About a week ago I hosted a panel discussion at the American Association of Individual Investors annual conference in Orlando, Florida. The S&P 500 was hitting all times highs, even as the China trade war and the impeachment investigation dominated headlines. The discussion covered everything from the death of value investing, to bitcoin and socially conscious investing. After about an hour, the panel of four investment gurus doled out their best stock ideas for the next 12 months. Here are their picks:
John Buckingham, Editor, The Prudent Speculator and Chief Investment Officer AFAM Capital.
Buckingham, whose long time strategy involves owning a large diversified portfolio of dividend paying stocks that sell for below average price-earnings and price-to-book value, debunked the increasingly popular notion that “value investing is dead.” He cited major value stock indexes like the S&P 500 Value Index (SVX), up 23.73%, which are actually outpacing the S&P 500 year-to-date. His three picks for the next 12 months:
General Motors (GM): Buckingham thought the chances of a U.S. recession were low, and was optimistic that GM’s strike, which involved 48,000 UAW workers in 50 plants, was coming to an end. Stock has a bargain-basement P/E of 6 and a dividend yield of 4%.
International Paper (IP): Buckingham reminded those who thought paper would be one of the big losers in the digital age that Amazon and others still ship in cardboard boxes, which are likely to be piling up outside of front doors this holiday shopping season. IP is a leader in corrugated packaging globally and he referred to the stock as a “stealth e-commerce play.” It’s price-earnings multiple, based on trailing earnings, is less than 13 and its dividend yield is 4.6%.
KeyCorp (KEY): The Cleveland-based regional bank has $147 billion in assets with branches and other services in 15 states. The company’s most recent quarter reported its lowest cash efficiency ratio in a decade of 55% or so, and strong fee income growth from investment banking and debt placement to its middle market customers. Key has a dividend yield of 3.8% and a P/E of 11.
Brad Thomas, Forbes Real Estate Investor
Thomas, a REIT perma-bull and prolific writer on the topic, was warmly received by AAII’s boomer-heavy, income craving audience. Vanguard’s Real Estate ETF (VNQ), which has a 3% current yield, is up nearly 30% year-to-date.
Iron Montain (IRM): This Boston based company got its start growing mushrooms in an old iron mine in upstate New York but today it is a leader in the records management business. Most of its revenues come from storing those paper records and thus Thomas shares Buckingham’s view that paper is far from dead. Organized as a real estate investment trust, Iron Mountain has 230,000 customers and more than 1,450 facilities in more than 50 countries. It’s current yield is 7% , which indicates it is higher risk than the average REIT, which yields about half as much.
Tanger Factory Outlet Centers (SKT): Swinging for the fences, from a yield standpoint, Thomas also recommended outlet mall REIT, Tanger, whose troubled tenants include Forever 21 and Dress Barn, continues to report a 95% occupancy ratio. Its stock is down 12% this year and it has an eye-popping dividend yield of 8%.
Simon Property Group (SPG): This is another mall REIT favored by bargain buying Thomas, though much stronger financially than Tanger. Simon owns 107 mostly high-end malls and 69 premium outlets. Its facilities span 37 states and Puerto Rico and it owns 29 premium properties in Asia, Europe and Canada. This A-rated REIT has seen its shares fall just under 5% year-to-date and it sports a yield of 5.3%.
Jack Tatar, Forbes CryptoAsset & Blockchain Advisor
Tatar, who is also coauthor of Cryptoassets: The Innovative Investors Guide To Bitcoin And Beyond, specializes in investing in cryptocurrencies. Tatar spent a considerable amount of time making the case that bitcoin should be considered an alternative asset and thus deserves up to 5% of investor portfolios. Tatar, who spent years on Wall Street with firms like Merrill Lynch, also devotes part of his newsletter to recommending stocks of companies that are embracing blockchain operationally.
Alibaba Group (BABA): China’s Alibaba is a global leader in online and mobile commerce. The company has already stated that it is integrating blockchain technology into many of its operations, including a “blockchain as a service” cloud-based system. Other potential areas for blockchain integration are intellectual property rights management and cross-border supply chain management. During the discussion Tatar was encouraged by recent statements by China’s President Xi Jinping supporting blockchain technology. Tatar first recommended Alibaba in September 2018 when its stock was at $164.76. After dipping as low as $130 during trade tariff turmoil, its shares now sell for nearly $180 each.
Square (SQ): This San Francisco-based company is a leader in payments technology and more importantly the vast majority of its millions of customers are small businesses. Billionaire Jack Dorsey, CEO (also the CEO of Twitter), is a big blockchain and bitcoin supporter. Here’s a recent statement from Dorsey, which Tatar quotes in a recent letter: “The one word that sums up everything we’ve been trying to do at Square is ‘access.’ And I don’t think there’s a greater technology out there that enables the kind of access we need at the individual level—that is borderless, that is not controlled by any one particular company and that was born on the internet and continues to be developed on the internet—than [cryptocurrency].” Tatar noted that in the second quarter Square’s Cash App, which accepts bitcoin, generated $125 million in bitcoin revenue. In 2018, Square’s stock appreciated 62% and year-to-date it has gained 11.61%.
Cheescake Factory (CAKE):
According to Dobosz, this well-known restaurant chain sells at discounts to 5-year average multiples of earnings, sales, cash flow and book value. Meanwhile, earnings and sales are growing rapidly. The stock is up 20% from its 2019 lows and it still yields 3.3%.
Cummins (CMI): This Columbus, Indiana based maker of diesel engines has suffered from the ongoing China trade war, but its stock screams value given its strong balance sheet, lean valuations and solid dividend history. Year-to-date the stock is up 35% and its dividend yield is 3%.
Author: Matt Schifrin
Source: Forbes: 10 Great Stocks For Income And Growth For 2020