Stocks and mutual funds: Where the experts say you should put your money
While we think stocks and mutual funds should be part of a diverse savings plan, we don't advise you on which companies or funds you should invest in.
But lots of commentators and experts do. Here's where some of the most prominent investment advisers say you should put your money.
Rudolph-Riad Younes, co-manager of the Julius Baer International mutual fund, in Kiplinger's Personal Finance:
Over the past decade, the fund returned 17% annualized to May 1 -- about twice the average return of all diversified international-stock funds.
Younes is keen on Homex Development, Mexico's leading homebuilder. To help alleviate an acute housing shortage, the Mexican government has begun providing subsidized loans to its lower- and middle-class citizens to purchase homes. He thinks the company can generate 15% annual earnings growth over the next five years. The stock sells at 15 times this year's estimated profits...
Younes also likes Norway's Norsk Hydro. While most major oil companies struggle to boost output, Norsk is ramping up by nearly 10% a year. Moreover, Younes thinks Norsk Hydro has a good shot at partnering with Russian natural-gas giant Gazprom to develop a huge field in the Barents Sea. The stock trades at 13 times the average of analysts' 2006 estimates.
Chris Edmonds, director of research at Pritchard Capital, on CNBC's "Squwk Box" this week:
The best opportunities in energy lie with companies focused on crude oil rather than natural gas. You look at companies like Schlumberger (SLB) and Weatherford International (WFT) that have exposure to the Eastern Hemisphere, where there's a lot of oil and not as much natural gas.
And then drillers have become very cheap. Companies like Nabors Industries (NBR), which drills for oil and natural gas. But Nabors is the leading domestic rig supplier in Saudi Arabia, and Saudi Arabia announced last week it's going from roughly 60 rigs this time last year to 120 rigs by the end of the year.
Michael Brush, MSN Money commentator:
Pepsi's knack for capturing consumer trends -- witness the success of Gatorade and Aquafina -- has helped reward shareholders with a 100% gain since the late 1990s, when the company first figured out that consumers were getting bored with old-school fizzy colas.
Now, with the stock brushing up against 10-year highs at $60.50, there's still plenty of room for Pepsi (PEP) shares to run. The company's knack for innovation and a push to build an international empire in salty snacks could send Pepsi stock into the low $70 range in a year or so. Throw in an annual dividend of $1.20 a share, and that means gains of better than 15%.
David Gardner, the co-founder of Motley Fool's, current top pick:
Let's say you want to rent a movie. Do you head over to your neighborhood Blockbuster store? Or are you one of the millions of Americans who now receive DVD's by mail from online movie-rental outfit Netflix?
By year-end 2005, roughly 2% of Americans answered "yes" to that second question. Oddly enough, the fact that you probably answered "no" is good news for Netflix. How so?
Well, with just over 4 million subscribers Netflix has proved in its business. The model works -- or is at least workable. But with just over 2% penetration of the U.S. market, there is no end in sight to the potential for future growth.
Tom Gardner, the other co-founder of Motley Fool, top stock pick:
...CDW's a distributor of products from Microsoft, Apple, Hewlett-Packard, Sony, IBM, and Cisco. It generates more than $6 billion in revenues, selling over 100,000 technology products and services to more than 300,000 different customers (primarily small-to-medium-sized businesses).
...CDW closed out 2005 with $6.3 billion in sales and around $275 million in owner earnings (with capital expenditures normalized over the past five years). The company's balance sheet sparkles, with almost $600 million in cash, no debt, and very rapid turns of inventory.
Smart Money magazine's August issue picks "nine bargain stocks,'' which it defines as companies that topped earnings and sales estimates by at least 10% each in their most recent quarters, have manageable debt levels and favorable price-to-earnings/growth ratios.
The nine are:
- Alliance Data Systems (ADS), which manages store credit cards, processes payments for utilities and manages miles programs for airlines.
- Arch Coal (ACI), the nation's second-largest coal producer.
- CompuCredit (CCRT), specializes in finding consumers with bad credit, but still likely to pay their bills. It uses that information to issue credit cards and buy and manage portfolios of receivables from other companies.
- Comtech Telecommunications (CMTL), makes satellite gear and "over-the-horizon" transmitters.
- Drew Industries (DW), makes components for recreational vehicles and manufactured homes.
- Global Industries (GLBL), builds pipelines and platforms for offshore oil and gas drilling.>/li>
- Mueller Industries (MLI), makes and sells plumbing fixtures and fittings to retailers and wholesale distributors.
- SEI Investments (SEIC), manages accounting, administration and other managerial tasks for money managers and financials advisers.
- West Pharmaceutical Services (WST). Makes syringes, inhalers and drug containers.
Katie Benner, The Street.com:
The Fidelity Select Defense & Aerospace fund (FSDAX) provides exposure to companies that may benefit from the U.S.' military and homeland security efforts, and its top 10 holdings include the big defense names you would expect, such as Raytheon, General Dynamics and Lockheed Martin.
While other funds...are heavily weighted toward homeland security and defense companies, Morningstar points out that Fidelity's fund is the only one mandated to buy defense stocks, and thus provides a pure play on the sector.
The $970 million fund is a mid-cap growth play that gets a five-star rating from Morningstar and has posted a 2.69% return year to date vs. the S&P 500's 1.95% return.
Jeff Knight, portfolio leader of the Putnam Asset Allocation Growth fund, in a story by CBS Marketwatch:
One of Knight's top picks is Sunoco Inc. (SUN), the oil and gas giant, partly as a bet that high oil prices are here to stay.
"In general, energy stocks are benefiting from a secular bull market in energy and we believe that energy companies in general are undervalued by the market because there is a skepticism as to how durable this cycle will be," said Knight.
According to the fund's analysis, energy stocks are cheap if you assume prices will remain high. Meanwhile, Sunoco is undervalued to energy stocks in general, but gets high marks for profitability, efficiency, management and earnings quality -- attributes Knight said the market systematically rewards.
Gregg Greenberg, commentator for TheStreet.com, on Bruce Abel, portfolio manager for the $14 million Kinetics Medical fund:
Abel looks specifically for companies willing to spend the (research) dollars to fill their pipelines. His current favorite pharma pick is Bristol-Myers Squibb (BMY) because of its generous 28% return on equity, 4.4% dividend yield, low trailing P/E multiple of 16 and strong research-and-development spending of $2.75 billion in 2005.
Follow Interest.com on Twitter.