May 27th, 2010 | 
Author: Top 10 Stocks For 2011: Hard Asset Producers (HAP)
“Whenever inflation heats up, there’s no better place to park your cash than in tangible commodities,” says Nathan Slaughter.
his The ETF Authority, he noes “Our favorite play on this sector is Market Vectors Hard Asset Producers (NYSE: HAP), an ETF whose 300-stock portfolio provides one-stop shopping for six distinct commodity sub- sectors.
“History has shown conclusively that there is one asset class that thrives above all others under these hostile conditions: commodities. A depreciating dollar is a sure-fire recipe for rising commodity prices. And when inflation is on the rampage, investors always like the reassurance of owning hard assets.
” Instead of watching prices for things like steel and gasoline rise all around you, why not convert your dollars into these commodities directly and enjoy the ride?
“Even if the Fed does manage to keep inflation in check, we believe that good old supply-and-demand fundamentals favor rising prices anyway.
“With the global economy getting back on track and emerging powers like China swallowing mountains of raw materials, the short-circuited commodities rally will have juice once again.
“Investors have a dizzying array of options here, but our favorite is Market Vectors Hard Assets. The fund is invested in six commodity sub-sectors.with top billing going to the energy sector, where integrated oil & gas giants, o?shore drillers and equipment/service providers soak up about 40% of the fund’s assets.
“Elsewhere, shareholders will have a large stake in agricultural firms, ample exposure to gold and silver producers, along with aluminum, nickel, iron ore and other critical industrial metals. Rounding out the portfolio are holdings linked to coal, steel, uranium and even forest products.
“Whether it’s to protect purchasing power against the ominous threat of currency debasement or a simple bet on stronger economic expansion, both point to a continued run-up in commodity prices — and the shares of producers that bring us these goods.”
Top 10 Stocks For 2011: IMAX (IMAX)
For his top pick for 2011, Dennis Slothower turns to the “big screen” and highlights a company that could benefit from the recently release film, Avatar.
The editor of Stealth Stocks says, “IMAX Corporation (NASDAQ: IMAX) is one of the world’s leading entertainment technology companies, specializing in motion picture technologies and large-format film presentations.” Here’s the reasoning behind his buy recommendation.
“The company’s principal business consists of large-format digital and film-based theater systems. The sale or lease of such systems to, or contribution of such systems under, revenue-sharing arrangements with its customers and the conversion of two-dimensional (2-D) and three-dimensional (3-D) Hollywood feature films for exhibition on such systems around the world.
“IMAX’s theater systems are based on proprietary and patented technology. Its customers that purchase, lease or otherwise acquire their theater systems are theater exhibitors that operate commercial theaters, museums, science centers or destination entertainment sites.
“The company generally does not own IMAX theaters but instead licenses the use of its trademarks along with the sale, lease or contribution of its equipment.
“In 2002, IMAX introduced a technology that can digitally convert live-action 35mm films to its large format at a modest incremental cost while meeting the company’s high standards of image and sound quality.
“In 2003, the company introduced IMAX MPX, a theater system designed specifically for use by commercial multiplex operators.
“The IMAX MPX system, which is highly automated, was designed to reduce the capital and operating costs required to run an IMAX theater, all without sacrificing image and sound quality.
“Avatar, a movie made in 3-D, was just released this Christrmas. Critics are saying that it could be the nextThe Lord of the Rings, only it uses a new kind of 3-D technology that is expected to revolutionize the movie industry, much as did sound and color did in the last century.
“High expectations are pushing theater chains around the world to invest in this new digital 3-D system. IfAvatar is, in fact, a big hit, we’re sure to see many more 3-D action films and many more 3-D theaters, which should increase IMAX’s earnings sustainably.
“According to my numbers, IMAX should be selling in the low teens over the next three to five years. It is currently trading around $10, so IMAX has large upside potential. Place a sell stop at 25% below your entry price. As the stock rises, continue to raise your stop so that you are trailing the Friday close by 25%.”
Top 10 Stocks For 2011: Longtop Financial (LFT)
“Longtop Financial Technologies (NYSE: LFT), our top pick for for 2011, was the first Chinese software company to list on the NYSE when its ADRs began trading in October 2007, and we’re impressed by the progress made since then,” says Timothly Lutts.
The editor of Cabot Stock of the Month Report explains, “Financial services industries are booming in China, and Longtop is a great way to benefit. We’ve long maintained that watching China’s growth in recent decades has been like watching a video of American history … but played at fast- forward speed.
“The transition from farming to industrial production was accomplished in one generation (in part by following the U.S. roadmap) and now the country is entering into the software era.
“Longtop Financial Technologies was founded in 1996 as a financial systems integration company, but made the transition to software and solutions in 2001.
“Today it’s the #1 developer of banking software in China and the #2 developer of software for the insurance industry. And now it’s breaking into the securities industry; Longtop announced its first contract there in November.
“Longtop’s main customers are banks; they accounted for 82% of revenue in the latest quarter. And its biggest bank customers (no surprise) are the ‘Big Four’ banks of China. These are the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, and the Agricultural Bank of China.
“These four banks together hold more than 65% of domestic market share. For Longtop, three of them (it’s working to get business from the fourth) accounted for 48% of revenues in the latest quarter.
“In China, of course, the banks are healthy — none have gone bankrupt, or been bailed out by the government. And none are expected to. Yes, business has slowed a little, but the future is still expected to bring great growth. And as the banks grow, Longtop will, too.
“In addition to banks, Longtop serves the insurance industry and the financial departments of major non-financial companies, and there’s no reason those won’t grow, as well. But banks are the company’s bread and butter and will be for the foreseeable future.
“Furthermore, Longtop, which spends 5.8% of revenue on R&D, has new projects starting frequently. Recent announcements include projects on anti-money laundering, e-banking, financial testing solutions, financial risk management and data warehousing.
“And then there are acquisitions. Longtop completed the acquisition of Sysnet in second quarter, and it’s currently working on an acquisition that would be its biggest yet.
“Technically, Longtop’s stock chart is encouraging. After coming public in October 2007 at 18, it peaked at 35 and then drifted slowly down over the next year (with the market), bottoming at 10 1/2 in November 2008. By late February, it had recovered to 15, and that’s when the big move of 2009 began that took the stock to a high of 38.
“Currently, it’s digesting that advance; it may pull back as far as 32, where we now find the 50-day moving average. And if it does I recommend that you treat the pullback as a buying opportunity.
“While the American banking industry struggles, the Chinese banking and financial services industries are booming, and Longtop is a great way to benefit from that boom.”
Top 10 Stocks For 2011: T. Rowe Price New Asia (PRASX)
“My top investment idea for 2011 is T. Rowe Price New Asia (PRASX),” says long-standing fund expert Walter Frank.
In his The MoneyLetter, which has been published for over 30 years, he explains, “What attracts us to the fund is the weight it gives to both China and India.” Here’s his review.
“It may seem a strange pick considering that the fund is up almost 100% for 2009.
Normally, after such a run, we would not pick the fund as a favorite for next year. In addition the entire range of emerging market stocks are now among the favored by surveyed managers for 2011.
“That too should serve as a warning to stay away from the group. Having duly warned you we are nevertheless sticking with our recommendation.
“What attracts us to the fund is the weight it gives to both China and India. Each is about 30% of the fund. We like that mix.
“In fact, what attracted us to the fund in the first place is that it gave reasonable weight to India. We see most Asian funds as underweighting India. We would be wary of a pure India fund and right now we are not keen on a pure China fund. It is the blend that we like.
“Even though the emerging market funds have been Wall Street favorites this year we think their run is by no means over. The emerging markets are being valued at about the same level as are developed markets.
“Considering their potential growth rate, they are actually selling at a more than trivial discount of what they would sell for were they a developed market. We do not believe the discount makes much sense any more.
“Today’s emerging markets are no longer the crap- shoots of the past. As this is being recognized,we look for higher normal valuations (price/earnings ratios) than in the past.
“There was a manager change for the fund in April, as the former manager retired. So far the fund has not lost a beat.
“We would not expect it to, considering the strong bench T. Rowe Price brings to Asian investment. We are still recommending the fund despite its meteoric gains in ‘09.”
Top 10 Stocks For 2011: Universal Insurance (UVE)
“Universal Insurance Holdings (NYSE: UVE) is my stock pick for 2011,” says Neil Macneale, editor of the In his 2-for-1 advisory.
Incidentally, Neil’s top stock pick in last year’s report — Teck Resources (NYSE: TCK) — soared nearly 600%. Here’s his review of last year’s pick as well as his new favorite for the coming year.
“Teck Resources has had a great run but it’s nearing the time to cash out. According to our monthly buy and sell routine — which is a laddered portfolio approach — the TCK position in our 2 for 1 portfolio will be sold in April.
“According to our monthly buy and sell routine — which is a laddered portfolio approach — . However, no one who bought at the beginning of 2009 could be faulted for taking their profits at any time.
“TCK now has a P/E of 32 and its balance sheet is way out of whack. A resumption of dividend payments seems unlikely in the next few years. TCK is selling at its 52 week high and, as hard as it is to face up to the facts, it’s time to let it go.
“Even if its has a little upside momentum remaining, as my Grandfather used to say, ‘You always need to leave a little on the table for the next guy, otherwise who would want to buy?’
“Universal is a small insurance company based in Fort Lauderdale, Florida, specializing in homeowner’s insurance. The company has a strong balance sheet with over $7.00 in cash per share on the books with earnings at close to a dollar a share.
“The current profit margin stands at just under 20% and the dividend yield is a whopping 13.8%. 47% of outstanding shares are held by insiders.
“Granted, investing in a homeowner’s insurance company in hurricane country should be considered on the risky side, but UVE has a good record with its premium/loss ratio so far.
“In return for the risk taken on, insurance companies get to use OPM (other people’s money) for investments during the periods between claims losses. Universal has done exceptionally well in that regard during the economic downturn.
“It cannot be assumed that the good record on investments in 2009 will be repeated, but the management of Universal seems to be playing a hot hand at the moment and it’s not unreasonable to imagine this might continue through 2011.”
Top 10 Stocks For 2011: AECOM (ACM)
“Our top pick for 2011 is engineering and construction (E&C) firm AECOM Technology (NYSE:ACM),” says Geo?rey Seiler.
In his BullMarket.com the advisor explains, “AECOM, unlike some better-known E&C names, o?ers a relatively low-risk business model. It performs no construction work at all and thus has none of the lump-sum, fixed-rate contracts that other companies might sign.
“The Los Angeles-based company focuses on a broad range of services that includes planning, design, environmental impact studies, project management, logistics and other jobs in the facilities, transportation, environmental, and energy and power segments.
“Transportation is the company’s largest end market, representing 28% of the business, followed by environmental at 25%, facilities work at 24%, and Management Support Services (MSS), which delivered 17% of its revenues in fiscal 2009.
“Energy and power is the company’s smallest segment, representing about 6% of its total revenues, but the company does view it as a growth opportunity. It is particularly strong in hydroelectric projects.
“The MSS business is 100% dedicated to working directly for the U.S. government, but government spending of all types — either from federal state and local governments and foreign governments — accounts for 70% of the company’s revenue. The remainder comes from the private sector.
“AECOM has been under some pressure toward the end of the year, despite initially rallying following a strong fiscal Q4 earnings report in November. The culprit was some weak reports from fellow E&C firms and the Dubai debt debacle.
“However, AECOM isn’t subject to the same type of energy sector cancellations that some other E&C companies experienced, and its exposure to Dubai is negligible.
“Impressively, AECOM is one of the few E&C firms to grow its backlog sequentially last quarter. Total backlog stood at a record $9.5 billion on September 30th, a 10% increase year over year and a 3% increase quarter over quarter.
“Meanwhile, AECOM is well positioned to be a beneficiary of increased government stimulus spending in 2011, as well as the possible passage of a substantial highway bill late next year.
“AECOM guided for fiscal year 2011 EPS to be in the range of $1.90 to $2.00. The midpoint of this range reflects 15% growth in earnings per share. We think the guidance is relatively conservative.
“In summary, we like AECOM’s position in the marketplace, its consistent growth, and sound low-risk strategy. With a pristine balance sheet, trading at under 14x the midpoint of conservative guidance, and an over 15% expected 5-year growth rate, AECOM is undervalued and our top pick for 2011.”
Top 10 Stocks For 2011: American Superconductor (AMSC)
Michael Cintolo, editor of The Cabot Market Letter and Cabot Top Ten Report, looks to the alternative energy sector for his favorite investment idea for 2011. The growth stock expert explains, “I consider this company to be the #1 wind power story in the market today.” Here’s his review.
“While alternative energy hasn’t been a terrific sector for much of 2009, we’re beginning to see some great strength in the group as investors discount accelerating growth in the quarters to come. And my favorite stock is sure to benefit from this trend, as it’s the #1 wind power story in the market today.
“We’re talking about American Superconductor which designs many di?erent wind turbines and then licenses them to customers that want to get into the wind business; customers are obligated by contract to then buy AMSC’s wind electrical systems- basically the brains of the wind system. “Its biggest customer (by far) is Sinovel of China, which wasn’t even in the wind industry a few years ago, but is set to become a top five turbine maker next year. And many other customers, including Hyundai Heavy Industries (which is going to have a big presence here in the U.S.) are set to ramp up production in 2011.
“Because of all that, revenues have leaped more than 80% in each the past two quarters, earning are ramping up quickly and management has stated it expects fiscal 2011 (ending next March) revenues to grow more than 33%, and earnings of “at least” $1.15 a share.
“Interestingly, because alternative energy stocks have been out of favor, AMSC hasn’t done much in the second half of 2009. It spent two months building a launching pad, then broke out powerfully after an earnings report in August.
“But then it spent another four months building a new launching pad! Happily, AMSC has just broken out on the upside, which leads us to believe the buyers are finally ready to push the stock much higher as 2011 arrives.”
Top 10 Stocks For 2011: American Superconductor (AMSC)
“Looking for a way to bet on a continued rebound in technology stocks, a rise in worldwide demand for energy, and China…all in one?” asks small cap growth stock expert Jim Oberweis, Jr.
The money manager and editor of The Oberweis Report suggests, “Take a look at American Superconductor Corp. (NASDAQ: AMSC), my choice for the top idea for 2011.
“The bulk of their business today comes from the wind power industry, as AMSC designs wind turbines and sells turbine electrical systems that can be customized for each customer.
“AMSC is the leading provider of electrical components to the leading Chinese wind turbine manufacturers, with Sinovel being their largest customer and representing roughly 75% of their revenues.
“Sinovel is the leading player in the Chinese market and continues to successfully take market share from competing players. While Sinovel’s growth is AMSC’s gain and their relationship has only strengthened as of late, sales concentration remains a risk.
“AMSC continues to mitigate this exposure through deals with several new international wind power customers. Hyundai represents another important customer and has already announced orders both in the US and Korea.
“Customer Doosan in Korea has ambitions of becoming a top ten manufacturer as well. AMSC has several other attractive growth opportunities that should help to diversify their business.
“Within the power grid market, the company sells power systems to utilities to help them control power output from renewable sources. With expected growth in electricity usage over the next few decades utilities are planning now to prevent costly power outages.
“AMSC products increase the reliability and capacity of the grid, directly addressing the growing problem of grid voltage instability. The company’s superconductor business represents another exciting growth opportunity.
“As renewable power stations continue to grow, so does the problem of collecting the energy they produce and e?ciently transporting it to the place it is used. “These stations are often erected in rural areas while the demand for their produced power is a good distance away, in more densely populated areas. “The copper wire that is currently used su?ers from an inability to span long distances e?ciently, thus causing power line losses among other costly issues. “AMSC is the leading manufacturer of proprietary high temperature superconductor (HTS) wire, which can carry roughly 150 times the electrical capacity of standard copper wire and will better handle the growing demand for energy usage worldwide.
“The company must win contracts here in order to achieve profitability within this business, but we expect rapid growth both here and abroad.
“The proof is in the pudding, of course. Amidst a weak economic backdrop, the company grew revenues by 85% in their latest reported quarter as they announced their third consecutive quarter of profitability.
“The future looks bright as well. After booking approximately $165 million of orders in their latest reported quarter, AMSC enjoys a backlog of orders valued at roughly $587 million.
“The stock should reward investors in 2011 as AMSC reports continued growth in the final two quarters of their current fiscal year (which ends in March), followed by a near doubling of earnings in the following year.”
Top 10 Stocks For 2011: Dataram (DRAM)
Kevin Kennedy specializes in micro and small cap “momentum” stocks that, technically, have broken to the upside and then pulled back in price.
In his The Coolcat Report, he looks to Dataram (NASDAQ: DRAM) as his top speculative idea for the coming year.
“Dataram is a small company with growing revenues and a market cap of less than $30 million. Founded in 1967, Dataram manufactures computer memory, storage and software products.
“Its products and services deliver IT infrastructure optimization, dramatically increase application performance and deliver substantial cost savings.
“Dataram solutions are deployed in 70 Fortune 100 companies and in mission-critical government and defense applications around the world.
“Second-quarter revenues reported in late November were $10.7 million, up 51% from the $7.1 million reported in the same quarter in the prior year. The company lost $1.6 million, or $0.18 per share.
“Demand and memory pricing is improving, and the company’s recently acquired Micro Memory Bank business unit is boosting sales and new products.
“The company also has high hopes for its recently introduced storage area network (SAN) optimization solution called XcelaSAN, which is expected to be available in early 2011. Sales of that product and lower expected R&D expenses going forward should push the company towards profitability.
“The company’s stock broke out of nine-week base on big volume Nov. 20, but has fallen back from above $5 to the low $3 range. It looks well priced at these levels.”
Top 10 Stocks For 2011: Electronics Arts (ERTS)
“I’ve been tracking the companies I feel are best positioned to sustain the market’s upward momentum into next year,” says Karim Rahemtulla.
The options expert with Investment U suggests, “One such company is Electronic Arts (NASDAQ:ERTS) – a major player in the video game industry. ERTS is one of the largest creators and sellers of multi-platform content in the industry and it finally o?ered some guidance for the year ahead.
“Expectations for earnings for 2011 are 87 cents per share with revenues of $4.26 billion. EA came out and said that revenues should fall between 4.2 and $4.4 billion with earnings ranging from $0.70 to $1.
“That type of wide range never sits well with Wall Street, which likes much narrower ranges and more specific guidance.
“There are three reasons to buy EA now:
“First, share prices do not usually wait for numbers to come through before they move higher. They move higher in anticipation of better earnings ahead. This should happen after the company reports numbers for the first and second quarter of next year.
Second, if this economy and market are really recovering, one of the prime beneficiaries will be a company like EA, which is solidly in the consumer discretionary space.
“Third, EA has been the subject of many takeover rumors, specifically by the likes of Microsoft. Currently the shares are trading at $16.50 per share, down from highs of more than $50 just over a year ago. It is flush with cash, very little debt and a dominant market position.
“While a takeover would be the least likely outcome, there still is that chance and in the current climate of mergers and acquisitions, I wouldn’t be surprised to see a bid made for EA.
“While shares themselves look to be a good buy, I prefer to play this one using the Electronic Arts January 2012 $20 LEAPs.”
Top 10 Stocks For 2011: Eldorado Gold (EGO)
“While my primary focus is on the international financial markets, it’s the glint of gold that has caught my eye for 2011,” says Martin Hutchison.
The contributing editor to both Money Map Report and Money Morning, explains, “Gold – or mining companies like Eldorado Gold (NYSE: EGO) – an especially compelling investment for 2011.
“There hasn’t really been a commodity bubble like the current one since the late 1970s. It will end, as these things always do – but only when the world’s central banks decisively tighten monetary policy and turn o? the spigots flooding the system with cash.
“That’s unlikely to happen until consumer inflation has shown itself rising sharply. In relative terms, gold’s price is still far below its all-time highs – the 1980 top at $875 per ounce is equivalent to $2,400 today, roughly double the current price.
“Supply is also becoming an ever-larger factor – the total global supply of new gold in 2009 was valued at under $90 billion, with another $35 billion or so available from recycling.
“That first number is unlikely to change as mining output has been declining by about 1% per annum in volume terms, in spite of the recent surge in gold’s price.
“This means that if the big boys – such as the hedge funds (global assets of $1.9 trillion) or China (o?cial reserves of $2.3 trillion) – get involved, demand is likely to quickly exceed supply by a huge margin.
“Even though all the gold ever mined is still with us, it has a value of only about $5 trillion – a lot of money, but not huge in light of global investment flows.
“So, if the money really pours into gold, the price could again take o?. After all, $2,400 an ounce is still some distance away, and there’s a lot more speculative capital around today than there was in 1980.
“There’s no money tightening in the works currently. The Fed has kept monetary policy extremely loose for a year now, and has said it has no intention of raising rates in the near term.
“The European Central Bank, the Bank of Japan and the Bank of England have also indicated they do not intend to tighten, while China’s M2 money supply has risen by 29% in the past year.
“Given all this money supply sloshing around, it’s not surprising that gold prices have zoomed upwards – and will continue doing so as long as the Fed and its central bank brothers maintain a loose-money policy.
Rather than gold itself, I’d recommend gold mining shares – first choice, Eldorado Gold – for two reasons:
1 * First, there’s the leverage. A gold mining company with extraction costs of $600 per ounce doubles its profits when gold goes from $900 to $1200.
2 * Second, commodity speculation pushes up share valuations, so chances are you’ll make even more money. After all, the earnings growth rate becomes pretty spectacular, which can make a very simple company look like a Google!
“As a bonus, Eldorado is not just in gold, it’s in Chinese gold – both internally and through a takeover it recently executed.
“That means it benefits not only from any rise in gold prices, but directly from increases in Chinese wealth. Chinese investors, when they buy gold, will naturally turn first to domestic output.
“Eldorado plans to double current production by 2013 (even without its recent acquisition) – no decline here. What’s more, it’s reasonably valued – actually quite cheap – considering its earnings potential.
“The company was founded in 1992, and has come a long way in a relatively short time, building to a recent market capitalization of $5.15 billion.
“It owns the Kisladeg gold mine in Turkey, which produced 58,000 ounces of gold in the third quarter of 2009, and the Tanjanishan gold mine in western China, which produced 31,000 ounces.
“In addition, its Efemcukuru project, with projected reserves of 1.7 million ounces of gold in Turkey, is expected to begin production in the fourth quarter of 2011.
“Eldorado also has gold-development projects in Greece and Brazil and an iron-ore project in Brazil. Its current gold reserves, proved and probable, total 7.6 million ounces.
“In September 2009, Eldorado made an agreed-share-exchange o?er for Sino Gold, the largest international gold mine in China. The o?er values Sino Gold at approximately $2.2 billion and will give Sino shareholders approximately 25% of the combined group.
“Sino has two operating mines in China – Jinfeng, the country’s second-largest mine with production of 151,000 ounces, and the White Mountain Gold Mine, which began production in January 2009. The Eastern Dragon project in Heilongjiang province will become Sino’s third mine.
“The combined companies will have gold reserves of 12.7 million ounces, with annual production expected to reach 850,000 ounces in 2011. In the third quarter, Eldorado earned $30.2 million, or 8 cents a share – up from 5 cents a share in the third quarter of 2008.
“That’s at an average gold price received of $957 per ounce, compared with a total production cost, including overhead, of $430 per ounce. Based on third-quarter earnings, EGO has a P/E ratio of about 35 times – steep, but not excessive given the growth potential.
“That should become obvious in the year-end figures, which will show the rise in gold prices we saw in recent months dropping straight to Eldorado’s bottom line.
“Just estimating, if the gold price for the fourth quarter averages $1,100 an ounce, that will send an extra $150 per ounce or so in profits to shareholders, adding about 35% to EPS and reducing the P/E correspondingly.
“Yes, labor and energy costs could rise a bit, but not much – Eldorado’s costs were only $402 per ounce in the third quarter of 2008, when oil was at $147 a barrel.
“Bottom line: Increasing gold production – check. Contained costs – check. In the middle of the world’s fast-growing Chinese gold market – check. Decent balance sheet and profitability – check. What’s not to like?”
Picking the right stock is never easy because of the lack of a foolproof rule by which it can be determined what a stock’s price is likely to do in the future. The process of stock picking is like a situation in which you use a systematic form of analysis to conclude that a particular stock will turn out to be a good investment and, therefore, you should add it to your existing portfolio. Picking top stocks, i.e., those likely to give you maximum returns, also demands lots of thought and judgment. There are several factors which make a share belong to the category of top stock picks. These factors may be financial as well as non-financial. Top stock picks should, in all probability, be a safe, diversified group of true, proven performers. You do not need to consult a commissioned investment advisor – you can have these stocks through low cost trading companies. Oil, natural gas and energy must be there in your top stock picks. They will continue to grow and may again produce record profits.
The travel and hospitality industry, i.e., hotels will also give you a good option. Banks and financial institutions, mortgage companies, Internet-based marketing companies should figure among your top stock picks. Remember, great companies have products and services that are in demand for years due to their universal appeal or because they update their products with changing consumer tastes.
You won’t likely lose money by investing in them. Also, strong competitive advantage, called the deep moat, protect big companies from their rivals. Such a situation makes competition well-nigh impossible, and these companies are always formidable contenders for your top stock picks. As market leaders in any sector can set the agenda for their industry, they should also certainly be among your top spot picks.
Top Stocks To Buy For 2011 No.1: Amedysis (AMED)
From: J. Royden Ward
J. Royden Ward is the editor of Cabot Benjamin Graham Value Letter, a newsletter that — as its name suggests — focuses on stocks that meet the criteria of legendary value investor Ben Graham.
For his top pick for 2011, he the advisor looks to Amedisys (NASDAQ: AMED), a provider of home health care and hospice services.
“Despite government e?orts, health care costs continue to rise to unacceptable levels in the U.S. But there are alternatives that o?er dependable care at substantially less cost to patients and to taxpayers, and I believe one option, home health care, will become an important alternative to lengthy hospital and nursing home stays.
“My top stock for 2011 is the largest company in the home health care sector whose impeccable reputation for delivering reliable care is providing the company with exciting new opportunities for exceptional growth.
“Amedisys is a leading provider of home health care and hospice services. The company typically provides skilled nurses or nurse assistants who coordinate health care with the patient’s family and physician.
“The company operates more than 500 Medicare-certified home health agencies and 50 hospice agencies in 37 U.S. states and Puerto Rico. “The company’s home health care services provide assistance to patients recovering improving patients’ quality of life through physical, speech or other therapy.
“For example, the company educates patients on how to avoid falls in the home, which are the leading causes of patients re-entering hospitals. Approximately 87% of Amedisys’ home health care services are covered by Medicare.
“Amedisys also o?ers hospice home care services for terminally ill patients. Hospice services are designed to provide basic care and comfort to patients and support to family members.
“Compared to hospitals and nursing homes, Amedisys can save patients, families and the health care system huge amounts of money. Health care delivered in patients’ homes is far less expensive than health services delivered in hospitals and nursing homes.
“The home health care industry is fragmented with 9,200 home health care agencies and 3,000 hospice agencies operating in the U.S. Amedisys is actively acquiring smaller home health care agencies that fit the company’s acquisition plans, as well as opening their own new agencies at a rapid pace.
“The growth opportunities in the home health care industry are obvious. The growing numbers of elderly, and the need for less expensive health care including home health care, will likely create industry growth of 15 to 20% during the next several years and decades.
“Revenues climbed 39% and EPS soared 57% during the 12 months ended 9/30/09. Analysts are forecasting 14% sales growth and 11% EPS growth for the next 12 months, but we believe Amedisys will produce sales and earnings growth exceeding 20%.
“We base our growth projections on the company’s aggressive acquisition program along with its ability to open new agencies e?ciently and profitably. AMED shares are clearly undervalued at 8.3 times our EPS estimate for the next 12-month period.”
Top Stocks To Buy For 2011 No.2: American Superconductor (AMSC)
From: Mike Cintolo
Michael Cintolo, editor of The Cabot Market Letter and Cabot Top Ten Report, looks to the alternative energy sector for his favorite investment idea for 2011. The growth stock expert explains, “I consider this company to be the #1 wind power story in the market today.” Here’s his review.
“While alternative energy hasn’t been a terrific sector for much of 2010, we’re beginning to see some great strength in the group as investors discount accelerating growth in the quarters to come. And my favorite stock is sure to benefit from this trend, as it’s the #1 wind power story in the market today.
“We’re talking about American Superconductor which designs many di?erent wind turbines and then licenses them to customers that want to get into the wind business; customers are obligated by contract to then buy AMSC’s wind electrical systems- basically the brains of the wind system. “Its biggest customer (by far) is Sinovel of China, which wasn’t even in the wind industry a few years ago, but is set to become a top five turbine maker next year. And many other customers, including Hyundai Heavy Industries (which is going to have a big presence here in the U.S.) are set to ramp up production in 2011.
“Because of all that, revenues have leaped more than 80% in each the past two quarters, earning are ramping up quickly and management has stated it expects fiscal 2011 (ending next March) revenues to grow more than 33%, and earnings of “at least” $1.15 a share.
“Interestingly, because alternative energy stocks have been out of favor, AMSC hasn’t done much in the second half of 2010. It spent two months building a launching pad, then broke out powerfully after an earnings report in August.
“But then it spent another four months building a new launching pad! Happily, AMSC has just broken out on the upside, which leads us to believe the buyers are finally ready to push the stock much higher as 2011 arrives.”
Top Stocks To Buy For 2011 No.3: AOL (AOL)
Form: Bernie Scharer
”AOL (NYSE: AOL), formerly America Online, is one of the most storied – and bloodied – names in the Internet sector,” says Bernie Schae?er.
Referring to skepticism surround its early December spin-o? from Time Warner, the editor ofSchae?er’s Research chooses AOL as his top pick for 2011, noting, “From a contrarian perspective, the current pessimism could have positive implications.
“AOL’s merger with Time Warner in 2001 was hailed (by some) at the time as an innovative marriage of old and new media. But AOL’s dial-up Internet access model was already under pressure by the time of the merger, and the AOL and Time Warner cultures never meshed.
“The merger is now regarded as one of the most disastrous in U.S. corporate history, losing more than $100 billion in market value. Steve Case, the deal’s architect , resigned the chairmanship of the combined company two years later and left the board in 2005.
“Time Warner has been looking to rid itself of AOL ever since. So it was no surprise that Time Warner’s spin-o? of AOL in early December 2010 was met with a heaping armful of skepticism.
“We have seen multiple media outlets weigh in negatively on AOL, perhaps an indication of how Wall Street is currently viewing the stock. In fact, the shares were initiated at ‘underperform’ by a major brokerage house in December.
“Moreover, Zacks reports that the stock has earned one ’strong buy’ rating, one ‘hold,’
and two ’strong sells.’ Therefore, we view the upgrade potential on AOL favorably.
“But AOL, with a market cap of only $2.5 billion, argues that it remains a strong brand. Its 80-plus Web sites attract 100 million unique visitors each month. It still generates cash through its Internet access business.
AOL has a new management team led by former Google exec Tim Armstrong. Armstrong wants AOL to di?erentiate itself from competitors by creating original content. Yahoo, Google and others are largely aggregators of others’ content ; AOL generates 80% of its own content.
“Although we emphasize that we are no in way comparing AOL to Google, the skepticism greeting the spin-o? is eerily reminiscent of what we saw around Google just prior to its initial public o?ering in 2004. hen the shares of GOOG quickly outperformed their low expectations, the bears quickly jumped on the stock’s bandwagon, pushing it even higher.
“OL’s shares so far are bucking the widespread pessimism as they hover above short-term support at the 23 level. From a contrarian perspective, this pessimism could have positive implications if skeptics succumb to better price action.”
Top Stocks To Buy For 2011 No.4: Weatherford International (WFT)
From: Elliott Gue
Energy sector expert Elliott Gue turns to Weatherford International (NYSE: WFT) as his top pick for the coming year. In his The Energy Strategist, he explains, “As with most oil services firms, Weatherford’s North American business has been hit hard and the stock now trades at a deeply discounted valuation.
“Weatherford is perhaps best known as an expert provider of services related to mature oilfields. Traditionally, Weatherford has had a strong presence in North America, which has been a proving ground for all sorts of technologies that squeeze oil from older fields.
“An example is underbalanced drilling, a technique that prevents damage to mature fields. Weatherford’s genius in recent years has been to take homegrown North American technologies and sell them internationally.
“The firm has gradually lessened its exposure to North America and forged into international markets where profit margins are higher and profitability cycles less severe.
“It also wins points for expanding its business in Russia, a key market for both oil and natural gas production. Specifically, Weatherford purchased the oil services business of TNK-BP, BP’s joint venture in Russia.
“Weatherford’s stock has significantly underperformed the rest of the oil services industry since October, primarily due to concerns about Weatherford’s Chicontepec contract in Mexico.
“Chicontepec is a heavy oilfield that is the centerpiece of Petroleos Mexicanos’ (PEMEX) strategy to stabilize and grow oil production.
“The problem PEMEX faces is that production from its largest field, the o?shore Cantarell oilfield, has fallen o? rapidly in recent years to the point that Mexico’s oil exports have tumbled.
“Accordingly, PEMEX has decided to reexamine its development plans for Chicontepec and has cut investment in the field 22%. Because Weatherford is a big player in Chicontepec, its stock has fallen.
“Although PEMEX’s recent announcements caught the market by surprise and are bad news for companies with significant exposure to Mexico, the sello? that’s hit Weatherford’s shares is overdone.
“Mexican oil production is falling fast; the country will have no choice but to bump up spending on Chicontepec.
“Finally, Weatherford is trading at less than 17 times 2011 earnings estimates. This compares favorably to Schlumberger’s stock, which trades at 22.5 times 2011 earnings estimates. Shares of Halliburton and Baker Hughes (NYSE: BHI) trade at 21 times 2011 earnings.
“Weatherford’s deeply discounted valuation more than prices in all the bad news surrounding Mexico and Chicontepec. Take advantage of the recent decline to buy Weatherford International under 26.”
Top Stocks To Buy For 2011 No.5: Virginia Mines (VGQ)
From: Adrian Day
”Virginia Mines (Toronto: VGQ) remains my favorite gold exploration company,” says resource expert Adrian Day.
In choosing the stock as his top pick for 2011, the editor of The Global Analyst explains, “The company has a successful track record, top management and a super-strong balance.
“Virginia Mines has a successful track record, having discovered and subsequently sold to Goldcorp, the rich Eleonore deposit in northern Quebec. This discovery saw the stock go from the $2 range to the mid-teens. Following the sale (which saw a spin out to shareholders), the stock is in the low $5s, ready to try again.
“Exploration by its nature is very high risk, with very long odds of discovery. Most companies finance their exploration by continual equity o?erings, which mean dilution for shareholders even if they are successful.
“Virginia has a di?erent way: it is a prospect generating, looking for prospects, often by staking the ground, doing some exploration, and then looking for a joint venture partner.
“The partner spends the high-risk exploration dollars in return for a majority ownership in the property. This results in a low-risk business model.
“Even though the company gives up most of the property, it holds on to its balance sheet and by doing this over and over, can build a portfolio of properties in which it owns minority interests with someone else spending the money.
“As Virginia has grown and built a strong bank account (it has has $44 million on its balance sheet), it is now in a position to do a little more exploration than in the past. This enables it to sift through its projects, and by advancing them more, obtain better deal terms.
“Virginia has build a broad portfolio of projects, all in mining-friendly Quebec, in a range of metals and minerals, but emphasizing gold.
“Right now, it has six properties ready to drill over the winter season, all in the prospective but under-explored James Bay area. Some of these are very close to the Eleonore discovery, on ground not included in the sale to Goldcorp.
“Virginia is spending the money on four of these properties, with two being funded by partners. Some have brand new targets being drilled, others following up on previous drilling.
“While exploration remains long odds, Virginia has as good a shot as any, and at minimum, we expect the next six months or so to generate a lot of news on these properties that should see the stock buoyant.
“Any positive exploration results will see it move much higher. In the meantime, you can buy a fine company at less than NAV. Just the value of the royalty it retained on Eleonore and its cash in the bank are worth more than the entire market cap. All the exploration comes free.
“So you can buy a great company at below NAV. Despite the move up in the stock price in recent months, this is an excellent time to buy, ahead of this aggressive drilling campaign. We expect 2011 to be very good for Virginia and its shareholders.”
Top Stocks To Buy For 2011 No.6: SmartHeat (HEAT)
From: Brendan Corey
Brendan Co?ey is the editor of The Cabot Green Investor, a newsletter focused on companies involved in varous aspects of the broad environmental technologies sector.
For his top pick for 2011 Here, he looks to SmartHeat (NASDAQ: HEAT), a maker of plate-heat exchange systems and heat meters.
“Like in seemingly every other business, China promises to be a massive market for the products SmartHeat provides: plate-heat exchange systems and heat meters.
“These are relatively simple products that are only just starting to be required in China. Using SmartHeat PHE systems can slash coal usage by up to two-thirds in wildly ine?cient Chinese buildings, oil refineries and chemical factories, where legacy shell and tube technology dominates.
“The market for PHEs in China will rise 20% to $3.2 billion in 2011, while the submarket for smaller, customized PHE units in which SmartHeat has a highly profitable specialty should grow triple-digits to nearly $1 billion.
“Plenty of growth should come in future years too: China generates 70% of its electricity from coal, and the government is keen to be more energy e?cient to ween itself from imported oil and improve its notorious urban air quality.
“There are plenty of competitors in PHEs, but SmartHeat has two advantages: It is Chinese and has production costs around 15% cheaper than imports at comparable quality.
“Sales through the first three quarters of fiscal 2010 were up 92% to $56.5 million, while net income surged 96% to 51 cents a share over the same period. Both should nearly double again in 2011.
“Management are industry veterans who are confident enough in the company they signed an agreement not to sell any of their shares until January 2012.
“The stock only began trading on the Nasdaq Global Market in March so the company’s story is still unheard by many investors. That will change quickly.”
Top Stocks To Buy For 2011 No.7: SPDR Small Cap Emerging (EWX)
From: Ron Rowland
For his top fund selection for 2011, fund specialist Ron Rowland turns to the SPDR S&P Emerging Markets Small Cap (NYSE: EWX).
In his All Star Investor, he suggests, “This is the easiest way to gain access to the small cap stocks of all the emerging markets, as it includes stocks from more than 20 countries countries.
“SPDR S&P Emerging Markets Small Cap excludes stocks with a market caps exceeding $2 billion (US) — the ones that dominate traditional cap-weighted emerging market ETFs.
“Historically, the growth of emerging market economies has been predominately export driven — the large cap companies that produce and export products to the U.S., Europe, Japan, and other consuming nations.
“There are also a few large cap companies (banks, utilities, and construction) within each emerging market nation that help provide the infrastructure needed.
“The major change now underway is the growth of the middle class within each of these countries. The people of the emerging market nations are becoming more prosperous and are becoming significant consumers themselves.
“In addition to economic growth via exports, many of these nations are now experiencing rapid internal growth. The large cap and export oriented companies will still do well, but the real opportunity is in the small cap segment of emerging markets.
“These small cap companies are undervalued compared to their large cap brethren and are better positioned to benefit from the internal growth of each nation.”
Top Stocks To Buy For 2011 No.8: Otelco (OTT)
From: Neil George
”Why try to guess what the S&P, gold, the dollar or anything else might do in 2011 when you can invest sure and simple in a proven utility company that pays you to own it?” asks Neil George.
In his Stocks that Pay You, he looks to Otelco (NYSE: OTT), an Alabama-based phone company, as his top investment idea for 2011.
“Why make a bet that can go bust when you can sit back and own a very simple company that year after year keeps sending nice fat checks your way every quarter.
“Otelco’s headquarters are just like they should be – simple and austere. No fancy facades and no fancy executive suites and board rooms. In fact, there isn’t even a garage for the executive limos – as there aren’t any limos – just company trucks.
“The company operates the core of utilities that include telephone lines, wireless services, broadband internet, cable and other television services to homes and businesses in very select rural markets in Alabama, Maine, Massachusetts, Missouri and West Virginia
“The core of the company has been in its original markets since the early part of the last century and has a very reliable, steady – if not completely sticky customer base that keeps its services, expands its services and most importantly keeps paying for its services year after year.
“While its peers focus more on dealmaking, Otelco keeps its focus on generating more cash from its base businesses resulting in average annual revenue growth running at an average 20%+ rate. And from keeping management and other costs down; its operating margin is equally impressive at a fat 27%.
“And it’s ready to deal with anything that the markets or the economy might throw at it with ample cash and reserves as its quick and current ratios are running at a very flush and ample 2.1 and 3.1 times.
“All of this comes as the company came to public market years ago with its prime focus on the shareholder. It structured its shares as a combination of half common stock and half corporate bond.
“The deal is that as a shareholder you get the surety and security of being a bond holder as well as the growth of being a common stock investor in one security.
“The dividend is amply covered and is paid every quarter at 42 cents being made up of the interest on the bond and from earnings from the common. That works out to a current 12% yield on your money.
“This is how over the past five years alone even with plenty of market gyrations – investors have averaged over a 66% return while those betting on the S&P 500 barely scraped up a return of just over 2%.”
Top Stocks To Buy For 2011 No.9: Longtop Financial (LFT)
From: Timothy Lutt
“Longtop Financial Technologies (NYSE: LFT), our top pick for for 2011, was the first Chinese software company to list on the NYSE when its ADRs began trading in October 2007, and we’re impressed by the progress made since then,” says Timothly Lutts.
The editor of Cabot Stock of the Month Report explains, “Financial services industries are booming in China, and Longtop is a great way to benefit. We’ve long maintained that watching China’s growth in recent decades has been like watching a video of American history … but played at fast- forward speed.
“The transition from farming to industrial production was accomplished in one generation (in part by following the U.S. roadmap) and now the country is entering into the software era.
“Longtop Financial Technologies was founded in 1996 as a financial systems integration company, but made the transition to software and solutions in 2001.
“Today it’s the #1 developer of banking software in China and the #2 developer of software for the insurance industry. And now it’s breaking into the securities industry; Longtop announced its first contract there in November.
“Longtop’s main customers are banks; they accounted for 82% of revenue in the latest quarter. And its biggest bank customers (no surprise) are the ‘Big Four’ banks of China. These are the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, and the Agricultural Bank of China.
“These four banks together hold more than 65% of domestic market share. For Longtop, three of them (it’s working to get business from the fourth) accounted for 48% of revenues in the latest quarter.
“In China, of course, the banks are healthy — none have gone bankrupt, or been bailed out by the government. And none are expected to. Yes, business has slowed a little, but the future is still expected to bring great growth. And as the banks grow, Longtop will, too.
“In addition to banks, Longtop serves the insurance industry and the financial departments of major non-financial companies, and there’s no reason those won’t grow, as well. But banks are the company’s bread and butter and will be for the foreseeable future.
“Furthermore, Longtop, which spends 5.8% of revenue on R&D, has new projects starting frequently. Recent announcements include projects on anti-money laundering, e-banking, financial testing solutions, financial risk management and data warehousing.
“And then there are acquisitions. Longtop completed the acquisition of Sysnet in second quarter, and it’s currently working on an acquisition that would be its biggest yet.
“Technically, Longtop’s stock chart is encouraging. After coming public in October 2007 at 18, it peaked at 35 and then drifted slowly down over the next year (with the market), bottoming at 10 1/2 in November 2008. By late February, it had recovered to 15, and that’s when the big move of 2010 began that took the stock to a high of 38.
“Currently, it’s digesting that advance; it may pull back as far as 32, where we now find the 50-day moving average. And if it does I recommend that you treat the pullback as a buying opportunity.
“While the American banking industry struggles, the Chinese banking and financial services industries are booming, and Longtop is a great way to benefit from that boom.”
Top Stocks To Buy For 2011 No.10: MannKind (MNKD)
From: Nate Pile
“My top stock pick for 2011 is MannKind Corp. (NASDAQ: MNKD), which is developing a a novel formulation of inhalable insulin called Afresa,” notes Nate Pile.
In his Nate’s Notes newsleter, he explains, “I would emphasize that while the stock must be considered speculative until the FDA delivers a ruling in mid-January of next year, I believe the clinical data that has been submitted by the company is likely to warrant approval.
“Inhalable insulin has admittedly been a losing proposition for other companies that have attempted to play the game over the years.
“However, I believe that MannKind’s unique approach to the situation will not only help the company win approval for its drug, it will also allow the company to experience a surprisingly strong rollout of the product if/when it is finally approved.
“In addition to developing a drug that has a far more favorable clinical profile that the last inhalable insulin product to be approved (Exubera, in 2006), MannKind has also leveraged its engineering expertise to develop a vastly superior mechanical device for delivering the powdered insulin to a patient’s lungs.
“The stock took a hit a few months ago when it was announced that the company would not be signing up a marketing partner for Afresa prior to the drug’s approval.
“However, it has been my contention all along that it was most likely Alfred Mann (already a billionaire a couple of times over thanks to past successes with start-up companies) who walked away from any potential deals, not the other way around.
“And given how the stock has responded following the dip, it appears that the rest of Wall Street may be coming to its senses around the issue as well.
“Assuming the drug gets approved, it would not surprise me at all to see a marketing deal announced shortly thereafter, most likely on much better terms than the company would have received had it signed an agreement pre-approval.
“Along with this lead product, MannKind is also working on next generation products for not only diabetes, but for other metabolic disorders as well.
“In addition, the company is also doing a lot of work in the oncology arena, and as time goes by, we believe the company has the potential to grow significantly as it leverages its expertise in all three areas it is doing work.
“With the caveat that the stock is likely to tumble sharply if the FDA denies approval of Afresa next month (and thus needs to be considered ’speculative’ by all who by it ahead of the ruling), I believe MannKind currently represents one of the best risk- reward ratios among all the stocks I follow. MNKD is considered a strong buy under $9 and a buy under $12.”
Top Stocks To Buy For 2011 No.11: iShares Silver (SLV)
From: Gene Arensberg
“2011 will be the year that silver shines,” says metals and mining specialist Gene Arensberg. In his Got Gold Report, a specialty service from The Gold Newsletter, he says, “We believe that the metal-backed exchange traded fund iShares Silver Trust (NYSE: SLV) is a safe and convenient way for most investors to gain exposure to the silver market.
“When the general public becomes fully involved in gold, silver shines brightly … for a time. At least it did so in the last public rush into gold which peaked about 30 years ago.
“SLV tracks the spot price of silver, less accumulated fees capped at 0.5% per annum.
Since the exchange traded fund’s inception in April, 2006, the trust has accumulated over 300 million ounces of silver.
“That is about 9,500 metric tonnes of bar silver held in ultra-secure soccer field sized vaults by a custodian in London. In December, 2010, the SLV silver stash was worth about $5.3 billion.
“Silver fell out of popularity until just recently, but we see that changing now. For more than 20 years, from 1980 to about 2003, investors all over the globe were conditioned by a weak silver price and not much joy of ownership.
“‘Who cares?’ sums up the public attitude before this bull market for silver began in 2003. Even now that attitude prevails among the same investing establishment that has grudgingly accepted gold as an investment class.
“During that long bear market for silver, government dishoarding of excess silver metal, metal left over from when governments actually had silver in their coinage, acted as a cap to the price.
“That excess supply from o?cial sources is all gone now, but the e?ects of the artificial over-supply are only just now retreating.
“Silver stayed so low-priced for so long it made the second most popular precious metal di?cult to mine profitably. Because of that, annual production of silver has not kept pace with increasing industry and investment demand.
“A factoid that some will find di?cult to believe is that because prices for actual physical silver metal have been so cheap for so long, and because global industry consumes more silver each year than miners are able to produce, there is actually considerably less silver metal in existence than there is gold.
“Gold recently rose to new all-time nominal highs above $1,200 the ounce, but its sister precious metal has lagged so far. In fact it hasn’t even gotten to half of where it did in the last bull market peak in January, 1980.
“Silver reached about $50 an ounce briefly then, but so far this cycle has yet to beat its May 2008 $21.44 pinnacle. That is with gold having bested its 1980 high of $850 by more than $350 an ounce. As such, we believe that silver has some serious catching up to do.
“”What is so enticing about the silver story is that it currently takes about 64 ounces of silver to buy an ounce of gold. That is called the gold:silver ratio. During the bull market for precious metals thirty years ago the ratio fell to about 16:1 or 16 ounces of silver to one ounce of gold.
“If gold simply stood still at $1,100 an ounce and the ratio were to fall to 1980 levels, silver would climb to about $69 an ounce. That suggests achievable upside for silver and SLV of nearly 4X from today.
“But wait, there’s more. Consider that compared to period of the last bull rush for precious metals the world has about 50% more people in it. Governments have inflated their fiat currencies since then by a factor of 10.
“World inventories of actual physical silver metal for investment have actually fallen to less than half of the amount that was available in 1980.
“Recently the government of China re-legalized the ownership of precious metals for its 1.3 billion people and is actually encouraging its citizens to accumulate them.
“The number of people of a?uence and means in the developing countries like Brazil, Russia, China and India has increased exponentially in the last thirty years.
“So, we see the currently unloved silver market as ripe for an investment renaissance of epic proportions. Think about it.
“Today versus 1980 we have globally 50% more people who will be using 1,000% more dollars, yen, euro, pounds sterling, yuan, etc., to chase less than half as much silver metal in a world where anyone can buy a silver ETF with just a mouse click from their study, even in their underwear.
“Isn’t that a potent recipe for silver? We think 2011 could very well be the year that a global popular rush, a veritable tsunami of liquidity into silver gets underway in earnest as more and more people discover just how little of it remains above ground for investment. Our favorite way to participate is SLV.”
Top Stocks To Buy For 2011 No.12: IMAX (IMAX)
From: Dennis Slothower
For his top pick for 2011, Dennis Slothower turns to the “big screen” and highlights a company that could benefit from the recently release film, Avatar.
The editor of Stealth Stocks says, “IMAX Corporation (NASDAQ: IMAX) is one of the world’s leading entertainment technology companies, specializing in motion picture technologies and large-format film presentations.” Here’s the reasoning behind his buy recommendation.
“The company’s principal business consists of large-format digital and film-based theater systems. The sale or lease of such systems to, or contribution of such systems under, revenue-sharing arrangements with its customers and the conversion of two-dimensional (2-D) and three-dimensional (3-D) Hollywood feature films for exhibition on such systems around the world.
“IMAX’s theater systems are based on proprietary and patented technology. Its customers that purchase, lease or otherwise acquire their theater systems are theater exhibitors that operate commercial theaters, museums, science centers or destination entertainment sites.
“The company generally does not own IMAX theaters but instead licenses the use of its trademarks along with the sale, lease or contribution of its equipment.
“In 2002, IMAX introduced a technology that can digitally convert live-action 35mm films to its large format at a modest incremental cost while meeting the company’s high standards of image and sound quality.
“In 2003, the company introduced IMAX MPX, a theater system designed specifically for use by commercial multiplex operators.
“The IMAX MPX system, which is highly automated, was designed to reduce the capital and operating costs required to run an IMAX theater, all without sacrificing image and sound quality.
“Avatar, a movie made in 3-D, was just released this Christrmas. Critics are saying that it could be the nextThe Lord of the Rings, only it uses a new kind of 3-D technology that is expected to revolutionize the movie industry, much as did sound and color did in the last century.
“High expectations are pushing theater chains around the world to invest in this new digital 3-D system. IfAvatar is, in fact, a big hit, we’re sure to see many more 3-D action films and many more 3-D theaters, which should increase IMAX’s earnings sustainably.
“According to my numbers, IMAX should be selling in the low teens over the next three to five years. It is currently trading around $10, so IMAX has large upside potential. Place a sell stop at 25% below your entry price. As the stock rises, continue to raise your stop so that you are trailing the Friday close by 25%.”
Top Stocks To Buy For 2011 No.13: EZchip (EZCH)
From: Paul McWillams
“EZchip Semiconductor (NASDAQ: EZCH), a fabless semiconductor company that specializes in network processors,” is my top pick for the coming year,” says technology sector guru Paul McWilliams.
In his Next Inning newsletter, designed for sophisticated tech investors, he suggests, “I think the upside potential here in 2011 and beyond is significant.
“Its initial market target has been what’s termed as CESR (Carrier Network Switching and Routing). EZCH has since expanded its focus to include products that are broadly grouped into what’s called the ‘Access’ market.
“Between organic demand growth in the CESR market and EZCH’s expansion into the Access markets, it is estimated the company will be addressing a total available market potential of about $1.5B by 2012.
“That implies substantial upside revenue potential for a company that will report somewhat less than $40M in revenue for calendar 2010.
“In 2011, EZCH will be shipping NP2 and NP3 / NP3C network processors in volume to its CESR customer base. In addition to this, we’ll also see the initial revenue generated from its next generation CESR solution, the NP4 and its debut Access product, the NPAx.
“Notable production ramps for the NPA and NP4, which sells for roughly twice the price of a NP3, will begin in 2011. Revenue from its NP2 will likely peak in late 2011 or 2012 as Juniper winds down its demand and replaces the NP2 with an internally designed ASIC.
“However, I believe this will be much more than o?set with the ramp of the NP3 and NP3C, the latter of which is designed into various platforms at Cisco including its new ASR series edge router.
“I believe EZCH’s lack of participation in the 2011 tech rally is attributable to two factors. The first is what I think will prove to be a misunderstanding as to when its business at Juniper will peak and the sharpness of the decline following the peak.
“In my view, this peak won’t happen until late in 2011 at the earliest and by then it will be much more than o?set by growing business at Cisco; not to mention design wins at other leading networking companies that will ramp in 2011 and beyond.
“The second factor has been the selling of shares by some of EZCH’s early venture capitalists (VC’s). Due to the fact EZCH initiated a secondary o?ering to liquidate these VC shares in one fell swoop as well as complete the purchase of its a?liated EZchip Technologies operating unit, this selling pressure will soon be eliminated. In my view, with this gone and EZCH poised to post impressive growth in 2011.”
Top Stocks To Buy For 2011 No.14: Fidelity Select Health Care (FSPHX)
From: Jim Lowell
Jim Lowell is a long-standing expert on mutual funds, which a noted specialty regarding the Fidelity family of funds.
In his The Fidelity Investor, he looks to Fidelity Select Health Care (FSPHX) as his top investment idea for 2011. He suggests, “Investors looking for a one-stop healthcare shop should pick this option.
“Diversification is a good Rx for risk and return. Manager, Eddie Yoon invests in the gamut of healthcare options: pharmaceuticals, biotechnology, medical equipment and systems, and HMOs.
“The trumped up political crisis that has engendered a rush to ‘cure’ our healthcare system has done little to dent the fundamental reasons (from earnings growth, demographics, and innovation) for keeping a core holding in healthcare now.
“As with all the sub-sector health-related Select funds except Select Medical Delivery, there’s a stealthy emerging market dose here, too; foreign stocks make up 13% of the holdings.
“In addition, it should be pointed out that even the companies that aren’t listed as foreign stocks derive increasingly greater amounts of revenue form the burgeoning global marketplace, and from emerging market consumers who are not only upgrading their lifestyle, but their healthcare as well.
“Yoon’s top ten holdings are Covidien, Pfizer, Medco Health Solutions, Allergan, Merck, Express Scripts, Baxter Intl, Amgen, Illumina, and Bard.”
Top Stocks To Buy For 2011 No.15: Ford Motor (F)
From: Mark Skousen
“Ford Motor Co. (NYSE: F) is in the driver’s seat when it comes to innovation, cutting costs, and building global demand,” says Mark Skousen.
In his Forecasts & Strategies, which this month is celebrating its 30th anniversary, he cautions, “I’ve decided to recommend Ford as the best turnaround speculation for 2011. Bear in mind that this is highly speculative, and not recommended for conservative investors.
“Ford shocked Wall Street and Washington two months ago in reporting its first positive cash-flow quarter in more than two years. Of course, it played some accounting games to do it, but the overall direction is up.
“Ford made its first billion by successfully increasing domestic sales for the first time in nearly five years, and boosting market share against its chief rivals, Government Motors (GM) and Crying Chrysler.
“Meanwhile, the #2 auto maker predicted it would turn solidly profitable by 2011 as a result of its cost cutting measures and renegotiations with the unions.
“Ford is the only major US auto maker not begging for a government bailout last year. This isn’t the first time Ford has broken away from the government trough. In the early 1980s, Ford executives opposed the call for import quotas on Japanese cars and took on their competitors by raising quality standards.
“I’ve been a long-time buyer of Ford cars, including two Mustangs, an Explorer truck, and a Lincoln Town Car. I have enjoyed relatively maintenance free service for years.
“Maybe my experience is exceptional, but most car rating services, such as Consumer Reports, rank Ford ahead of its domestic competitors. The company is innovative. The hot-selling Ford Taurus just won Kelly Blue Book’s ‘2011 Best Redesigned Vehicle.’
“Its engineers have developed the first robot (named RUTH) to scientifically test the feel and appearance of switches and surfaces in their automobiles. And Ford’s Quick Lane Tire and Auto Centers are expanding rapidly across the country.
“Ford isn’t out of the woods yet. It still carries an incredible (gulp) $103 billion in debt (it blundered by borrowing billions to buy back its stock at much higher prices) and has been forced to restructure its debt again. Unions are refusing to cut back any further their generous medical and pension benefits.
“CEO Alan R. Mulally, a turnaround executive from Boeing, deserves high marks for Ford’s latest success. If anyone can make an elephant dance, he can.
“The stock price has already tripled in price in 2010, but it is still way below its previous high of $40 a share in the late 1990s, so it has lots of room to grow. It’s selling at 20 times next year’s earnings, and has over $32 billion in cash.
“We’re adding Ford Motor Co. to our growth stock portfolio, with the caveats that the stock does not pay a dividend and is considered high risk. As such, it may not be for everybody.”
Top Stocks To Buy For 2011 No.16: Continental Minterals (KMKCF)
From: Tom Bishop
“Continental Minerals (Other OTC: KMKCF), my top pick for 2011, holds high-grade copper and gold deposits that are located in Tibet/China,” notes Tom Bishop In his BI Research, an advisory focused on small cap, high growth stocks, he adds, “I also believe the company is a juicy takeover target.
“The company has proven up 220 million tons of measured and indicated reserves in its high grade-porphyry copper-gold Xietongmen deposit grading 0.43% copper and 3.9 grams of gold per ton. This translates into 2 billion pounds of copper and 4.3 million ounces of gold.
“A feasibility study has been completed and the project has received all 16 sub- approvals and is now in for final approval.
“In addition the company’s Newtongmen deposit, a couple thousand feet away and drilled o? more recently, sports another 2.8 billion tons of copper and 2.3 million ounces of gold and 11 million ounces of silver.
“I think signs are abundant that Continental is a takeover target, hopefully in the $3 range:
“For one, the Hunter Dickinson Group, under whose wing the company was formed and nurtured has a long history of buying up unseasoned prospects, financing them, proving them up and then selling them to a major mining company.
“Second, no project makes more sense to go this route given it’s far away in China than this project.
“As an example, we note that a few months ago, the same day Pepsi Bottling company rejected PepsiCo’s takeover o?er and concurrently announced a shareholder rights plan to protect itself in the event of a takeover.
“That takeover has since happened at a better price. Continental coincidentally announced a similar plan. That’s what first made the light bulb come on here.
“Then a new party suddenly entered the picture when a Chinese mining company, Zinjin, suddenly purchased 21 million shares and was given a seat on the board. Then I even read that this company had stated that it intended to acquire Continental.
“Also China’s shopping trip for resources all around the globe is well documented and none makes more sense than one owned by a Canadian company right within China’s borders.
“Finally the CEO of Continental was redeployed to be the CEO of the latest company birthed by the Hunter Dickinson Group (Heatherdale Resources, also worth a look)… hmmm, odd timing. They say they don’t ring a bell, but I sure hear something.”
Top Stocks To Buy For 2011 No.17: Dataram (DRAM)
From: Kevin Kennedy
Kevin Kennedy specializes in micro and small cap “momentum” stocks that, technically, have broken to the upside and then pulled back in price.
In his The Coolcat Report, he looks to Dataram (NASDAQ: DRAM) as his top speculative idea for the coming year.
“Dataram is a small company with growing revenues and a market cap of less than $30 million. Founded in 1967, Dataram manufactures computer memory, storage and software products.
“Its products and services deliver IT infrastructure optimization, dramatically increase application performance and deliver substantial cost savings.
“Dataram solutions are deployed in 70 Fortune 100 companies and in mission-critical government and defense applications around the world.
“Second-quarter revenues reported in late November were $10.7 million, up 51% from the $7.1 million reported in the same quarter in the prior year. The company lost $1.6 million, or $0.18 per share.
“Demand and memory pricing is improving, and the company’s recently acquired Micro Memory Bank business unit is boosting sales and new products.
“The company also has high hopes for its recently introduced storage area network (SAN) optimization solution called XcelaSAN, which is expected to be available in early 2011. Sales of that product and lower expected R&D expenses going forward should push the company towards profitability.
“The company’s stock broke out of nine-week base on big volume Nov. 20, but has fallen back from above $5 to the low $3 range. It looks well priced at these levels.”
Top Stocks To Buy For 2011 No.18: Blue Coat (BCSI)
From: Leo Fasciocco
“My pick for 2011 is Blue Coat Systems (NASDAQ: BCSI), a company that provides web security,” says Leo Fasciocco, a leading technical analyst known for his focus on stocks that are breaking out of basing patterns.
In his The Ticker Tape Digest, he explains, “We consider the stock an excellent intermediate-term play because of its strong profit outlook. Blue Coat, based in Sunnyvale, Ca., provides software and services for networking, with annual sales of $444 million.
“Its products enable its end user customers to secure their Internet gateways and remote computer systems by providing protection from malicious code, or malware and objectionable content.
“”The company is benefiting from an expansion of its products. In 2008, BCSI acquired Packeteer, a provider of WAN tra?c prioritization technologies. It most recently came out with an expansion of its Webpulse cloud service for Arabic web content.
“Looking out to fiscal 2011 ending in April, the Street projects a 44% jump in net to $1.30 cents a share from the 90 cents anticipated for fiscal 2011.
“The stock has been trending higher the past few months recovering from the bear market. The long-term chart for BCSI shows the stock with a cyclical tendency. It is now in the up trend part of its cycle. We see that as favorable for bulls at this time with the stock now trending higher.
“In our view, BCSI is an outstanding stock poised to breakout. It is holding in its base and poised to show massive earnings gains.We are targeting BCSI for a move to 36 after a breakout. A protective stop can be placed near 24 after a breakout.”
Top Stocks To Buy For 2011 No.19: BMC Software (BMC)
From: Dow Theory
Dow Theory Forecasts is one of the most respected and venerable players in the financial newsletter community; the service has been published continuously for well over 5 decades.
Editor Richard Moroney looks to BMC Software (NYSE: BMC) as his top pick for 2011. He explains, “BMC develops products that run corporate data centers, which house critical computer systems.
“BMC’s long-term contracts sustained stable profits during the downturn. Over the next 12 months, results should benefit as clients resume spending on technology. “Consensus estimates project per-share profits will advance 15% in fiscal 2011 ending March – and grow 14% annually over the next five years.
“Recent acquisitions have bolstered BMC’s promising segment for automating datacenter activities. Fortune 500 companies comprise more than 85% of BMC’s client list, and such companies are unlikely to abandon cost-cutting initiatives once the environment improves.
“Reflecting this optimism and better-than-expected results for the September quarter, BMC in October raised profit guidance for fiscal 2011. With a trailing price/earnings ratio of 15, BMC trades at a discount to its three-year average P/E of 22 and five-year average of 27.
“If the P/E returned to the three-year average and BMC matched consensus profit estimates, the stock would trade at $58 next year.
“While that target seems a stretch, BMC seems fully capable of reaching $45 to $50. BMC is a Focus List Buy and a Long-Term Buy.”
Top Stocks To Buy For 2011 No.20: Atlantic Power (ATP)
From: Carla Pasternak
”Atlantic Power Corp. (Toronto: ATP.TO) sells power primarily to electric utilities in major U.S. markets under long-term contracts,” notes income specialist Carla Pasternak.
The editor of High Yield Investing and High Yield International explains, “The firm has reorganized its share structure, has been listed on the Toronto exchange and expects a NYSE-listing shortly. The company owns and manages 14 power generating plants and an 85-mile electric transmission line in the US.
“When we first added Atlantic Power to our portfolio, the shares were organized as an income participating security, a stock/bond hybrid comprised of one-part stock, one- part note.
“On October 14th, Atlantic Power announced plans to abandon the IPS structure, “The IPS units were converted to common shares on December 2nd, and now trade in Toronto. The company has applied for a listing to the NYSE and expects to be there in the first half of 2011.
“The conversion will simplify the structure and reporting of the securities and enable Atlantic to get a NYSE listing. According to management, about half of the IPS owners resided in the United States.
“The NYSE listing will make life easier for these shareholders in the form of increased liquidity and will enable the company to actively market the shares to U.S. individuals and institutions, which it has been prohibited from doing.
“In addition, the new listing should gain the stock a larger following and enable Atlantic to raise capital to fund future acquisitions. The best news for investors is that Atlantic Power’s high yield should continue unabated.
“Monthly distributions for the IPS units had been comprised of a C$0.0383 common stock dividend and C$0.0529 interest on an 11% bond — for a total of C$0.091 per month. The company has stated that it will continue to pay the same monthly dividend on the common shares.
“At current prices, the C$1.09 per year dividend translates to a solid 10% yield (C $1.09/ C$10.54). Also, since the new dividend will come entirely from the common shares (and not interest on a bond) dividends will increase on an after-tax basis for many investors. The entire payment will now qualify for the reduced 15% rate.
“Moreover, management stated in the third-quarter press release that cash on hand and projected future cash flows from existing contracts are su?cient to meet the current level of cash distributions into 2015 without any positive impact from potential acquisitions.
“This projection makes sense as Atlantic isn’t highly exposed to changes in either the price of or the demand for power.
“About one-half of revenues are generated by payments for capacity, whereby the company earns fixed fees for just making power available regardless of how much is purchased or used.
“The rest of the revenue is almost entirely accounted for with fixed-rate contracts for services and contracts that stipulate that the e?ects of commodity price fluctuations will be passed on to the consumer.
“In the first nine months of 2010, operating cash flow decreased about -28% to $45 million versus a year ago, primarily because of one-time items — including a planned outage at the Chambers facility in the second quarter. Distributable cash of $52 million for the first nine months of 2010 easily covered dividends of $18 million.
“The company did have a substantial long-term debt of $307 million compared to equity of $189 million at September 30th.
“However, the conversion to common shares will reduce leverage, and management has projected that debt as a percentage of total capitalization will go from 83% at the end of the second quarter of 2010 to 53% post-conversion as at mid-2011.
“Atlantic Power has recently announced that it plans to raise C$75 million with a new convertible debenture o?ering. The proceeds would be used to retire higher interest debt.”
