It has become a New Years tradition to combine forces with a few investment bloggers and put together some investment ideas for the coming year. ZachStocks has bragging rights to the last place slot for 2009 as my recommendations for TBS International, TBSI (a dry bulk shipping company) and China Medical Technologies, CMED both faces significant challenges. Shipping rates continued to be low throughout much of the year, and China Medical faced a surprise change in management and a heavy debt load.
Looking forward to 2010, I expect the ZachStocks recommendations to perform much more positively, while at the same time I want to caution against buying and simply leaving the positions unmonitored for the year. We live in dynamic times where policy and economic trends are fluctuating very rapidly. All investment decisions must be made with imperfect information, and then adjusted as new information comes to light. Successful investors are able to allocate capital with purpose and confidence, but they are also able to switch gears and make new decisions when the situation warrants.
So with that said, here are my four recommendations for 2010 and as they become available you will see the additional recommendations from my competition at the bottom of the post:
The private equity industry is set for a major rebound in the coming year. Many of the funds that are managed by Blackstone are nearing their high water mark which means that the company will be able to participate in further gains in the alternative funds managed. The market is offering ample liquidity which means that many of the companies owned by Blackstone’s private equity funds can be sold to the public in Initial Public Offerings (IPOs). These transactions will allow the funds to book significant profits and lead to increasing shareholder value. Finally, Blackstone continues to attract new capital with the most recent figure of $96.3 billion under management. With these growth situations along with a healthy 9% dividend yield, I expect Blackstone to rally sharply this year.
Assured Guaranty (AGO)
Most financial insurance companies (which insure securities such as municipal bonds and Mortgage Backed Securities) have either gone out of business or are teetering on the edge. Companies like Ambac Financial (ABK) and MBIA Inc. (MBI) may still be solvent, but they don’t have the capital available to go after new business. But Assured Guaranty made some very smart, conservative decisions in the mania leading up to the housing crash, and now has the capital to write new business and capture market share. Assured Guaranty recently made an acquisition that adds a significant amount of new revenue, and should be accretive to shareholders in the coming year. While the stock has had a tremendous run since April, it still trades at an attractive level compared to its high quality assets and its prospective growth. I expect the stock to continue to add to its gains as we enter this new decade.
As Congress works to overhaul the regulatory system for our financial markets, many of the banks and derivative dealers will face a new standard of disclosure and risk control. OTC contracts which used to be private will be forced onto exchanges and the contracts will have to be cleared by a third party. The CME Group (CME) and IntercontinentalExchange are the two primary clearinghouses which have the ability to clear derivative products and the additional business should add to profitability for both of these companies. ICE has made several recent acquisitions to give the company a competitive edge and I expect the company to capitalize on the regulatory opportunities in the next several months. The stock is not cheap, so there is a bit more risk in this opportunity, but investors should reward the company for its growth, driving the stock price higher.
The fear of inflation could be a major trend for 2010 as most governments continue to utilize an accommodating monetary policy. Printing presses continue to pump out more currency leaving more dollars (or euros) chasing fewer goods. When inflation fears mount, the best investment strategy is to own “stuff” or hard assets because supplies are relatively stable (versus an increasing supply of currency). Silver is unique in that it is both a precious metal (storage of value) as well as an industrial metal (there are real-world uses for it). December has featured a sharp pullback in the shiny metal and that actually gives us an excellent entry point for silver heading into the new year. I expect silver to be a solid place to store “real” value, and if inflation fears take off, silver could vault higher with a price that increases many-fold as investors look for an alternative to owning dollars.
Happy New year and I wish you the best of success in the coming year. If you would like information on how to develop an appropriate investment program for your personal account, please email me and I would be happy to discuss ways to safely grow your capital.
Wishing you every success!
Other Bloggers 2010 Recommendations2010 ZachStocks Recommendations