Make Money Investing The Warren Buffett Way
In December of 2009, I wrote a post about my investment in Chicago Bridge & Iron (CBI). CB&I was one of my Favorite Stocks For 2010. I trimmed my position a little in March to take some profits but still hold the majority of my position. Today, I want to take a look at how my investment in CB&I has performed over the past 11 months.
Congress is currently discussing another stimulus package. This one would not be like the first package which was loaded with tax cuts and spending on healthcare, information technology, and education. This package would go directly to improving our bridges, highways, dams, and tunnels. If Congress does pass a $50 billion dollar infrastructure stimulus bill, these are the sectors that would benefit the most.
2010 will be a year in which a premium is placed on investment selection. From March of 2009 to December of 2009 it didn’t matter what stocks you invested in; everything went up. 2010 will not be a repeat of 2009. 2010 is all about company specific earnings. Only invest in companies with strong balance sheets and sustainable earnings growth.
Here’s what I expect for 2010:
Financial Stocks will lag the S&P500. Banks will continue to be plagued by high unemployment, credit card defaults and home foreclosures. Major retail banks like BofA, JPMorgan, and Wells Fargo appear headed for a choppy 2010 with earnings hits and misses.
Tech Stocks will outperform the market as a whole. The Google’s and Apple’s of the world will continue to shine with strong earnings growth and increased profits. Whether it’s cell phones, laptops, netbooks ,tablet PC’s or chips, this sector is loaded with strong financial companies whose shares have upside potential including Intel, HP, Qualcomm and even Dell.
Energy stocks are a safe play for 2010. Energy stock earnings appear to have bottomed out in 2009 and any rebound in commodities prices will be an earnings driver. Great dividend yields will reward investors while waiting for a bounce back in oil and natural gas prices. BP, Conoco Phillips, Chevron, Royal Dutch Shell are yielding from 3.5% to 5.8% in dividends.
The retail sector will underperform in 2010. Retail companies have seen their share prices rebound explosively over the last 15 months based on an expected recovery. Until there is jobs growth and appreciation in home prices, the consumer will remain soft. Most of the growth for the retail sector appears to be already valued in most companies.
Industrial stocks will outperform in 2010. Basic material companies and industrial good manufacturers have tremendous upside based on any kind of recovery in the US. Rising metal prices and a continued recovery in emerging markets would benefit firms like Caterpillar, US Steel, Freeport McMoran and Joy Global.
Healthcare stocks will rebound in 2010. These stocks were beaten down based on fears of a public option in national healthcare. Those fears appear to have been unfounded. Wellpoint and UnitedHealth should be much higher at the end of 2010. Drug manufacturers Pfizer and Abbott Labs are solid value plays.
Consumer staples will be inline with the S&P for 2010. Experts are expecting investors to run for safety and bid up large cap consumer staples. Large cap staples like Colgate, Unilever and Proctor & Gamble will perform adequately but won’t beat the market.
The dollar is still king. The dollar will continue to strengthen as investors worldwide flock to the safest currency.
Now is not the time to buy bonds. I think the time to look at bonds will be in the 4th quarter of 2010 as interest rates will start to rise.
My favorite sectors for 2010 are industrial, energy and tech. I am really bullish on small and midsized construction companies and mid sized tech companies. Listed below are some of my favorite stocks for 2010.
AK Steel
Chicago Bridge & Iron
ConocoPhillips
General Electric
Intel
Neutral Tandem
Nuance Communication
Nucor
