 26.25 a share 1/1/2009 , Target price 39.00.
The Kroger Co. is a retailer in the United States. The Company also manufactures and processes some of the food for sale in its supermarkets. As of February 2, 2008, the Company operated, either directly or through its subsidiaries, 2,486 supermarkets and multi-department stores, 696 of which had fuel centers. Approximately 43% of these supermarkets were operated in Company-owned facilities, including some Company-owned buildings on leased land. It operates retail food and drug stores, multi-department stores, jewelry stores, and convenience stores throughout the United States. The Company operated 42 manufacturing plants, primarily bakeries and dairies, which supply approximately 43% of the corporate brand units sold in the retail outlets. Ultra-solid grocer with a strong private brand and good real estate management.
Safe harbor.If you paid attention when you were shopping you've noticed the sharp jump in grocery prices that coincided with the rise in fuel prices. Now that fuel prices have fallen, it is equally as noticeable that the price of groceries and consumer goods hasn't. This means higher profits for Grocery stores in the near term. With an uncertain economy and high gas prices, consumers are pinching pennies wherever they can, and that includes doing things like buying Kroger brand soup or Kroger brand milk instead of Campbell's Soup or Trauth milk. This penny pinching will continue into the foreseeable future because shoppers aren't going to pay higher prices when they can get the same thing for less. This is a definite buy for 2009 .

3. AeroVironment 36.80 a share 1/1/2009 , Target price 49.00.
AeroVironment, Inc. (AeroVironment) designs, develops, produces and supports a portfolio of small unmanned aircraft systems (UAS) that it supplies primarily to organizations within the United States Department of Defense (DoD), and fast charge systems for electric industrial vehicle batteries that it supplies to commercial customers. AeroVironment derives the majority of its revenue from these two business areas. The Company's core technological capabilities include lightweight aerostructures and electric propulsion systems, electric energy systems and storage, high-density energy packaging, miniaturization, controls integration and systems engineering optimization. The Company is organized into two segments: UAS and Efficient Energy Systems, which focuses primarily on the development of electric energy technologies for internal and external customers, and also develops, produces and supports a line of electronic test equipment used for research and development activities.With cuts in defense spending likely, drones offer a cheaper alternative to full sized aircraft.I've been watching this stock go up since its IPO opening , and there is a little downturn now. With their drone business, Aerovironment is a good candidate for a buyout by the big boys. Drones are not going away -- the local air national guard changed to drones, and the Air Force secretary was fired for his slow adoption of the technology.

4. PowerShares Water Resources (ETF) ( PHO ) 14.39 a share 1/1/2009 target price 19.75
PowerShares Water Resources Portfolio (the Fund) seeks investment results that correspond generally to the price and yield of the equity index, the Palisades Water Index (the Index). The Index seeks to identify a group of companies that focus on the provision of potable water, the treatment of water, and the technology and services that are directly related to water consumption. The Index includes United States exchange traded companies drawn from water sectors, such as water utilities, treatment, analytical, infrastructure, water resource management and multi business.water - can't replace it can't get enough of it, enough said .world is going to get hungry due to a larger stomach and of course we will need water to wash it all down not to mention grow everything we eat in the first place. 1% of the worlds water is drinkable and our demand for that water double every 6-8yrs.With Obama's new public works stimulus should include some spending towards the aging water infrastructure, and this sector would definitely benefit from that !

5. Amazon.com ( AMZN ) 51.13 a share , target price 76.00
Amazon.com, Inc. (Amazon.com) operates retail Websites, which enables its consumer customers to find and discover anything they might want to buy online. The Company’s retail Websites include www.amazon.de, www.amazon.fr, www.amazon.co.jp, www.amazon.co.uk and the Joyo Amazon Websites at www.joyo.cn and www.amazon.cn. Amazon.com has organized its operations into two principal segments: North America and International. The North America segment includes Websites, such as www.amazon.com, www.amazon.ca, www.shopbop.com and www.endless.com. The International segment includes www.amazon.co.uk, www.amazon.de, www.amazon.co.jp and www.amazon.fr. In June 2008, the Company announced the acquisition of Fabric.com, an online fabric store that offers custom measured and cut fabrics, as well as patterns, sewing tools and accessories.Good earnings growth. I have made several purchases from their site, and they have one of the most user-friendly and convenient marketplaces on the web. I get what I want on time and at competitive prices. They seem well positioned to profit from Internet shopping. This isn't a massive growth stock.Upside is that it is growing right through the recession. Nevertheless, this has to be a long-range investment. I plan to add to my investment in modest increments over a substantial period of time.

6. Molson Coors Brewing Company ( TAP ) 48.92 a share, target price 71.00
Molson Coors Brewing Company (MCBC) is a global brewer of beers. The Company’s subsidiaries include Molson Canada (Molson), Coors Brewing Company (CBC), Coors Brewers Limited (CBL), and other corporate entities. The segments of the Company include Canada, the United States and Europe. The brands sold in Canada include Coors Light, Molson Canadian, Molson Dry, Molson Export, Creemore Springs, Rickard's Red Ale, Carling and Pilsner. The brands sold in the United States include Coors Light, Coors, Coors Non-Alcoholic, Blue Moon Belgian White Ale and Blue Moon brands, George Killian's Irish Red? Lager, Keystone, Keystone Light, Keystone Ice and Zima.I'm not a drinker, but in times like these I'll make an exception. a case of 24 for $15 exception.Solid financials. Cash on hand. Great products. Cheap stock price.With recession on the horizon, this is a great hedge against it. With the overall market going down, TAP may go down too, but not nearly as much. Therefore, it will outperform. TAP pays a .20 Dividend.

7. Verizon Communications ( VZ ) 33.90 a share 1/1/2009 , target price 49.00.
Verizon Communications Inc. (Verizon) is engaged in providing communication services. The two segments of the Company are Wireline and Domestic Wireless. Wireline communications services include voice, Internet access, broadband video and data, next generation Internet protocol (IP) network services, network access, long distance and other services. The Company provides these services to consumers, carriers, businesses and government customers both domestically and internationally in 150 countries. Domestic Wireless’s products and services include wireless voice, data products and other services, and equipment sales across the United States. In March 2008, Verizon announced the completion of the spin-off of Northern New England Spinco Inc. In July 2008, MTN Group Limited acquired 100% of Verizon South Africa Ltd. In August 2008, Verizon announced that Verizon Wireless, a joint venture of the Company and Vodafone Group Plc, had completed its purchase of Rural Cellular Corporation.I just switched to FIOS so now VZ do all my telecom ( winches, ISP, TV) and it rocks! l don't see the cable co's keeping customers from switching .I like both T and VZ for their dividend; but I like VZ more for it's dividend. For now in tough times Utilities are king, VZ is set to continue giving steady returns.They pay a reasonable dividend and are a cash vacuum !

8. Johnson & Johnson ( JNJ ) 59.70 a share , target price 69.50
Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Sales of the Company's two largest products.Long term, solid company. A vast stable of staples, products that consumers will want and need to buy regardless of the recession/depression. It's hard to imagine any company as being recession-proof, but I think Johnson & Johnson comes very close to that wishful ideal. During the recession of 1992-1993, it lost about 20% of its value, but other companies lost much more. During the gloomy times of mid-2001 through 2003, it traded sideways while most other large-cap companies lost money. It currently has nice profit a 6.4 quarterly revenue growth with a 29.9% quarterly earnings growth. Very nice. Hopefully, that will continue. For a large cap, it also seems to have its debt load under control, something that will separate the strong from the weak in the coming months. To wit, JNJ's Debt/Equity ratio is 32%, and has a book value of $16.45/share, which is twice better than my internal yardstick of 1/7th that of its price (currently $58.70). While we wait for the stock to appreciate, the dividend yield will help us out a bit at its current 5-year average of 2.1% (hey, it's not great, but it's there!). Finally, very few people are going against this stock, as the short interest is extremely low at only 0.80% of the float (yep, less than 1% -- nice & stable). This would be a good place to park your money for the next 1-3 years.

9. Pfizer Inc ( PFE ) 17.71 a share 1/1/2009 , target price 24.00
Pfizer Inc. (Pfizer) is a research-based, global pharmaceutical company. The Company discovers, develops, manufactures and markets prescription medicines for humans and animals. It operates in two business segments: Pharmaceutical and Animal Health. The Company also operates several other businesses, including the manufacture of gelatin capsules, contract manufacturing and bulk pharmaceutical chemicals.PFE is a cash cow, easily a $25 stock and with a rally in the market, PFE is set to go higher.PFE will likely outperform the S&P 500 for the near future simply because the recession hurts others more than it hurts this company. Also the incoming Obama administration favors health care reform, which although could dampen some healthcare sector stocks, will not likely have much direct effect on R&D or capsule manufacturing. Although the cost of medicine is high in some cases, it is tiny when compared to all other medical costs as a whole. High medicine costs are usually pass-on costs but, Obama will likely encourage more R&D, and the government will favor this sector in subsidies. Baby boomers keep on retiring in ever growing numbers and they need medications… there is an ever growing demand for the products of the company over the long term, recession or not .

10. Google ( GOOG ) 307.00 A share 1/1/2009 , Target price 355.00
Google Inc. maintains an index of Websites and other online content, and makes this information freely available to anyone with an Internet connection. The Company’s automated search technology helps people obtain nearly instant access to relevant information from its online index. Google generates revenue primarily by delivering online advertising. Businesses use its AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party Websites that comprise the Google Network use its AdSense program to deliver relevant ads that generate revenue and enhance the user experience.Long term play, good value, buying at a discount. Will rebound powerfully when the global economy improves in the coming years.Google is becoming the Top search and work engine in the world including in Peru South America. Besides the ever growing Pay Per Click business model, Google will eventually open up a Pay per call model (google both these items to learn about them). Pay Per Call is still a very lucrative industry and is expected to grow incredibly over the next five to ten years (google search will lead you to this information as well, as would yahoo or microsoft or whatever search you use, but i'm making a pseudo-subliminal point by saying 'google it'.)Beyond advertising, Google's dark horse will be cloud computing in my opinion. It will save companies thousands upon thousands of dollars in that they wont have to purchase on site storage of information, it is stored elsewhere. Computer security can also be cut back. Network administration can also be cut back. All this money that will be saved can now be thrown at various other optimizations (or just added to a bottom line). Cloud computing is Google's oft misunderstood, nary a mentioned monster. Its most recent deal with IBM will show this as a rapidly growing income stream. With Cloud computing, the bearish sentiment on the possible failures of online advertising will quickly have to brainstorm new critiques of what will become a vast lucrative market. What about Google's Android? It seems a fight may be brewing with Verizon and the FCC over definition of terms, but if the OS is as easy to ingest as google's website itself, I can only see upward motion in its future.

11. Altria ( MO ) 15.05 a share 1/1/2009 , target price 24.50
Altria Group, Inc. (ALG) is the holding company of Philip Morris USA Inc. (PM USA) and John Middleton, Inc., which are engaged in the manufacture and sale of cigarettes and other tobacco products. Philip Morris Capital Corporation (PMCC), another wholly owned subsidiary, maintains a portfolio of leveraged and direct finance leases. In addition, at December 31, 2007, ALG held a 28.6% economic and voting interest in SABMiller plc (SABMiller), which is engaged in the manufacture and sale of various beer products. The Company’s segments are U.S. tobacco; European Union; Eastern Europe, Middle East and Africa; Asia; Latin America, and Financial Services. In March 2008, the Company completed the spin-off of Philip Morris International Inc., a wholly owned subsidiary. On December 11, 2007, ALG acquired 100% of John Middleton, Inc., a manufacturer of machine-made large cigar .Incredible dividend, controls majority of tobacco products in America, also has a stake in SABMiller. The only reason I don't have real money invested in this one is because the gov. is clamping down on smokers and will become even more strict in the future. With the way things are going, smoking could become illegal within 20 years. This is why I think PM is a better growth play because it focuses on countries whose govs don't mind if their citizens smoke themselves to death (i.e. China, South Korea, Japan, Russia, etc). In the near term the stock will outperform the market, but in the long term its performance will depend on how healthy or unhealthy Americans choose to live and gov regulations. I forecast a diminishing number of Americans choosing to pick up this bad habit in the long term .Great company, great management, great lawyers, great dividend. Only problem is they sell a product people have a strong opinion on. Will be a strong performer for years to come .. Many people will miss this one just because it is a sin stock. However, when times get hard to is a proven fact that PEOPLE smoke consume more alcohol, Even people that have stopped for long periods start back to smoking. It is one of those things that take your mind off of the here and now for 6 minutes. After the 9-11 devastation, their sales went up.

What are your thoughts on the 2009 top stock picks ??
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