Tuesday, January 04, 2011

Stock Picks For 2011

Below is a copy of an article I wrote for TheStreet.com last Friday:

'Tis the time of year to make bold predictions for next year. While you may glean some good investment ideas from these pieces, I hope that all investors realize by now that proper risk management entails following your stocks, as well as not letting losses get out of hand when things don't go as expected.

On the last trading day of 2009, I said my top picks for 2010 were: Apple (AAPL) , Google (GOOG) , Broadcom (BRCM) , F5 Networks (FFIV) and one speculative play in MEMC Electronic Materials (WFR) .

Although I provided updates on these throughout the year, let's pretend you bought them at year-end last year and held them until today. You would have done best in F5 Networks, which rocketed 151%. Apple didn't do too shabbily, either, with its return of 54%. Broadcom rose 38%, and Google was roughly flat for the year, though this stock should do better in 2011. My big loser was MEMC, which is currently 23% lower. Again, though, with proper risk management, one may have elected a stop-loss strategy to limit losses on that name.

I also said that, while analysts were coming out on television and hyping Microsoft (MSFT) as a top pick for 2010, that the stock would likely underperform again. Right on cue, Microsoft shares ended the year 8% below where they started it. This stock has been a serial disappointer, and I still feel your hard-earned investment capital will do better elsewhere. I think the company's upcoming foray into the tablet market will be about as exciting as its Zune MP3 player. (What, you haven't heard of the Zune?)

I also wrote a piece in early March about the commercial real estate market, suggesting that readers not fall into the bearish trap of avoiding this rebounding sector. I suggested six different ways of playing the group. Fortunately this was a good call, and all of my picks experienced gains from ranging from 20% to 30%. That's not bad, and I would stick with these names for 2011.
With that, here are my top picks for 2011.

First there's Priceline (PCLN), which has defied the slowdown in Europe and, in my view, can continue growing in 2011. I'm also going with MercodoLibre (MELI) , another fast-growing Internet play capitalizing on the rapid growth in Latin America. Another pick is Mosaic (MOS) , a fertilizer play that was much higher in 2008, and should benefit from rising agriculture prices.

Rounding out the list, finally, are Intuitive Surgical (ISRG) -- a depressed growth stock which is down for 2010 and which I believe can bounce back next year -- and Urban Outfitters (URBN) . The latter name is another one that was flat for 2010, but it's still growing and should be a solid pick for 2011.

As for Apple and Google, I continue to hold both of these names. Each is executing well, and the companies are sporting solid growth. Moreover, valuations are reasonable, and if 2011 is the year of price-to-earnings multiple expansion, these two stocks are prime candidates for bigger multiples. Apple, in particular, should have a big year with iPads (my kids love mine) and garner more respect for its sustainable growth.

So Happy New Year, and happy trading to all.



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