China Tel (CHTL): Toby Smith’s top stock for 2010
Growth stock specialist Toby Smith turns to a speculative micro-cap stock for his top pick for 2010: ChinaTel Group, Inc. (Other OTC: CHTL).
With the added disclosue that he personally own shares in CHTL, along with his clients at ChangeWave Research, the advisor looks to the firm's potential role in a new joint venture in the China telecom space."
"Our bullishness is based on a pending China Tel and Chinacomm joint venture as a 'basic telephone service' (BTS) licensed carrier in China.
"The other BTS carriers are all large companies with $10 billion+ market caps, such as China Mobile, China Netcom and China Unicom. Today's market cap for China Tel is $130 million.
"The Chinacomm/ChinaTel joint venture owns 37,000 kilometers of fiber-optic network and 3.5Ghz spectrum for wireless broadband in 29 of the biggest China cities. That infrastructure alone has a book value of over $1 billion.
"ChinaTel has suffered a great credibility problem on the Street due to a set of failed capital raising deals that failed to close.
"But the delays in their closing equity financing over the last 18 months has turned out to be a blessing in disguise, as the potential valuation for the China Wi-Max network has at least doubled since the previous failed deal.
"We have advised clients to be positioned in China Tel now, ahead of what we consider to be imminent PIPE (private investment in public equity) deal, which CHTL announced in their latest SEC 8K. The size of the PIPE will undoubtedly be larger and at higher value than the failed $3.14 per share Olotoa deal.
"CHTL's announcements in the last few weeks on $500M+ of new private network business alone from the People's Republic of China ministries adds $1 a share (or more) to the $3.20 book value that Olotoa was paying for 49% of CHTL.
"In addition, CHTL just closed stock-only consulting contracts with their key employees on Dec 1. Nobody takes a stock deal in lieu of cash unless they know a lot about the near future of the PIPE transaction.
"Based on our analysis, the PIPE deal offers disclosed in Oct 8K are from Asian telco/high tech firms itching to capitalize on the China Internet miracle - -they are the only market other than India with less than 40% wirless/fixed broadband penetration.
"We believe ChangeWave Research is the only independent research firm following China Tel Group; we rate the stock a 'strong buy' with a $5 a share target for 2010 and a $9-$10 target for 2011."
Kevin Kennedy: Dataram (DRAM)
In his The Coolcat Report, small cap expert Kevin Kennedy looks to Dataram (NASDAQ: DRAM) -- a player in information technology products -- as his top speculative idea for the coming year.
"Dataram is a small company with growing revenues and a market cap of less than $30 million. Founded in 1967, Dataram manufactures computer memory, storage and software products.
"Its products and services deliver IT infrastructure optimization, dramatically increase application performance and deliver substantial cost savings.
"Dataram solutions are deployed in 70 Fortune 100 companies and in mission-critical government and defense applications around the world.
"Second-quarter revenues reported in late November were $10.7 million, up 51% from the $7.1 million reported in the same quarter in the prior year. The company lost $1.6 million, or $0.18 per share.
"Demand and memory pricing is improving, and the company’s recently acquired Micro Memory Bank business unit is boosting sales and new products.
"The company also has high hopes for its recently introduced storage area network (SAN) optimization solution called XcelaSAN, which is expected to be available in early 2010. Sales of that product and lower expected R&D expenses going forward should push the company towards profitability.
"The company’s stock broke out of nine-week base on big volume Nov. 20, but has fallen back from above $5 to the low $3 range. It looks well priced at these levels."
Dollar Tree (DLTR): Michael Vodicka’s top stock for 2010
"Discount retailers are in high fashion right now, and 2010 could be a good time to capitalize on the macro-level trend toward value-driven consumption as consumers battle too much debt and a weak labor market," says Michael Vodicka.
To benefit from this trend, the momentum stock strategist for Zacks.com looks to Dollar Tree (NASDAQ: DLTR) as his top pick for the coming year.
"2009 was a year of surprises. Stocks ended up logging a monumental rally that kicked off in March, most of the major domestic banks have freed themselves from TARP restrictions and the housing market has shown signs of stability.
"But in spite of all these incredible gains, consumers are still struggling with too much debt and high unemployment. This is the ideal consumer environment for an extreme discounter like Dollar Tree.
"Dollar Tree isn’t a new name, the company’s been around since 1986, has a market cap of $4.26 billion and operates more than 3,600 stores in 48 states.
"It carries a wide range of consumer and household products like paper towels, cleaning goods and beauty supplies, all for less than $1.
"The company’s strategic advantage was on full display in 2009, beating the consensus estimate in each quarter by an average of 11%. Its Q4 results from late November, heading into the holiday season included sales growth of 12% from last year.
"The top line growth goes well with gross and operational margin expansion, both on the upswing due to lower commodity costs and process evaluation.
"Dollar Tree bought back 3.5 million shares in 2009, with $300 million remaining from a $500 million Board approval. The company has been committed to taking advantage of the value-driven consumer environment, opening 94 new stores this year and expanding or relocating another 74.
"But in spite of these moves, Dollar Tree balance sheet still looks strong, with cash and equivalents totaling $342 million against a debt load of $267.5 million, with just $17.6 million current.
"Looking forward, analysts are optimistic about the company’s prospects in 2010, targeting full-year earnings of $3.84 per share. With shares trading at $48, this stock has a forward P/E of just 12.5, a nice discount to the overall market."
Winnebago (WGO): On the road
"If you're looking for a potential turnaround in 2010, you should strongly consider Winnebago (NYSE: WGO) for your portfolio," says Todd Salamone, an analyst with Schaeffer's Research.
"Expectations for this manufacturer of motor homes and self-contained recreating vehicles are extremely low as we head into 2010.
" This is evident by WGO’s reaction to earnings in December. The shares soared higher by almost 22 percent after reporting a quarterly loss of five cents per share, which beat mean estimates of a loss of seven cents per share.
"In the quarterly earnings statement, the company said, 'The worst may be over.'
"In fact, the company is 'walking the talk' as it will hire workers back, increase production and cancel the traditional holiday shutdown to keep up with growing demand. The order backlog increased 350%.
"Prior to the mid-December earnings report, the shares had pulled back from their mid-October highs to support at their 160-day moving average.
" A similar pullback in May-June 2009 to this trendline preceded a 166-percent advance into October. Therefore, the recent rally from support, on the heels of an earnings catalyst, appears to be an attractive entry point.
"From March through November 2009, short interest on WGO increased by 116% and currently represents 16% of the shares’ float.
"With the shares up more than 100% during the past year and a recovery on the horizon, the shorts are likely feeling pain and may be looking to cover their positions.
"Additionally, brokerage upgrades may be in store too, as there is only one 'buy' rating among the five Wall Street analysts that cover WGO. "
Lowell’s new year portfolio
Last December, Jim Lowell offered a portfolio of favorite funds; combined, they returned 31.7%. Here's a package of 6 new favorites from his ETF Trader and Fidelity Investor.
"I’m still bullish. Am I still bold? You bet! I think it is time for investors to upgrade their portfolios with the Dow Diamonds (NYSE: DIA).
"Multinational blue chip companies still selling at a discount to recovery value let alone recovered value, enables you to upgrade from this year’s smaller-cap bottle rockets to next year’s leadership gainers.
"I also suggest buying healthcare. I like this sector for its lower beta (less risk relative to the S&P 500) defense, as well as stealth global market offense.
"Foreign stocks make up 13% of the holdings, but the companies that aren’t listed as foreign stocks derive increasingly greater amounts of revenue from the burgeoning global marketplace.
"My picks: Fidelity Select Health Care (FSPHX) and the iShares S&P Global Heath Care (NYSE: IXJ). Why a twofer? I like the overall sector but prefer an injection of active insight and management given the potential for government infection in 2010.
"In my book, emerging markets stocks remain the best long-term buy. To cover that map, the iShares MSCI Emerging Markets (NYSE: EEM) or Vanguard Emerging Markets (NYSE: VWO) ETF are straightforward puts.
"Off the beaten emerging market stock trail is Fidelity New Markets Income (FNMIX), a fund run by an inimitable manager with 15-plus years of buying the bond side of this market’s fence.
"You can’t finance infrastructure, technology, healthcare, agriculture expansion without debt financing. It also provides a buffer to the ever-present potential for emerging market stock shocks."
Energizer Holdings (ENR)
Energizer Holdings' (<a href=http://www.zacks.com/stock/quote/enr>ENR</a>) fourth-quarter results missed the Zacks Consensus Estimates due to lower sales in Household Products and an adverse currency impact. The company expects growth in earnings for fiscal 2010 driven by continued reduction in overhead costs. <p> The company stands to benefit from restructuring initiatives, product innovations, strong cash flow and increased debt repayment. However, weaker margins, a delay in stock buybacks, intense competition, a sluggish battery business and increased marketing spending are potential negatives. <p> We downgrade the stock to Underperform as the company has been hit hard by the global economic crisis, leading to weak demand and prices for its battery business. We expect the negative impact of the economic downturn to continue in the near term. Our six-month price target is lowered to $54.00.Statoil ASA – ADR (STO)
<b>Statoil ASA</b> (<a href=http://www.zacks.com/stock/quote/sto>STO</a>) is gaining momentum with the start-up of operations on several new oil and gas fields. The growing share of natural gas in the company's NCS (Norwegian Continental Shelf) volume mix enables it to play a leading role in the European natural gas market. <p> A sharp rise in production is offsetting the fall in oil and gas prices, which helped the company to experience smaller profit declines in the third quarter than other large European oil companies. <p> With our bullish long term view on natural gas and the company's extensive interests in infrastructure assets, we recommend an Outperform rating for Statoil ADRs.The Best Stocks for 2010
Happy holidays! Please enjoy the just-released Top Picks 2010: our 27th annual survey of the the nation's leading advisors.
To download the 100-page PDF, simply enter your email address at the top or bottom of this page. It is free to all our readers.
The 75 stocks in last year's report rose an average of 34%, vs. an 18% gain for the broad market. And according to Gainer's Today, the report was the #1 most accurate portfolio of stocks among the 120 investment research groups it monitored throughout 2009. Kudos to all our particiating advisors!
EZCorp (EZPW): Pawn profits
In his Upside newsletter, Richard Moroney uses as proprietary screening system, Quadrix, which ranks stocks on dozens of variables. His latest 'best buy' pick is EZCorp (NASDAQ: EZPW).
"EZCorp provides short-term personal loans, or payday loans, through 477 EZMONEY locations.
"The company also offers pawn loans and sells forfeited merchandise through 369 U.S. locations. A solid international presence bodes well for growth. The company has 62 pawnshops in Mexico.
"In addition, EZCORP owns stakes in Cash Converters International, which operates about 500 worldwide locations, and in Albemarle & Bond, one of the U.K.’s largest pawn businesses.
"There are two major risks to owning EZCORP. First, payday lenders face ongoing regulatory scrutiny. Second, volatile gold prices can impact the value of jewelry and scrap metal.
"Still, EZCORP seems undervalued given its operating momentum. Consensus estimates project per-share earnings will increase 17% to $1.67 in fiscal 2010 ending September.
"Revenue is expected to climb 11% to $660 million. Upside has had success with EZCORP in the past — we recommended and sold the stock for gains in 2006 and 2008. The stock is being initiated as a Best Buy."
Dividend expert eyes a four-pack of favorites
In our 27th annual Top Stocks Report, dividend specialist Vita Nelson chose Florida utility FPL (NYSE: FPL) as her top pick for 2010.
However, the editor of the Moneypaper emphasized her preference for a more diversified approach and submitted a package of 5 favorite stocks. Her commentary on FPL appears in our Top Picks report; here, we share her other 4 favorites.
"Cracker Barrel Old Country Store (NASDSAQ: CBRL) headquartered in Tennessee, operates nearly 600 combination full-service restaurant and gift shops in 41 states.
"Most are company owned, not leased, and can be found along major highways. The restaurants, which feature home-style country cooking menus, accounted for 79.2% of revenues in fiscal 2009. (Fiscal year ends last Friday in July.)
"The gift shops feature rocking chairs, apparel, toys, cookware, ceramics, and an array of food items.
"The company reported a 37% increase in first-quarter (October) earnings per share and consensus estimates call for it to earn about $3.23 per share in the fiscal year that ends next July and $3.47 in fiscal 2011, compared with $2.89 in fiscal 2009.
"The stock sports a price/earnings ratio of about 12 and its 80 cent-per-share annual payout results in a yield of 2.1%.
"Founded in 1847, Cliffs Natural Resources (NYSE: CLF) -- the former Cleveland-Cliffs -- is the largest producer of iron ore pellets in North America, accounting for almost 45% of the market.
"Since acquiring Alpha Natural Resources in 2008, a significant producer of metallurgical coal for the steel-making industry. It operates six iron ore mines in Michigan, Minnesota, and Eastern Canada and coalmines in West Virginia and Alabama.
"The company also owns an Australian iron ore mining company and has interests in a Brazilian iron ore facility and an Australian coal mining operation.
"CLF is a cyclical company whose shares declined from a 2008 high of $121 before rebounding from $11.80 to a recent $41.30.
"Consensus estimates call for it to earn about 70 cents per share this year and $2.73 in 2010, compared with $6.57 in 2008. But Value Line projects earnings per share of over $4 in 3-5 years.
"The shares split 2-for-1 in 2005, 2006, and 2008. With a dividend yield of just 0.8%, the primary goal of CLF investors is capital appreciation.
"General Electric (NYSE: GE) operates as a technology, media, and financial services company worldwide.
"Its Energy Infrastructure segment produces gas, steam, and aeroderivative gas turbines; generators; and combined cycle systems, and provides water treatment services and equipment.
"The Technology Infrastructure segment manufactures jet engines, aerospace systems and equipment. The Consumer & Industrial segment produces various household appliances, lighting products, and electrical equipment and control products.
"GE was founded in 1892. The stock currently trades at a price/earnings ratio of less than 15 and its dividend provides a 2.5% yield.
"Founded in 1885, Johnson & Johnson (NYSE: JNJ) is a major health-care products company that derived about 49% of its $63.7 billion in 2008 sales from overseas.
"Its consumer brand names include Band-Aid, Monistat, Neutrogena, Tylenol, Stayfree, and Reach.
"Typically, the company spends at least 12% of its revenue on research and development.
"Earnings per share were $4.57 in 2008, compared with $4.15 in the previous year, and consensus estimates call for the company to earn about $4.58 in 2009 and $4.93 in 2010.
"The annual dividend has been increased for 47 consecutive years, and now stands at $1.96 per share, providing a yield of 3.12%."