WASHINGTON, December 18, 2013 – Markets will thrash about today awaiting the Fed’s alleged announcement that’s expected to provide some insight, allegedly, as to when they will slow down—or begin to “taper”—their massive bond purchasing program, otherwise known as QE3.
The idea behind QE3 was to flood the U.S. with liquidity in such massive amounts that it would stimulate more aggressive consumer spending, mortgage lending, job creation and so forth. You know, the stuff neither Congress nor the President has bothered with for the past five years, focusing their entire attention on socialized medicine as well as America’s evolution toward a one-party state.
Of course, what the Fed has really been up to is pumping up the stock market, aka “asset prices.” For all this generous tidal wave of paper dollars has ended up in the hands of Wall Street fat cats, banks, asset managers, hedge funds, algos and HFTs, all the better to increase the already massive wealth of the 1%. Meanwhile, most of America stews in misery, the middle-class is being systematically eliminated, and the media lapdogs report none of it.
Well, the Maven is here for you, doing the best he can to keep you profitable in the Game of Stocks and Bonds, particularly now when the Fed may announce its intention to pull the punch bowl away from everyone. Today, we present Part II of our year-end bounce back stock picks, a concept we explained fully in yesterday’s Part I article.
In short, bounce back stocks are stocks that have been sold off heavily in the final quarter for whatever reason, the main one being tax loss selling. Such stocks, if otherwise healthy, tend to bounce back up sharply after the first of the year when everyone gets to start a new P&L slate.
Not all these stocks will bounce of course, but enough do each year to make this annual exercise worth a try. As we mentioned yesterday, if we’re right on our picks—a big if these days—our bounce back stocks could be the best Christmas present ever. If not, well, feel free to send the Maven a lump of coal. If President Obama and Nannie Bloomberg will let you.
Our 2014 list consists of 10 candidates—the final five appear today—plus an additional list of super speculations that we’ll run tomorrow. We list the stock name and symbol, the amount of appreciation we expect in a fairly short timeframe (completely unscientific but useful for establishing a sell objective), and the current dividend if any. We also provide a short narrative providing our rationale for each and, in fairness, point out what if any stocks we’ve already taken a position in.
Let Part II of the Wild Rumpus begin. Stocks presented in no particular order:
Twenty-First Century Fox (FOXA). TP: $40. Div.: 0.75%. This company was created when Rupert Murdoch’s Newscorp (now NWSA) split in two, allocating its media and entertainment assets to this spinoff stock. Here’s a boilerplate write-up describing FOXA’s assets:
“The Company is home to a global portfolio of cable and broadcasting networks and properties, including FOX, FX, FXX, FS1, Fox News Channel, Fox Business Network, Fox Sports, Fox Sports Network, National Geographic Channels, Fox Pan American Sports, MundoFox, STAR and 28 local television stations; film studio Twentieth Century Fox Film; and television production studios Twentieth Century Fox Television and Shine Group. The Company also provides content to millions of subscribers through its pay-television services in Europe and Asia, including Sky Deutschland, Sky Italia and its equity interests in BSkyB and Tata Sky.”
Since FOXA is still run by a Murdoch, our liberal friends may turn their noses up. That said, this is part of the point, since we’ve just learned that the audience for the FoxNews cable outlet has just exceeded the entirety of CNBC, MSNBC, CNN combined. That’s what fair and balanced will do for you. Add in films like “The Hobbit” and the (incoming) “Avatar” franchise, and FOXA, which has been moribund for a while, could start bouncing back in January.
Devon (DVN). TP $75. Div.: 1.45%. Energy company Devon has been flat for quite some time. But it’s been making all the right moves over the years and 2014 could be the year it finally breaks out. The company divested itself of its offshore assets in the Gulf of Mexico just months before the disastrous BP spill occurred, and, given the stubborn refusal of natural gas prices to move up, has largely gotten out of that still-iffy business as well. In the meantime, it’s bought heavily into Ohio’s oil-productive Utica shale formation and is also putting together midstream assets with Crosstex Energy (XTXI) to form/participate in an additional entity that’s supposed to happen in early 2014. (It was originally supposed to have been a spinoff, but it will apparently be handled in a different fashion now).
In any event, the divestitures of low-margin businesses along with a greater focus on income-producing efforts should give DVN a good shot at an upward climb in early 2014.
Huntington Bancshares (HBAN). TP: $10.50. Div.: 2.1%. This Ohio-based bank was one of many Midwestern banks that were badly stressed by the 2007-2009 real estate foreclosure debacle. However, HBAN has gone a long way toward solving its problems, and has become one of the strongest surviving regional banks. The dividend is still slightly anemic and the Dodd-Frank and Volcker Rule tag team could still combine with Fed policy to cause issues for the regional banks in 2014. But HBAN appears to be in better shape than most, and could provide a nice bounce in 2014—a bounce that may already have begun. We currently hold shares of HBAN.
CenturyLink (CTL). TP: $40. Div.: 7%. Formerly a large, regional telephone company, CTL surprised Wall Street a few years back by gobbling up Qwest (former symbol Q), the last and most troubled of the former Baby Bells to lose its independence. It has taken CTL a long time to digest this big meal, given that Qwest’s main problem, after getting rid of its crooked CEO, was the fact that it had no viable presence or plan for wireless or cable in its future. CTL is still hobbled by that fact, but has been improving offerings and arrangements.
But here’ something else everyone seems to have forgotten. Another problem with the old Qwest was its enormous buildout of fiber back in those days not long ago when nobody would have believed how ubiquitous broadband would soon become. As a result, Qwest took a terrible and continuing hit on all that “dark” (unused) fiber capacity. There were few users for it.
But now, with ambitious companies like Google (GOOG), Yahoo! (YHOO) Amazon (AMZN) and others actually renting and constructing additional fiber to come up with their own broadband networks, CTL may be finding plenty of demand for Qwest’s once disastrously dark fiber. Nobody in the financial punditocracy seems to be noticing this. Once someone does, CTL, with its rich and likely safe dividend, could respond.
Apple. (AAPL). TP: $600. Div.: $2.90. Prior to the death of Steve Jobs and his Reality Distortion Zone, AAPL sat like the king of the gods, Zeus, at the top of Wall Street’s corporate Mount Olympus. But with the company’s numbers still brilliant but relatively flat, Wall Street increasingly soured on AAPL in 2013, sending the shares into a fairly violent decline. Part of this was due to the stock’s being terribly over-owned—i.e., no sellers, too many buyers. So when everyone decided to get scared and dump the stock, it went into freefall since there really weren’t any buyers left.
While there are still some out there in the lunatic financial press who figure that AAPL will soon go the way of BlackBerry (BBRY), this kind of reasoning is astonishingly simplistic. Apple has at least one if not two new products on the horizon and, although its percentage ownership has decreased, it’s still king of the hill in tablets and is experiencing a resurgence in iPhone sales, which will kick into high gear once they get a little jiggier with the Chicoms.
The stock has picked up considerably this month, but has taken a hit over the last few days, perhaps providing one more opportunity to catch what we think is a likely 2014 bounce. On a dollar cost basis, the stock is “expensive,” though on a price-to-earnings basis (PE), it’s incredibly cheap for a tech stock. But you can get around this—risky business—by purchasing long-term in-the-money calls on AAPL, something we’ve done with partial success in the past. Just be careful. Both AAPL stock and options are fantastically volatile even for this very stable company. So if wild swings make you nervous, this might not be the investment for you.
Tomorrow: Six speculative bounce back stocks.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment ideas and decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk. Caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
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Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
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