Stocks That Almost Made The Cut: January 2007

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January 1, 2007 | S.T.A.M.T.C | | Author Asif

Seventeen newsletters, 34 stocks and four options later, it is certainly difficult to find two new investments each month that are likely to be winners and help us deliver the kind of returns we enjoyed in 2006.

In my quest to find the two stocks for the first investment newsletter of 2007, I considered using the Dogs of The Dow theory that we used last year to pick Pfizer (PFE) but decided against it because the 2007 Dogs of the Dow happen to be the exact set of 10 stocks that were also on the 2006 list and every single one of them posted gains in 2006. The top 5 dogs from 2006 were General Motors (GM), AT&T (T), Merck (MRK), Verizon (VZ) and JP Morgan Chase (JPM) with gains of 58.19%, 45.98%, 37.06%, 23.64% and 21.69% respectively without including dividends. Considering these gains, the stocks on the 2007 list can hardly be called “dogs”.

If I were to pick two stocks from the 2007 Dogs of the Dow, it would be Verizon (VZ) and General Electric (GE). Based on my personal experience with various cellular carriers, I think that Verizon wireless is the best carrier out there and I like Verizon’s bold plan to invest $18 billion to build out its fiber-optic infrastructure.

GE’s aircraft engines division should benefit from the large number of aircraft orders that Boeing (BA) has recently received for its new 787 Dreamliner thanks to the delayed launch of the rival Airbus 380 “Superjumbo” aircraft. GE’s water purification systems have a global market and recent interest in alternative energy sources should bode well for GE’s windpower equipment business. These three divisions are part of GE’s Infrastructure business, which accounts for 29% of revenues & 33% of operating profits.

Other than Verizon and GE, the biotech behemoth Amgen (AMGN), Yahoo (YHOO) and the fitness company that makes the Bowflex line of products, Nautilus (NLS) were also top contenders for this month’s SINLetter. However I decided to pick Alvarion (ALVR) and Diamond Offshore Drilling (DO) for all the reasons mentioned in the January 2007 edition of SINLetter.

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  1. mumbaiKar
    January 7th, 2007

    I am looking at a looming healthcare crisis in Mumbai. People are working late into nights to coincide with their collaborators in the US and Europe. Many of the professionals are eating dinners past 10pm. This after spending the entire day drinking coffee and sitting at a desk. Indian physical constitution is based on a "thrifty gene". Indian bodies are meant to take small amount of food and make it last. This has happened after years and years of famines. Now these bodies don’t know what to do with all these excess calories.

    How can we play this information? Insurance companies? Drug stocks?

    This is a wonderful site and it has become a part of my daily visit.

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