Top Stock Picks Conclusion

By on January 22, 2013

A monthly look at attractively valued stocks, or “Three Top Stock Picks,” commenced in August 2012. It was intended to be a regular feature of this blog, however, due to the market’s overall strength it is becoming more difficult to identify suitable investments.

As of January 18th, the 15 stocks identified as the “Three Top Stock Picks” have gained 7.6% (excluding dividends) versus a rise in the S&P 500 of 5.4%.

Stock Market Advantage Stock Picks

The following stocks were deemed to be of interest for inclusion in this monthly feature, but after the market’s strength it is probably not the most opportune time to initiate a position. Microsoft (MSFT), Darden Restaurants (DRI), Mondelez International (MDLZ), Astec Industries (ASTE), EZCorp (EZPW), Universal Entertainment (UETMF) are all of interest based on current earnings, or future prospects of earnings. Several have underlying issues, including pending litigation, which could impact their profits, therefore, caution is warranted as with any investment.

Equities, in general, especially in relation to bonds, do not appear to be overpriced as Oscar Shafer aptly pointed out in the recent Barron’s Roundtable:

Speaking of bubbles, Lee Cooperman [chairman of Omega Advisors] pointed out the other day that Cisco Systems [CSCO] sold for 100 times earnings in 2000, and paid no dividends. The 10-year bond was yielding 6.5% at the time. Today Cisco sells for 10 times earnings, or less if you subtract its cash, and yields 3%. The 10-year yields 1.9%. Where is the bubble? It isn’t in the stock market. It is in the bond market.

The top stock picks could be re-initiated in the future, possibly as the market presents extreme bargains again. It may not be a regular feature, but an opportunistic look when the stars align.

Disclosure: I currently hold positions in Microsoft, Darden Restaurants, Mondelez International, Astec Industries, Applied Materials, Electronic Arts, Corning, Exelon, Market Vectors Coal ETF, Molson Coors Brewing, Cliffs Natural Resources, Intel, and QC Holdings.

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