Recently I was approached by a few fellow bloggers who wanted to collaborate on some investment picks for 2009. Always a competitor (a trait that my brothers and I share – and one that drives my Mother nuts), I suggested we each pick a few names and see who comes up with the best record. You can see links to each of the other participants at the end of this post. We plan to revisit these picks quarterly to give all readers an update on how things are progressing.
Now before going much farther, I want to immediately hedge my bets by stating that four picks for a full year is far from a complete investment strategy. Much can change as the economy evolves, regulators continue to change the rules, and executives navigate their course. That’s why we continue to monitor markets and individual stocks to keep up with changes. But for competitions sake, here are the four stocks that I think have the most promise in 2009:
- JA Solar Holdings (JASO)
Alternative energy is set to be a hot item in the coming year. The sector has been absolutely decimated during the second half of 2008 due to lower traditional energy prices and the financial crisis. Low oil prices makes it more difficult for solar energy to compete. But as raw material costs come down and technology helps manufacturers become more efficient, solar will once again be a viable alternative. The credit crisis made it difficult for solar manufacturers to increase production. But firms are finally beginning to see light in this area and find alternative means for getting jobs done. Finally, the Obama administration has made alternative energy a top priority and will likely add billions in stimulus packages to support the industry. JA Solar should be a strong beneficiary of rising trends in this area.
- AECOM Technology Corporation (ACM)
Infrastructure is another sector that will garner much attention. As billions are spent on construction projects, bridges, roads and more, AECOM will generate a significant amount of new business. The company is large enough to be recognized as a top tier contractor and will be invited to bid on most every competitive job. But at the same time, this company is small enough to be able to support growth over the coming year. The company has a significant backlog of signed contracts, so any new business will simply be icing on the cake. The stock is trading at a healthy multiple which shows the market has confidence in the prospects. But I believe this multiple could see significant expansion over the next 12 months.
- TBS International (TBSI)
Investors in shipping stocks reacted fearfully to the global recession. Day rates have dropped sharply, cutting into profits and in some cases requiring shippers to take a loss in order to charter vessels. TBSI was one of the more aggressive companies in the business, operating primarily on spot rates instead of locking customers into long-term contracts. This strategy helped the company produce record profits during 2007 and early 2008 because day rates were out of sight. The aggressive business decision also caused huge pain when day rates plummeted. The company is expected to see 2009 earnings drop 71% from 2008 levels and the stock certainly shows this pessimism. My expectation is that any unexpected news will be positive for this company since the market is pricing in only negative occurrences. If we see any recovery at all in this sector, TBSI should rebound sharply!
- China Medical Technology (CMED)
In its most recent quarterly report, ChinaMed announced that they would be selling their HIFU tumor therapy business line. While the market reacted somewhat negatively to the news, the business decision is likely going to allow the company to operate with stronger margins over the coming year. The remaining diagnostic business is very well respected and growing rapidly across China. Management is talented at finding and integrating new business lines and it would not surprise me if another big acquisition was made in 2009. The balance sheet appears to be under control with a managable amount of debt, and the stock is now trading for less than 10 times expected earnings for this year. The future looks bright for China Medical!
These four stocks have strong fundamentals and should show significant gains over the coming months. In fact, subscribers to the ZachStocks Growth Model will likely be trading all four of these names from time to time. Please take a look at the model as I believe this could be a valueable tool as you manage your investments this coming year.
Now for the competition! Take a look at the links below to see the stocks picked by the other participants: (NOTE: Some links may not go live until some point during the day Jan 1)Four Stocks for the New Year