Bonus Weekend Reading — Predictions

Every year I like to grab a big ‘ol pile of the investing magazines and see exactly what predictions they make for the year ahead. Many of them have “buy lists” of a dozen or so companies that they believe will succeed … and, to tell you the truth, it sometimes seems to me that a few of the newsletter editors do little more than parrot the entries from these lists.

So in the interest of sharing a few ideas with you that you might not have yet run into (and there are a few magazines that I haven’t hit yet this year), I’ll share the buy lists for 2008 here of a few of the most popular mags. I don’t have time to comment on any of them at the moment, though there are many stocks in these lists that I find appealing as well, even if some of them are still a bit pricey even after their recent dips. I do hope that if you have opinions on any of these stocks — or a “top ten” list of your own, you’ll add it to the pile here so we can all make ourselves a touch wiser.

Without further ado, the lists:

Fortune

• Annaly Capital Management (NLY) — this has been a newsletter teaser pick that masquerades as the 180% government bond.
• Berkshire Hathaway (BRKB) (The Gumshoe owns this one, and it’s one of Stansberry’s Secret Investment Societies)
• Dick’s Sporting Goods (DKS)
• Electronic Arts (ERTS)
• Genentech (DNA)
• General Electric (GE)
• Jacobs Engineering (JEC)
• Merrill Lynch (MER) (The Gumshoe, unfortunately, owns some call options on this one)
• Petrobras Energia (PZE) — from the description, they really meant the parent company Petrobras, PBR or PBRA.
• St. Joe (JOE)

Barron’s “ready to bounce” stocks for the year ahead:

• American International Group (AIG) (Ken Fisher is also looking for a bright 2008 for this cheap and embattled insurer)
• Bear Stearns (BSC)
• Comcast (CMCSA)
• Comerica (CMA)
• SunTrust (STI)
• Gannett (GCI)
• Kohl’s (KSS)
• Legg Mason (LM)
• Micron Technlogy (MU)
• Southwest Airlines (LUV)
• Starbucks (SBUX)
• Time Warner (TWX)

SmartMoney’s “Where to Invest 2008″

• Bunge (BG)
• Deere (DE)
• Diamond Offshore (DO) (This is the sexiest subsidiary of Loews, which we looked at very recently as the Ultimate Hedge Fund)
• Ion Geophysical (IO) (this one was apparently teased several times last year, though not recently that I’ve seen)
• Central European Media ENt. (CETV)
• Erste Bank (EBKDY)
• Phililppine Long Distance (PHI) (this was a Robert Hsu pick about six months ago)
• Telefonica (TEF)
• General Electric (GE)
• United Technologies (UTX)
• Genworth Financial (GNW)
• Wells Fargo (WFC)

BusinessWeek’s predictions are a lot harder to look at with any seriousness, since they issue predictions by sector for Environment, Energy, Banking, Agribusiness, falling Dollar, Infrastructure, Tech, Housing, Canadian, European, and Indian Stocks … in addition to options strategies, inflation hedges, and inverse funds. And each of those different sectors or strategies has a half dozen ways to profit, so we can’t say they’ve got a “best for 2008″ list unless you’re willing to give them a “top 50″ list. Though it might be worth noting that these are the hot and talked about ideas of 2007, too, not a lot of contrarian thought in here (except for finding a few good values in banks) … they didn’t list a homebuilder or a retailer that they recommended buying, nor did they go out on a limb and say that China is going to keep up with its exponential growth. I’d say that safe and diversified is the kind way to describe their 2008 investment outlook, which is a nice way to invest but a pretty boring way to make predictions.

All of these mainstream magazines, by the way, tend to be much better at reporting the progress of their picks than are many newsletter editors, even when they make bad picks. The bonus of being an underpaid journalist, no one really expects you to be a great stock picker.

For the record, the stocks on those lists that sound most appealing to me so far, just on a gut reaction, are Genentech, Legg Mason, Starbucks, St. Joe, and Erste Bank.

And I think there are a few interesting magazine lists that I haven’t gotten to here … if you want to share a list — yours or someone else’s — go right ahead and add it below with any comments you might have (though please don’t copy and paste copyrighted material). I’ll see if I find a few more to share in our next installment of the Gumshoe’s Weekend Reading.

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

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1. It would be interesting to revisit this post in a year and see which ones actually panned out.

   Best Wishes,
   D4L

   [Reply]

   Posted by Dividends4Life | January 27, 2008, 9:17 pm

2. Or to revisit their last year’s lists and see how they are doing now.

   [Reply]

   Posted by Duangtip Gupta | January 28, 2008, 1:18 pm

3. MY PROBLEM IS I BELIEVE THE U.S. ECONOMY IS IN FOR A ROUGH PERIOD IF NOT A RECESSION. The CPI index was abnormaly high,the dollar is falling,and the unemployment rate has risen to 5%. Tech stocks had a rough begining in 2008. The total of major banks probably have more billion type writeoffs to announce. My suggestion is to find stocks that are recession proof. Heavy equipment companies cannot keep up with foreign demand. Energy has risen and seems to continue an upward trend. Investment in these sectors and foreign growth would lessen risk and give a chance for growth in our portfolios. This is my fundamental read. Notice extreme volatility has raised its ugly head in the markets.

   [Reply]

   Posted by G IMBURG | January 28, 2008, 9:26 pm

4. Thanks for the comments, folks. Imburg, the only thing I can say is that we may or may not be in a recession, and it may or may not get worse before it gets better … but for long term investors, the middle of a recession is often a really good time to be investing. Investors generally buy stocks with an eye on the economy as it will be six months from now, or a year from now, not as it is today.

   That said, things could definitely get ugly this year, especially with so many people so scared about the US economy. And a real slowdown would, the experts tell us, significantly depress demand for energy and slow the developing market growth that’s fueling demand for construction and engineering. I hope I have the nerve to continue buying into the fear, I really like the prices that a lot of businesses are going for now, businesses that will not disappear or stop making a profit if we have a typical six month recession.

   [Reply]

   Posted by StockGumshoe | January 28, 2008, 9:47 pm

5. From around 1966 or so until 1984 or so the stock market didn’t move much. That wasn’t a 6 month recession, it was more like a 20 year stagnation. I’m not saying that could happen again. Things are different now. However, it is a possibility. On the one side the sovereign funds still have a lot more they want to invest in the stock market, so that should keep it volatile at least. On the other hand, they will eventually have invested everything, and then what? Or how about the aging population problem? These things could bring about a very long stagnation or even a fall. What should we do if that happens? How do we preserve our assets and even gain in such circumstances? In that scenario we certainly would not be in the middle of a recession now and our strategy would have to be much different. Any ideas?

   [Reply]

   Posted by Pearl Little | January 28, 2008, 10:43 pm

6. dksc,,,,,,,,,,,,,,,,,,,,whats the future and when?

   [Reply]

   Posted by ghayos | January 29, 2008, 2:10 am

7. Just a comment on energy.My belief is that the world growth, particularly China and India are reaponsible for crude prices and the demand keeps rising. Coal prices will probably rise if exports increase.New legislation for clean energy is a compelling reason to look at these stocks. Notwithstanding a recession,or stagnation,electricty use will not decrease and there are some exciting alternatives to using crude products and nat gas to create electricity.Many of these new energy types are clean and in their infancy with years to grow.The only problem is selecting the right growth stock.

   [Reply]

   Posted by G IMBURG | January 29, 2008, 10:15 am

8. Pearl, and Imburg, more good points from both of you. I guess that’s why the market moves both directions, there’s room for many different predictions. Personally, if I thought that we were primed for a few decades of US stagnation (and I don’t) I’d probably focus on investing in large multinationals with good dividends and, in an attempt to find some real winners to boost my portfolio, in growth stocks that are non-cyclical, including perhaps some medical growth names (mostly devices and biotech). It’s worth remembering that during that stagnant period you note, almost all of the returns from the stock market came from dividends.

   [Reply]

   Posted by StockGumshoe | January 29, 2008, 10:36 am

9. Gumshoe

   First, your blog above regarding the US Market for 2008 may be correct long term,,,,however, tell that to people who are losing money now!….Yes, it may be a good time to buy for the long term, however, please read the IBD take on the markets – they suggest that the market will tell you when the correction is over, and not to try to second guess,,,,,
   Meanwhile, Japan and Korea are signaling that there may be hope yet for the global markets, both being up today. Watch those markets closely, as they may be part of a new global leadership group! China and India would likely follow,,,,The USA will be a laggard, as the damage of being down 7.7% in January has taken its toll.

   Finally, a comment on PZE vs. PBR,,,,I had the same conclusion that you did, so I contacted Fortune. In two separate replies from the magazine, their representatives clearly reported that PZE was the selection they made, not PBR. Perhaps they should rename the magazine “Lose a Fortune!” Another magazine that has to be renamed is Smart Money. mmmmmm Any ideas on a new Name? Dumb Money? lol

   [Reply]

   Posted by advantedges | January 31, 2008, 6:17 am

10. Let me flip this controversial remark into the mix.Its my belief that trying to capture dividends is a zero sum game.Typically,when the company issues the dividend, the stock price adjusts downward to compensate for the loss of earnings, and the dividend may be a taxable event. This may even result in loss if the stock price keeps falling. I winessed this in PCU, Southern copper. Your right,different strokes is what makes the market move in both directions. Better to come to the market as a predator rather than prey because the game is surival of the fittest.

    [Reply]

    Posted by G IMBURG | January 31, 2008, 10:18 pm