Top five stock picks for 2011

One of the keys to successful investing is beating the herd to the next hot stock. These five stocks and sectors could be those diamonds in the rough in 2011.

One of the keys to successful investing is beating the herd to the next hot stock. Here are my top five stock picks for 2011. They might not be in the limelight yet, but they very well could be by the end of the year:

1) Tech IPOs. In my unofficial tech IPO calendar for 2011, I detail 23 major tech companies that could have large, high-profile IPOs this year. Only one of those companies (Demand Media, Inc., NYSE:DMD) has gone public so far, and it shot up 33 percent in its first day of trading. The best are yet to come, from coupon-of-the-day company Groupon, which turned down a $6 billion offer from Google, to LinkedIn, a social networking company for professionals with more than 90 million members. Keep an eye on tech IPOs throughout the year as the market seems ready to take on more risk in a sector that’s growing rapidly; particularly in China.

2) Cloud-computing. As more businesses move their web sites and applications from dedicated web servers onto distributed server platforms, several companies are poised to soak up that new revenue stream. Amazon.com, Inc. (Public, NASDAQ:AMZN) has been at the forefront of the cloud computing industry although the company’s not all that transparent on how much revenue cloud computing actually generates for them. Estimates range from $500 million in 2010 to $1 billion. UBS analysts Brian Pitz and Brian Fitzgerald predict cloud computing could pull in some $2.5 billion a year for Amazon by 2014. Two other players you might consider in the space: Cisco Systems, Inc. (Public, NASDAQ:CSCO) and dedicated web hosting company Rackspace Hosting, Inc. (NYSE:RAX). Shares in Rackspace are up more than 86 percent over the past six months.

3) Blue chip stocks. Thanks to exchange rates and a falling dollar, even investors abroad are moving into large-cap American stocks. “Australian investors have a once-in-a-generation opportunity to get as much money as they can into overseas assets, ideally blue-chip global industrial companies,” Mike Hawkins, head of private clients at Evans and Partners, tells The Australian. “When you’re talking about those high-quality global blue-chip names, the likes of Nestle and Procter and Gamble (NYSE:PG) and Kraft (NYSE:KFT) and Unilever (NYSE:UL), you’re talking about companies that are well tapped into the growth in income and demand coming from emerging markets. We see this as a bigger story than China and India’s demand for Australia’s raw materials: the growth of the emerging-market consumer is a far more powerful and enduring theme than simply the supply of raw materials to China.” As a middle class begins to develop in emerging markets, consumers will have more disposable income for food and hygiene products. American blue chips have been positioning themselves in those markets for decades, and it could finally start paying off as the falling dollar will make their goods more affordable on Chinese shelves.

4) Platinum and palladium stocks. In the precious metals community, the focus throughout 2010 was almost exclusively on gold and silver. Gold posted gains for the year of 30 percent and silver rose 80 percent. Platinum and palladium did just as well with palladium shooting up 100 percent in 2010 and platinum rising 20 percent. The gains in platinum and palladium largely came on the heels of increasing demand from China and India where the metals are used as autocatalysts to limit pollution from cars and other vehicles. Car sales surged 32 percent in China and 31 percent in India last year. GM’s President of International Operations Tim Lee expects that growth rate to slow to 10 to 15 percent in 2011 as commodity prices rise. Still, Lee points out that the sheer size of the market in China still equates to a lot of demand. “Even 10 to 15 percent growth on such a huge base makes China a vast market,” he tells AFP. For all the talk of hybrid and electric vehicles, they still only account for 3 percent of the auto market worldwide, meaning they’ll hardly dent the growing appetite for platinum and palladium. Stricter emission standards in the U.S. should also compensate for the decreased demand for platinum and palladium as more of the metals will be used to limit emissions. ETFs offer the easiest (and safest) way to get a finger in the palladium pot. Try ETFS Physical Palladium Shares (NYSE:PALL). PALL’s up 66 percent in the past six months.

5) Wealth management in emerging economies. My fifth and final pick comes from my personal portfolio: Noah Holdings Limited (NYSE:NOAH). A wealth management company, Noah serves high net worth individuals in China. After the company’s IPO in November, shares briefly spiked 30 percent and they’ve since flat-lined around the IPO price. Heavy resistance at $16 per share indicates that the downside risk is limited, and some analysts are calling for earnings growth of 35 percent in 2011 and a target price of $22 per share. The company’s numbers are off the charts with year-over-year growth in net revenue at 210 percent. It makes sense that as the ranks of China’s wealthy swell, so too will the profits at the companies that serve them. Noah Holdings should be perfectly positioned to rake in growing profits from a brand new market.

Related

GOLD BUGS


Triggers that could push gold to $5,000 per ounce


BYE BYE OIL


Death to Exxon? A sythentic fuel maker hopes so


DROPPING DOLLARS


Signs double digit inflation is coming to U.S.


SHOW ME YOUR RESUME


3 reasons to buy LinkedIn shares during IPO


DIY BUSINESS


Five cheap franchises to start with less than $10,000

BE MY FRIEND?


China’s Facebook: RenRen.com?

3 reasons U.S. stock market forecast for 2011 is bullish

Here are three reasons why we’ll probably see another banner year for stocks in 2011 despite high unemployment and restrained consumer spending.

If 2010 taught us anything about investing, it should be this: stocks markets don’t follow the overall mood of an economy. You would think last year’s double-digit unemployment, crumbling housing prices, massive economic stimulus plans and fears of a double-dip recession would have forced down equities. Instead, the S&P 500 rose more than 12 percent last year.

Stock markets are always looking ahead, though, and forecast appears rosy in 2011. Here are three reasons why we might see another banner year for equities:

1) Hot money. The Federal Reserve’s quantitative easing program is designed to pump more money into the financial system. In theory, this money will spur lending by banks, which would allow businesses to expand and start hiring with abandon. In reality, employers are still wary of hiring or investing in expansion. That leaves a whole lot of fresh cash sitting on the sidelines. Why sink it into government bonds when you could dump it into high-yielding blue chip dividend stocks?

2) The double-dip is dead. Fears over a double-dip recession have all but disappeared. That should be a warning sign for contrarian investors, but it just might encourage the bulk of the public to re-invest in stocks. “The investing public in the United States has been massively underinvested in equities, with U.S. equity mutual funds experiencing three consecutive years of net redemption,” Chen Zhao writes in the Financial Post. “Once investors regain confidence in the economic recovery, they will likely move their capital away from bonds into equities.”

3) Booming exports. A falling dollar has made U.S.-produced goods more attractive on the global marketplace and that contributed to some 2 to 3 percent of the annual U.S. GDP growth last year. Exports through November of 2010 grew 17 percent over 2009’s numbers, according to U.S. Commerce Undersecretary Francisco Sanchez. More exports means bigger earnings for American companies.

It’s also important to remember that it’s becoming increasingly difficult to think of an American company as an American company. More than half of Citigroup Inc.’s (NYSE:C) revenue comes from outside the U.S., for instance, and other banking giants like JPMorgan Chase & Co. (NYSE:JPM) are eagerly expanding into the Asia-Pacific region.

So while 9 percent of Americans are unemployed, the country’s biggest corporations will keep churning out record profits on the back of a weak dollar. That might not be good for Main Street, but it’s probably good for Wall Street, and I imagine that will keep the cash spigot flowing in Washington – no matter what the consequences are in the years to come.

Related

GOLD BUGS


Triggers that could push gold to $5,000 per ounce


BEAD POWER


Death to Exxon? A sythentic fuel maker hopes so


SHIMMERY SILVER


Top 5 reasons to invest in silver bullion


TIGER MOMS


Chinese ‘Tiger Moms’ company, Tsingda eEDU, to IPO in 2011


IPO CALENDAR


The unofficial tech IPO calendar for 2011

LIGHTER WALLETS

Signs double digit inflation is coming to U.S.

Five stocks picks for 2011 from John Paulson

After returning as much 590 percent betting against mortgages in 2007, John Paulson’s looking toward precious metals, energy and housing in 2011.

Hedge fund manager John Paulson became an icon in the investing world when he made a huge wager against subprime mortgages in 2007. That year, his funds gained as much as 590 percent, according to the Wall Street Journal.

Paulson’s 2010 returns ranged between 11 percent and 45 percent compared with the 15 percent gain the S&P locked in. That was enough to net Paulson himself some $5 billion. Here’s a look at where he’s making his bets for 2011:

1) Precious metals. For several years now, Paulson’s been urging investors to buy gold. Just based on monetary expansion alone, he said last year, gold could hit $2,400 an ounce. Tack on significant inflation on top of that, and gold prices at $4,000 an ounce aren’t out of the question. Paulson’s gold positions in 2010 netted him a return of 45 percent, and he’s still optimistic that gold will outperform for the next 5 years calling it “the ideal vehicle to hedge against the risk of the U.S. dollar,” Forbes reports.

Among Paulson’s biggest gold positions last year were AngloGold Ashanti Limited (NYSE:AU), Osisko Mining Corp. (TSE:OSK) and the SPDR Gold Trust ETF (NYSE:GLD). Currently, his funds own securities that represent the rough equivalent of 96 metric tons of the metal, according to the New York Times. That’s more gold than the Australian government holds.

2) Internet security. Of the top positions initiated by Paulson as of Sept. 30, 2010, McAfee, Inc. (NYSE:MFE) made the list. McAfee, which makes antivirus software, firewalls and other software-based security for computers, made headlines after a buyout by Intel Corporation (NASDAQ:INTC) was announced in August. Paulson’s reputation as a macroeconomic investor makes it clear where he sees big opportunities for growth: protecting data from hackers.

3) Oil and natural gas. Paulson has jettisoned his position in banks in favor of energy stocks. Chief among his energy holdings going into 2011? Anadarko Petroleum Corporation (NYSE:APC), the Texas-based oil and natural gas producer. It’s returned 20 percent over the past three months.

4) Biotechs. Genzyme Corporation (NASDAQ:GENZ) also made the list of top stocks that Paulson was acquiring late last year. Another buyout target, Sanofi-Aventis SA (NYSE:SNY) appears close locking in a deal to buy Genzyme. Trend anyone?

5) Housing. Paulson argued late last year that it was the best time to buy a house in 50 years. “If you don’t own a home, buy one,” he said at a lecture for New York’s University Club. “If you own one home, buy another one, and if you own two homes buy a third and lend your relatives the money to buy a home.” Can’t buy a home? Consider some beat-down real estate or construction stocks. A few good picks and you, too, might be on your way to earning $5 billion a year.

Related

GOLD FOR SALE


When should I sell my gold?


GO BULLION


Top 5 reasons to invest in silver bullion


VIRTUAL WATERCOOLER


3 reasons to buy LinkedIn shares during IPO


GOOGLE ME


How to get a job at Google Inc. (NASDAQ:GOOG)


COPPER OR BUST


How to Invest in Copper

RISING TIDE


Gold price target in 2011: $1,800+

Analysts like Noah Holdings Limited stock (AMEX:NOAH)

Currently trading at a P/E ratio of 89, Noah’s shares sound expensive, but the company’s growth just might justify the premium.

A month and a half after Noah Holdings Limited’s IPO (AMEX:NOAH), analysts have started weighing in on the Chinese wealth management company, and they seem to like what they see – even at what appears to be an extremely high price for shares in a young company.

Here’s the first batch of analyst ratings that started rolling in earlier this month: JPMorgan Chase & Co. (NYSE:JPM) gives NOAH an “overweight” rating, and Roth Capital Partners joins Bank of America Corporation (NYSE:BAC) in listing it as a “buy.” Both Wells Fargo & Company (NYSE:WFC) and Oppenheimer (NYSE:OPY) started the stock at “perform.”

Noah targets wealth management products to high net worth individuals in China, and that’s a decent niche to fill. The ranks of China’s wealthy are swelling as high net worth individuals in the PRC controlled some $5.6 trillion in 2009, according to Reuters. That was good enough to rank them No. 4 in the world in terms of high net worth individuals in 2009.

Currently trading at a P/E ratio of 89, Noah’s shares sound expensive, but the company’s growth just might justify the premium. During the first half of 2010, Noah’s net revenue more than doubled to $13.7 million over the same period in 2009. Even better: Noah’s profits grew fivefold during that time span to $4.04 million.

“As investors, we like to see companies that can grow,” Benjamin Kirby, a Santa Fe, New Mexico-based analyst at Thornburg Investment Management, told Businessweek. Noah definitely meets that qualification, and that’s made me a believer in the stock.

Related

Bling Nation sets sights on Visa (NYSE:V) and Mastercard (NYSE:MA)

It astounds me that credit card companies like Visa Inc. (NYSE:V) and MasterCard Incorporated (NYSE:MA) haven’t made a strong push into the mobile payments arena. Bling Nation of Palo Alto appears to be doing just that.

Investing in Bling NationIt astounds me that credit card companies like Visa Inc. (NYSE:V) and MasterCard Incorporated (NYSE:MA) haven’t made a strong push into the mobile payments arena. Roughly 264 million Americans ages 13 and older use mobile devices. If you could turn those mobiles into payment tools, it would make buying goodies at the mall (or anywhere for that matter) even easier than swiping plastic.

Bling Nation, a Bay-area startup, has seen the writing on the wall, and they’re rolling out a pilot program now that allows consumers to pay for products with their phones. Kind of. Here’s their vision: small businesses offer RFID stickers to loyal customers who can affix the stickers to the backs of their phones.

The customers can then link the stickers with their PayPal accounts, and use it make purchases at that business. If the price for the goodie is high enough, the consumer will have to enter a PIN number. Otherwise, they’re done.

Here’s where it gets interesting, though: Bling Nation charges businesses just 1.5 percent to use their purchasing platform. That’s half the cost most credit card companies charge (take that Visa and Mastercard!). Bling Nation has also partnered with Facebook so that consumers can optionally broadcast their purchase and/or location to Facebook.

Small business owners can track purchases and set up loyalty programs for their customers using Bling Nation’s online software. It’s the perfect marriage of old-world payment processing, new world social-networking and good old-fashioned capitalism.

Icing on the cake comes in the form of a rather spectacular board of advisors. Bling Nation has enlisted help from John Reed, the former Chairman of Citibank and former Chairman of the New York Stock Exchange, Jeff Stiefler, Chairman of Intuit’s advisory board and former President of American Express, Carl Pascarella, former President and Chief Executive Officer of VISA USA and VISA International, and Brian Swette, former Chief Marketing Officer of Pepsi and COO of eBay and current Chairman of Burger King, among other heavy-hitters.

It seems Bling Nation is the real deal. Now, if only there was a way to invest in the startup… It looks like you’ll just have to settle for shares in PayPay’s parent company eBay Inc. (NASDAQ:EBAY). If the idea takes off, though, watch for a buyout offer or an IPO in the coming years.

Bank of America (BAC) to rise 50 percent per year over next three years?

WikiLeaks or not, I remain bullish on Bank of America (NYSE:BAC) as the Fed’s money-printing policies make it easy for lending institutions to profit on near-zero percent interest rates.

Despite a recent downgrade of Bank of America Corporation (NYSE:BAC) stock by Keefe Bruyette Woods, analyst Richard Bove of Rochdale Securities has called for BAC to hit $32 per share in three years. That’s a downward revision of Bove’s May prediction for banking stocks when he said shares in Citigroup Inc. (NYSE:C) and BAC could sextuple by 2015.

“While his official price target is $19.25, he also states in the report that he believes Bank of America will ‘more likely’ return to its historical price of 1.5 times book value, which would be $32,” BusinessInsider.com reports.

Shares in Bank of America have markedly underperformed Citigroup over the past six months as news sources speculate BAC could be the target of an upcoming WikiLeaks document release. Bank of America shares have lost 20.5 percent in value since June, while Citigroup shares are up more than 17 percent.

WikiLeaks or not, I remain bullish on banks as the Fed’s money-printing policies make it easy for lending institutions to profit on near-zero percent interest rates.

Related

Three reasons to move back into Bank of America’s stock (BAC)

Bank of America (BAC) has a net worth of $230 billion and a market cap of just $119 billion. After falling some 12 percent over the past three months, the stock is truly starting to look like a value play, even with the specter of negative press having over its head.

Bank of America Corporation (NYSE:BAC) was one of the major banks to benefit from a sector-wide upgrade by Goldman Sachs (NYSE:GS) last week. Goldman Sachs argues that banks “will deliver market-leading earnings growth” in each of the next two years and likely raise dividends soon, according to Investor’s Business Daily. Here then are three more reasons to take another look at BAC:

1) BAC’s stock has gotten beaten down by negative news including speculation that it will be the rogue bank named in an upcoming document dump by WikiLeaks. According to its most recent quarterly report, BAC has a net worth of $230 billion and a market cap of just $119 billion. After falling some 12 percent over the past three months, the stock is truly starting to look like a value play, even with the specter of negative press having over its head.

2) Federal Reserve chairman Ben Bernanke comments over the weekend on a widely-watched 60 Minutes interview showed that the Fed is not opposed to the idea of a QEIII or QEIV. Bernanke argues that fears over inflation are overblown, and he’s signaling that the money-printing spigot isn’t going to be shut off anytime soon. It’s hard for banks NOT to make money in that environment. Negative press doesn’t much matter if Bank of America is making hoards of cash.

3) One of these days, in theory, BAC’s ill-fated purchase of Countrywide Financial for $4 billion just might pay off. Losses are still mounting on the deal, but the bank is trying to meet them head-on by assigning some 20,000 employees to its loan modification division. If they can start generating income from Countrywide loans, they’ll be in a much better position. The controversial move vaulted Bank of America from sixth place to No. 1 in mortgage originations in U.S. They’re a mega bank, and one of these days, the company’s earnings will reflect that.

Credit card companies Visa (V), MasterCard (MA) tossed under bus

Visa Inc. (NYSE:V) fell further than any stock in the S&P 500 yesterday as it bled off 4.13 percent. It was joined at the party by MasterCard Incorporated (NYSE:MA), which dropped 3.05 percent. The catalyst? Analysts at Bank of America Corporation (NYSE:BAC) downgraded the stock from “neutral” to the dreaded “underperform.”

Visa Inc. (NYSE:V) fell further than any stock in the S&P 500 yesterday as it bled off 4.13 percent. It was joined at the party by MasterCard Incorporated (NYSE:MA), which dropped 3.05 percent. The catalyst? Analysts at Bank of America Corporation (NYSE:BAC) downgraded the stock from “neutral” to the dreaded “underperform.”

Analysts cited stiffer regulations and rising costs as they gave Visa and MasterCard the proverbial middle finger.

“We believe it will be difficult for the current balance of power in the payment system to be sustained longer term, with Visa generating 55% plus operating margins while issuers and merchants struggle to make money,” research analysts at BAC told clients in a note (per the Wall Street Journal).

Not everyone’s so bearish on Visa and MasterCard, though, even in the face of the seemingly harsh financial reform bill that passed in July. The companies posted great 2Q numbers (revenue jumped 23% at Visa), and they’ve been largely insulated from the credit crunch since they don’t make money off of credit card users but rather off the fees banks pay the companies to process credit card purchases.

The thing that’s really got BAC’s analysts in a tizzy, though, are regulatory changes that will increase competition among debit card processors, which could potentially lower Visa’s rake. Under the reform, U.S. merchants must have at least two options when they choose a debit card processor – no longer will they just have Visa as an option. That means good, old-fashioned American capitalism will be at play. That could be a boon for merchants and banks and a downer for Visa and Mastercard (at least as long as we can keep them from colluding in the shadows).

Buffet buys 4.4 million shares in Fiserv, Inc. (FISV)

Nearly 70 percent of all online banking in the U.S. utilizes Fiserv technology at some point, and the company seems be positioning itself for big gains in the future. They’ve bought back more than $2.3 billion in shares over the past five years, and they’re at the leading edge of what’s an undeniable trend: mobile and web-based banking.

In something of a departure for the Oracle of Omaha, Warren Buffet seems to have taken a liking to a technology stock: Fiserv, Inc. (NASDAQ:FISV). The heralded chief of Berkshire Hathaway Inc. (NYSE:BRK.B), slightly trimmed down positions in Kraft Foods (NYSE:KFT) and Procter & Gamble (NYSE:PG) for a sexier bet on Fiserv – a company that provides e-commerce and bill payment services to banks worldwide.


Nearly 70 percent
of all online banking in the U.S. utilizes Fiserv technology at some point, and the company seems be positioning itself for big gains in the future. They’ve bought back more than $2.3 billion in shares over the past five years, and they’re at the leading edge of what’s an undeniable trend: mobile and web-based banking. As more and more clients move online, they’ll be using Fiserv’s technology, and that’ll spell more greenbacks for this NASDAQ company. If that’s good enough for Buffet, that’s good enough for me.

Three reasons to avoid Citigroup (NYSE:C)

In an interesting piece at the Boston Herald, writer Chuck Jaffe comments on the large number of readers asking if Citigroup (NYSE:C) is a buy. He says no, quoting the old Oracle of Omaha, Warren Buffet, when he says “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

In an interesting piece at the Boston Herald, writer Chuck Jaffe comments on the large number of readers asking if Citigroup (NYSE:C) is a buy. He says no, quoting the old Oracle of Omaha, Warren Buffet, when he says “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Here are three of Jaffe’s reasons for avoiding Citigroup – no matter what the cost:

1) $7 billion in off-balance-sheet debt. That’s on top of the $670+ billion in debt that we know about.

2) The U.S. government is the single largest shareholder in Citigroup, and they’re not in it for the long-haul. Expect Uncle Sam to sell and dilute the stock even further.

3) Citigroup just isn’t a safe investment when compared to its peers. Investment research firm Value Line gives Citigroup its lowest possible safety ranking. If everything plays out perfectly, Citigroup will be an OK long-term investment. If things don’t go perfectly, it could severely underperform its peers. Why take the added risk?

“The company has above-average appreciation potential over our projected three- to five-year period,” Gregg Brewer, Value Line’s executive director of research, tells the Boston Herald. “But that assumes mostly positive outcomes all along the way. The other ranks and ratings highlight just how uncertain those positives could be.”