Top 10 Stocks For 2011

Top 10 Stocks For 2011: Hard Asset Producers (HAP)

"Whenever inflation heats up, there's no better place to park your cash than in tangible commodities," says Nathan Slaughter.

 

his The ETF Authority, he noes "Our favorite play on this sector is Market Vectors Hard Asset Producers (NYSE: HAP), an ETF whose 300-stock portfolio provides one-stop shopping for six distinct commodity sub- sectors.

 

"History has shown conclusively that there is one asset class that thrives above all others under these hostile conditions: commodities. A depreciating dollar is a sure-fire recipe for rising commodity prices. And when inflation is on the rampage, investors always like the reassurance of owning hard assets.

 

" Instead of watching prices for things like steel and gasoline rise all around you, why not convert your dollars into these commodities directly and enjoy the ride?

 

"Even if the Fed does manage to keep inflation in check, we believe that good old supply-and-demand fundamentals favor rising prices anyway.

 

"With the global economy getting back on track and emerging powers like China swallowing mountains of raw materials, the short-circuited commodities rally will have juice once again.

 

"Investors have a dizzying array of options here, but our favorite is Market Vectors Hard Assets. The fund is invested in six commodity sub-sectors.with top billing going to the energy sector, where integrated oil & gas giants, o?shore drillers and equipment/service providers soak up about 40% of the fund's assets.

 

"Elsewhere, shareholders will have a large stake in agricultural firms, ample exposure to gold and silver producers, along with aluminum, nickel, iron ore and other critical industrial metals. Rounding out the portfolio are holdings linked to coal, steel, uranium and even forest products.

 

"Whether it's to protect purchasing power against the ominous threat of currency debasement or a simple bet on stronger economic expansion, both point to a continued run-up in commodity prices -- and the shares of producers that bring us these goods."

Top 10 Stocks For 2011: IMAX (IMAX)

For his top pick for 2011, Dennis Slothower turns to the "big screen" and highlights a company that could benefit from the recently release film, Avatar.

 

The editor of Stealth Stocks says, "IMAX Corporation (NASDAQ: IMAX) is one of the world's leading entertainment technology companies, specializing in motion picture technologies and large-format film presentations." Here's the reasoning behind his buy recommendation.

 

"The company's principal business consists of large-format digital and film-based theater systems. The sale or lease of such systems to, or contribution of such systems under, revenue-sharing arrangements with its customers and the conversion of two-dimensional (2-D) and three-dimensional (3-D) Hollywood feature films for exhibition on such systems around the world. 

 

"IMAX's theater systems are based on proprietary and patented technology. Its customers that purchase, lease or otherwise acquire their theater systems are theater exhibitors that operate commercial theaters, museums, science centers or destination entertainment sites.

 

"The company generally does not own IMAX theaters but instead licenses the use of its trademarks along with the sale, lease or contribution of its equipment.

 

"In 2002, IMAX introduced a technology that can digitally convert live-action 35mm films to its large format at a modest incremental cost while meeting the company's high standards of image and sound quality. 

 

"In 2003, the company introduced IMAX MPX, a theater system designed specifically for use by commercial multiplex operators.

 

"The IMAX MPX system, which is highly automated, was designed to reduce the capital and operating costs required to run an IMAX theater, all without sacrificing image and sound quality.

 

"Avatar, a movie made in 3-D, was just released this Christrmas. Critics are saying that it could be the nextThe Lord of the Rings, only it uses a new kind of 3-D technology that is expected to revolutionize the movie industry, much as did sound and color did in the last century.

 

"High expectations are pushing theater chains around the world to invest in this new digital 3-D system. IfAvatar is, in fact, a big hit, we're sure to see many more 3-D action films and many more 3-D theaters, which should increase IMAX's earnings sustainably.

 

"According to my numbers, IMAX should be selling in the low teens over the next three to five years. It is currently trading around $10, so IMAX has large upside potential. Place a sell stop at 25% below your entry price. As the stock rises, continue to raise your stop so that you are trailing the Friday close by 25%."

 

Top 10 Stocks For 2011: Longtop Financial (LFT)

"Longtop Financial Technologies (NYSE: LFT), our top pick for for 2011, was the first Chinese software company to list on the NYSE when its ADRs began trading in October 2007, and we're impressed by the progress made since then," says Timothly Lutts.

 

The editor of Cabot Stock of the Month Report explains, "Financial services industries are booming in China, and Longtop is a great way to benefit. We've long maintained that watching China's growth in recent decades has been like watching a video of American history … but played at fast- forward speed.

 

"The transition from farming to industrial production was accomplished in one generation (in part by following the U.S. roadmap) and now the country is entering into the software era.

 

"Longtop Financial Technologies was founded in 1996 as a financial systems integration company, but made the transition to software and solutions in 2001.

 

"Today it's the #1 developer of banking software in China and the #2 developer of software for the insurance industry. And now it's breaking into the securities industry; Longtop announced its first contract there in November.

 

"Longtop's main customers are banks; they accounted for 82% of revenue in the latest quarter.  And its biggest bank customers (no surprise) are the 'Big Four' banks of China. These are the Industrial and Commercial Bank of China, the Bank of China, the China Construction Bank, and the Agricultural Bank of China.

 

"These four banks together hold more than 65% of domestic market share. For Longtop, three of them (it's working to get business from the fourth) accounted for 48% of revenues in the latest quarter.

 

"In China, of course, the banks are healthy -- none have gone bankrupt, or been bailed out by the government. And none are expected to. Yes, business has slowed a little, but the future is still expected to bring great growth. And as the banks grow, Longtop will, too.

 

"In addition to banks, Longtop serves the insurance industry and the financial departments of major non-financial companies, and there's no reason those won't grow, as well. But banks are the company's bread and butter and will be for the foreseeable future.

 

"Furthermore, Longtop, which spends 5.8% of revenue on R&D, has new projects starting frequently. Recent announcements include projects on anti-money laundering, e-banking, financial testing solutions, financial risk management and data warehousing.

 

"And then there are acquisitions. Longtop completed the acquisition of Sysnet in second quarter, and it's currently working on an acquisition that would be its biggest yet.

 

"Technically, Longtop's stock chart is encouraging. After coming public in October 2007 at 18, it peaked at 35 and then drifted slowly down over the next year (with the market), bottoming at 10 1/2 in November 2008. By late February, it had recovered to 15, and that's when the big move of 2009 began that took the stock to a high of 38.

 

"Currently, it's digesting that advance; it may pull back as far as 32, where we now find the 50-day moving average. And if it does I recommend that you treat the pullback as a buying opportunity.

 

"While the American banking industry struggles, the Chinese banking and financial services industries are booming, and Longtop is a great way to benefit from that boom."

 

Top 10 Stocks For 2011: T. Rowe Price New Asia (PRASX)

"My top investment idea for 2011 is T. Rowe Price New Asia (PRASX)," says long-standing fund expert Walter Frank.

 

 In his The MoneyLetter, which has been published for over 30 years, he explains, "What attracts us to the fund is the weight it gives to both  China and India." Here's his review.

 

"It may seem a strange pick considering that the fund is up almost 100% for 2009.

 

Normally, after such a run, we would not pick the fund as a favorite for next year. In addition the entire range of emerging market stocks are now among the favored by surveyed managers for 2011.

 

"That too should serve as a warning to stay away from the group. Having duly warned you we are nevertheless sticking with our recommendation.

 

"What attracts us to the fund is the weight it gives to both China and India. Each is about 30% of the fund. We like that mix.

 

"In fact, what attracted us to the fund in the first place is that it gave reasonable weight to India. We see most Asian funds as underweighting India. We would be wary of a pure India fund and right now we are not keen on a pure China fund. It is the blend that we like.     

 

"Even though the emerging market funds have been Wall Street favorites this year we think their run is by no means over. The emerging markets are being valued at about the same level as are developed markets.

 

"Considering their potential growth rate, they are actually selling at a more than trivial discount of what they would sell for were they a developed market. We do not believe the discount makes much sense any more.

 

"Today's emerging markets are no longer the crap- shoots of the past. As this is being recognized,we look for higher normal valuations (price/earnings ratios) than in the past.     

 

"There was a manager change for the fund in April, as the former manager retired. So far the fund has not lost a beat.

 

"We would not expect it to, considering the strong bench T. Rowe Price brings to Asian investment. We are still recommending the fund despite its meteoric gains in '09." 

 

Top 10 Stocks For 2011: Universal Insurance (UVE)

"Universal Insurance Holdings (NYSE: UVE) is my stock pick for 2011," says Neil Macneale, editor of the In his 2-for-1 advisory.

 

Incidentally, Neil's top stock pick in last year's report -- Teck Resources (NYSE: TCK) -- soared nearly 600%. Here's his review of last year's pick as well as his new favorite for the coming year.

 

"Teck Resources has had a great run but it's nearing the time to cash out. According to our monthly buy and sell routine -- which is a laddered portfolio approach -- the TCK position in our 2 for 1 portfolio will be sold in April.

 

"According to our monthly buy and sell routine -- which is a laddered portfolio approach -- . However, no one who bought at the beginning of 2009 could be faulted for taking their profits at any time.

 

"TCK now has a P/E of 32 and its balance sheet is way out of whack. A resumption of dividend payments seems unlikely in the next few years. TCK is selling at its 52 week high and, as hard as it is to face up to the facts, it's time to let it go.

 

"Even if its has a little upside momentum remaining, as my Grandfather used to say, 'You always need to leave a little on the table for the next guy, otherwise who would want to buy?'

 

"Universal is a small insurance company based in Fort Lauderdale, Florida, specializing in homeowner's insurance. The company has a strong balance sheet with over $7.00 in cash per share on the books with earnings at close to a dollar a share.

 

"The current profit margin stands at just under 20% and the dividend yield is a whopping 13.8%. 47% of outstanding shares are held by insiders.

 

"Granted, investing in a homeowner's insurance company in hurricane country should be considered on the risky side, but UVE has a good record with its premium/loss ratio so far.

 

"In return for the risk taken on, insurance companies get to use OPM (other people's money) for investments during the periods between claims losses. Universal has done exceptionally well in that regard during the economic downturn.

 

"It cannot be assumed that the good record on investments in 2009 will be repeated, but the management of Universal seems to be playing a hot hand at the moment and it's not unreasonable to imagine this might continue through 2011."

 

Top 10 Stocks For 2011: AECOM (ACM)

"Our top pick for 2011 is engineering and construction (E&C) firm AECOM Technology (NYSE:ACM)," says Geo?rey Seiler.

 

In his BullMarket.com the advisor explains, "AECOM, unlike some better-known E&C names, o?ers a relatively low-risk business model. It performs no construction work at all and thus has none of the lump-sum, fixed-rate contracts that other companies might sign.

 

"The Los Angeles-based company focuses on a broad range of services that includes planning, design, environmental impact studies, project management, logistics and other jobs in the facilities, transportation, environmental, and energy and power segments.

 

"Transportation is the company's largest end market, representing 28% of the business, followed by environmental at 25%, facilities work at 24%, and Management Support Services (MSS), which delivered 17% of its revenues in fiscal 2009.

 

"Energy and power is the company's smallest segment, representing about 6% of its total revenues, but the company does view it as a growth opportunity. It is particularly strong in hydroelectric projects.  

 

"The MSS business is 100% dedicated to working directly for the U.S. government, but government spending of all types -- either from federal state and local governments and foreign governments -- accounts for 70% of the company's revenue. The remainder comes from the private sector.

 

"AECOM has been under some pressure toward the end of the year, despite initially rallying following a strong fiscal Q4 earnings report in November. The culprit was some weak reports from fellow E&C firms and the Dubai debt debacle.

 

"However, AECOM isn't subject to the same type of energy sector cancellations that some other E&C companies experienced, and its exposure to Dubai is negligible.

 

"Impressively, AECOM is one of the few E&C firms to grow its backlog sequentially last quarter. Total backlog stood at a record $9.5 billion on September 30th, a 10% increase year over year and a 3% increase quarter over quarter.

 

"Meanwhile, AECOM is well positioned to be a beneficiary of increased government stimulus spending in 2011, as well as the possible passage of a substantial highway bill late next year.

 

"AECOM guided for fiscal year 2011 EPS to be in the range of $1.90 to $2.00. The midpoint of this range reflects 15% growth in earnings per share. We think the guidance is relatively conservative.

 

"In summary, we like AECOM's position in the marketplace, its consistent growth, and sound low-risk strategy. With a pristine balance sheet, trading at under 14x the midpoint of conservative guidance, and an over 15% expected 5-year growth rate, AECOM is undervalued and our top pick for 2011."

 

Top 10 Stocks For 2011: American Superconductor (AMSC)

Michael Cintolo, editor of The Cabot Market Letter and Cabot Top Ten Report, looks to the alternative energy sector for his favorite investment idea for 2011. The growth stock expert explains, "I consider this company to be the #1 wind power story in the market today." Here's his review.

 

"While alternative energy hasn't been a terrific sector for much of 2009, we're beginning to see some great strength in the group as investors discount accelerating growth in the quarters to come. And my favorite stock is sure to benefit from this trend, as it's the #1 wind power story in the market today.

 

"We're talking about American Superconductor which designs many di?erent wind turbines and then licenses them to customers that want to get into the wind business; customers are obligated by contract to then buy AMSC's wind electrical systems- basically the brains of the wind system. "Its biggest customer (by far) is Sinovel of China, which wasn't even in the wind industry a few years ago, but is set to become a top five turbine maker next year. And many other customers, including Hyundai Heavy Industries (which is going to have a big presence here in the U.S.) are set to ramp up production in 2011.  

 

"Because of all that, revenues have leaped more than 80% in each the past two quarters, earning are ramping up quickly and management has stated it expects fiscal 2011 (ending next March) revenues to grow more than 33%, and earnings of "at least" $1.15 a share.  

 

"Interestingly, because alternative energy stocks have been out of favor, AMSC hasn't done much in the second half of 2009. It spent two months building a launching pad, then broke out powerfully after an earnings report in August.

 

"But then it spent another four months building a new launching pad! Happily, AMSC has just broken out on the upside, which leads us to believe the buyers are finally ready to push the stock much higher as 2011 arrives."

Top 10 Stocks For 2011: American Superconductor (AMSC)

"Looking for a way to bet on a continued rebound in technology stocks, a rise in worldwide demand for energy, and China…all in one?" asks small cap growth stock expert Jim Oberweis, Jr.

 

The money manager and editor of The Oberweis Report suggests, "Take a look at American Superconductor Corp. (NASDAQ: AMSC), my choice for the top idea for 2011.

 

"The bulk of their business today comes from the wind power industry, as AMSC designs wind turbines and sells turbine electrical systems that can be customized for each customer.

 

"AMSC is the leading provider of electrical components to the leading Chinese wind turbine manufacturers, with Sinovel being their largest customer and representing roughly 75% of their revenues.

 

"Sinovel is the leading player in the Chinese market and continues to successfully take market share from competing players.  While Sinovel's growth is AMSC's gain and their relationship has only strengthened as of late, sales concentration remains a risk.

 

"AMSC continues to mitigate this exposure through deals with several new international wind power customers.  Hyundai represents another important customer and has already announced orders both in the US and Korea.

 

"Customer Doosan in Korea has ambitions of becoming a top ten manufacturer as well.  AMSC has several other attractive growth opportunities that should help to diversify their business.

 

"Within the power grid market, the company sells power systems to utilities to help them control power output from renewable sources. With expected growth in electricity usage over the next few decades utilities are planning now to prevent costly power outages.

 

"AMSC products increase the reliability and capacity of the grid, directly addressing the growing problem of grid voltage instability. The company's superconductor business represents another exciting growth opportunity.

 

"As renewable power stations continue to grow, so does the problem of collecting the energy they produce and e?ciently transporting it to the place it is used. "These stations are often erected in rural areas while the demand for their produced power is a good distance away, in more densely populated areas. "The copper wire that is currently used su?ers from an inability to span long distances e?ciently, thus causing power line losses among other costly issues. "AMSC is the leading manufacturer of proprietary high temperature superconductor (HTS) wire, which can carry roughly 150 times the electrical capacity of standard copper wire and will better handle the growing demand for energy usage worldwide.

 

"The company must win contracts here in order to achieve profitability within this business, but we expect rapid growth both here and abroad.

 

"The proof is in the pudding, of course. Amidst a weak economic backdrop, the company grew revenues by 85% in their latest reported quarter as they announced their third consecutive quarter of profitability.

 

"The future looks bright as well. After booking approximately $165 million of orders in their latest reported quarter, AMSC enjoys a backlog of orders valued at roughly $587 million.

 

"The stock should reward investors in 2011 as AMSC reports continued growth in the final two quarters of their current fiscal year (which ends in March), followed by a near doubling of earnings in the following year."

Top 10 Stocks For 2011: Dataram (DRAM)

 Kevin Kennedy specializes in micro and small cap "momentum" stocks that, technically, have broken to the upside and then pulled back in price.

 

In his The Coolcat Report, he looks to Dataram (NASDAQ: DRAM) 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 2011. 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."

 

Top 10 Stocks For 2011: Electronics Arts (ERTS)

 

"I've been tracking the companies I feel are best positioned to sustain the market's upward momentum into next year," says Karim Rahemtulla.

 

The options expert with Investment U suggests, "One such company is Electronic Arts (NASDAQ:ERTS) – a major player in the video game industry. ERTS is one of the largest creators and sellers of multi-platform content in the industry and it finally o?ered some guidance for the year ahead. 

 

"Expectations for earnings for 2011 are 87 cents per share with revenues of $4.26 billion. EA came out and said that revenues should fall between 4.2 and $4.4 billion with earnings ranging from $0.70 to $1. 

 

"That type of wide range never sits well with Wall Street, which likes much narrower ranges and more specific guidance. 

 

"There are three reasons to buy EA now: 

 

"First, share prices do not usually wait for numbers to come through before they move higher. They move higher in anticipation of better earnings ahead. This should happen after the company reports numbers for the first and second quarter of next year.

 

Second, if this economy and market are really recovering, one of the prime beneficiaries will be a company like EA, which is solidly in the consumer discretionary space. 

 

"Third, EA has been the subject of many takeover rumors, specifically by the likes of Microsoft. Currently the shares are trading at $16.50 per share, down from highs of more than $50 just over a year ago. It is flush with cash, very little debt and a dominant market position. 

 

"While a takeover would be the least likely outcome, there still is that chance and in the current climate of mergers and acquisitions, I wouldn't be surprised to see a bid made for EA. 

 

"While shares themselves look to be a good buy, I prefer to play this one using the Electronic Arts January 2012 $20 LEAPs."

 

Top 10 Stocks For 2011: Eldorado Gold (EGO)

 

"While my primary focus is on the international financial markets, it's the glint of gold that has caught my eye for 2011," says Martin Hutchison.

 

 The contributing editor to both Money Map Report and Money Morning, explains, "Gold – or mining companies like Eldorado Gold (NYSE: EGO) – an especially compelling investment for 2011.

 

"There hasn't really been a commodity bubble like the current one since the late 1970s. It will end, as these things always do – but only when the world's central banks decisively tighten monetary policy and turn o? the spigots flooding the system with cash.

 

"That's unlikely to happen until consumer inflation has shown itself rising sharply. In relative terms, gold's price is still far below its all-time highs – the 1980 top at $875 per ounce is equivalent to $2,400 today, roughly double the current price.

 

"Supply is also becoming an ever-larger factor – the total global supply of new gold in 2009 was valued at under $90 billion, with another $35 billion or so available from recycling.

 

"That first number is unlikely to change as mining output has been declining by about 1% per annum in volume terms, in spite of the recent surge in gold's price.

 

"This means that if the big boys – such as the hedge funds (global assets of $1.9 trillion) or China (o?cial reserves of $2.3 trillion) – get involved, demand is likely to quickly exceed supply by a huge margin.

 

"Even though all the gold ever mined is still with us, it has a value of only about $5 trillion – a lot of money, but not huge in light of global investment flows.

 

"So, if the money really pours into gold, the price could again take o?. After all, $2,400 an ounce is still some distance away, and there's a lot more speculative capital around today than there was in 1980.

 

"There's no money tightening in the works currently. The Fed has kept monetary policy extremely loose for a year now, and has said it has no intention of raising rates in the near term.

 

"The European Central Bank, the Bank of Japan and the Bank of England have also indicated they do not intend to tighten, while China's M2 money supply has risen by 29% in the past year. 

 

"Given all this money supply sloshing around, it's not surprising that gold prices have zoomed upwards – and will continue doing so as long as the Fed and its central bank brothers maintain a loose-money policy.

 

Rather than gold itself, I'd recommend gold mining shares – first choice, Eldorado Gold – for two reasons: 

 

  1    * First, there's the leverage. A gold mining company with extraction costs of $600 per ounce doubles its profits when gold goes from $900 to $1200.

 

  2    * Second, commodity speculation pushes up share valuations, so chances are you'll make even more money. After all, the earnings growth rate becomes pretty spectacular, which can make a very simple company look like a Google!

 

"As a bonus, Eldorado is not just in gold, it's in Chinese gold – both internally and through a takeover it recently executed.

 

"That means it benefits not only from any rise in gold prices, but directly from increases in Chinese wealth. Chinese investors, when they buy gold, will naturally turn first to domestic output.

 

"Eldorado plans to double current production by 2013 (even without its recent acquisition) – no decline here. What's more, it's reasonably valued – actually quite cheap – considering its earnings potential.

 

"The company was founded in 1992, and has come a long way in a relatively short time, building to a recent market capitalization of $5.15 billion. 

 

"It owns the Kisladeg gold mine in Turkey, which produced 58,000 ounces of gold in the third quarter of 2009, and the Tanjanishan gold mine in western China, which produced 31,000 ounces.

 

"In addition, its Efemcukuru project, with projected reserves of 1.7 million ounces of gold in Turkey, is expected to begin production in the fourth quarter of 2011.

 

"Eldorado also has gold-development projects in Greece and Brazil and an iron-ore project in Brazil. Its current gold reserves, proved and probable, total 7.6 million ounces.

 

"In September 2009, Eldorado made an agreed-share-exchange o?er for Sino Gold, the largest international gold mine in China. The o?er values Sino Gold at approximately $2.2 billion and will give Sino shareholders approximately 25% of the combined group. 

 

"Sino has two operating mines in China – Jinfeng, the country's second-largest mine with production of 151,000 ounces, and the White Mountain Gold Mine, which began production in January 2009. The Eastern Dragon project in Heilongjiang province will become Sino's third mine.

 

"The combined companies will have gold reserves of 12.7 million ounces, with annual production expected to reach 850,000 ounces in 2011. In the third quarter, Eldorado earned $30.2 million, or 8 cents a share – up from 5 cents a share in the third quarter of 2008.

 

"That's at an average gold price received of $957 per ounce, compared with a total production cost, including overhead, of $430 per ounce. Based on third-quarter earnings, EGO has a P/E ratio of about 35 times – steep, but not excessive given the growth potential.

 

"That should become obvious in the year-end figures, which will show the rise in gold prices we saw in recent months dropping straight to Eldorado's bottom line. 

 

"Just estimating, if the gold price for the fourth quarter averages $1,100 an ounce, that will send an extra $150 per ounce or so in profits to shareholders, adding about 35% to EPS and reducing the P/E correspondingly.

 

"Yes, labor and energy costs could rise a bit, but not much – Eldorado's costs were only $402 per ounce in the third quarter of 2008, when oil was at $147 a barrel.

 

"Bottom line: Increasing gold production – check. Contained costs – check. In the middle of the world's fast-growing Chinese gold market – check.  Decent balance sheet and profitability – check. What's not to like?"