best stocks to buy
In New York City last week investors from around the country gathered for the Ira Sohn Conference to pitch their lists of the best stocks to buy in 2013.
One of the more interesting presentations this year featured Steve Eisman of Emrys Partners, who gave a presentation that was very bullish on the prospects for the U.S. housing market.
While many investors have proffered opinions of the strength and validity of housing market performance, investors should pay especially close attention to Eisman when he speaks on the subject.
Eisman has shown he knows how to evaluate and profit from this market. He successfully profited from the market top in 2007.
Eisman was featured in Michael Lewis' book on subprime mortgages, "The Big Short," as one of the investors who made huge bets against the housing market at the top of the bubble and raked in billions of profits.
Now, he's picking the bottom. If he's right again, the profits could be just as large on the upside as they were during the collapse.
In his Ira Sohn presentation, Eisman pointed out that monthly payments as a percentage of income for mortgages is at an all-time low of just 14% and inventories of available homes are at a multi-year low. He thinks the growth is just beginning, and aided by very low interest rates we could see strong growth in the industry for several years.
He listed several of the best housing stocks to buy that would allow investors to profit from this continued recovery.
He favors home builders that have substantial land inventory as we go into the recovery. Those builders who have built up their land holdings over the past couple of year should amass substantial profits form reselling land purchased on the cheap.
Here are three housing stocks to buy in 2013, according to Eisman, including what he calls the "most powerful" play in the sector this year.
Why These Are Among the Best Stocks to Buy Now
One of the most successful long-term strategies when hunting for the best stocks to buy is contrarian investing.
It's a rather simple strategy: buy something when it is out of favor and everyone else is selling, which leads to bargain prices. Then wait for sentiment to turn, sell and pocket your profit.
Many contrarian investors are taking a long, hard look at one particular sector: gold miners. This is a sector that has not only been battered by falling prices for the gold they mine hurting profitability, but also a sector plagued by poor management at many companies.
But a closer look shows why some of these miners are among the best stocks to buy now when prices are low and potential is soaring.
Stocks to Buy: Why Warren Buffett Is Hunting in Europe
Investment guru Warren Buffett is looking for stocks to buy now in struggling Europe- a region many investors refuse to touch thanks to the destructive Eurozone debt crisis.
"We've bought some European stocks," Buffett said. "And the fact that there are troubles in Europe, and there are plenty of troubles, and they're not going away fast, does not mean you don't buy stocks. We bought stocks when the United States was in trouble, in 2008 and it was in huge trouble, and we spent $15.5 billion in three weeks in between September 15 and October 10."
One reason for Buffett's interest in Europe: plenty of cheap buys.
Stocks to Buy: This Cheap Metals Play Has 10-Bagger Potential
The recent selloff in metals has made some opportunities for investors to scoop up stocks to buy at record discounts, and it's not just in gold and silver-related plays.
Although it is not as heavily traded as the shinier metals or treated as a safe haven asset, copper has also been slipping.
Copper prices recently fell to a 17-month low as more efficient mining practices has increased supply and demand has slowed. According to the Bureau of Metal Statistics copper supply will top demand by 97,000 tons in 2013.
The rise in the dollar has also pressured prices as copper is priced and traded in dollars.
This has caused a price plunge in copper-related stocks, giving some huge upside potential.
In fact, this tumble may be creating a huge opportunity in a special situation stock that is owned by some of the world's most successful investors. It's a chance to own a company with large reserves of copper that are worth far more than the current stock price.
Stocks to Buy: This Defense Winner is in a Class of Its Own
If you think the sequester has taken all defense companies off the "stocks to buy" list, think again.
Indeed, there has been a cloud over defense stocks for some time thanks to the automatic spending cuts. The Department of Defense has to reduce its budget by $47 billion by the end of the summer.
That is in addition to almost $500 billion of cuts over the next decade that was passed back in 2011. All of the budget proposals currently circling Capitol Hill include additional cuts to defense spending.
Companies that work with the military and other defense agencies are feeling the pinch and many of their stock prices have reflected that.
But the truth is, while cuts will be made to some of the bigger, flashier programs, the military will still be in the business of protecting the country. Not all companies will slow spending.
And any industry that sees the type of investor distaste that has swept over defense frequently sees a wave of consolidation and takeover activity that lifts the valuation of companies in the sector.
That means it's time to go hunting for some undervalued stocks in defense.
Here's one we like.
How to Find Defensive Stocks to Buy for Portfolio Protection
In recent weeks many pundits and gurus have advised investors on which defensive stocks to buy for portfolio protection - but before following their lead, you should do some research as well.
The definition of defensive stocks seems to be a little unclear, but generally the same names keep appearing: large drug stocks, consumer-related issues and utility companies. While those suggestions sound like smart moves, many of these advisors seem to be using a rearview mirror to select which stocks and sectors fir the definition of "defensive."
In fact, during the past year the dividend-paying large cap stocks have had a huge rally as yield-seeking investors have pushed them to new highs. They are exactly the type of stocks that a defensive investor would want to avoid in the current market.
Fortunately for investors there is a method for identifying and selecting truly defensive stocks that has worked for more than 40 years.
Stocks to Buy, or Sell? Take Your Money and Run from these Huge Gainers
If you felt a shiver Wednesday afternoon as the stock market closed, it was Sam "The Grave Dancer" Zell walking over your portfolio.
Zell is a noted real estate investor who visited CNBC last week. He told viewers that the stock market was starting to remind him of the housing market back in 2006. No matter what happened economically or politically prices just kept going up every day, every week and every month to levels that no longer made sense.
Zell has made his billions by buying in times of distress and selling in times of irrationally high asset prices. He once commented on his nickname saying that he dances with the skeletons of other people's mistakes.
As the market appears to be at higher risk, it is more important than ever to not become one of the skeletons that enriches Zell and other sophisticated investors.
Zell's suggestion that stock prices are overheated make it time to examine some of your holdings, and figure out which ones are steadily climbing - and which ones have had a good run that's ending. It might be a good time to harvest profits from the market's strong upward move.
This is particularly true of consumer-oriented names, as there are a lot of reasons consumers could tighten up the purse strings in 2013.
Here are two of the year's biggest gainers, that might look like stocks to buy based on 2013 performance - but look unlikely to maintain their share prices. They're just like the kind of "skeletons" Zell was referring.
Stocks to Buy: We Found Two of the Next Big Growth Stories
When investors discuss growth stocks to buy they are usually talking about the most popular issues of the day. These tend to be the companies that dominate the headlines and have the newest, most exciting products and services.
While stocks like Google Inc. (Nasdaq: GOOG), Apple Inc. (Nasdaq: AAPL) and other market darlings have rewarded investors, when they become too popular there is a risk that the valuations become unsustainable and the shares find a new lower level.
Often it can take many years for a broken growth stock to get back on track and allow investors to recover lost gains.
There is another way to approach growth stocks that's more successful than targeting the most talked about companies. The stocks aren't always as well-known - but the returns can be even higher.
It's fairly simple to put together a list of stocks that have been able to grow sales, earnings and dividends at a double-digit rate for at least the last ten years.
As a further qualifier you should limit your list to those that have been able to successfully grow the book, or net asset value, of the company at a high rate. This is an indication that management has been able to generate free-cash flow and reinvest in the business successfully. All too often companies that initially boast strong revenue and profit growth fall victim to high capital expenditures or startup costs that squeeze profits and make the growth unsustainable.
The following companies may not be the most exciting, but they have products and services that are in high demand and have been so for an extended period of time.
Stocks to Buy Now: How to Make Money from Banks
In the past, you used to be able to safely invest at the bank. But now, it might be wiser to invest in the bank, as the following institutions are looking more like attractive stocks to buy now.
Thanks to the U.S. Federal Reserve, interest rates will continue to be low for an extended period of time, meaning savers would be lucky to get 1%.
Meanwhile, bank stocks have gone from unloved and out of favor to being an industry on the verge of recovery - and able to pay dividends to shareholders.
Income investors have a new opportunity with certain bank stocks. Banks that eliminated or reduced dividend payouts to preserve capital during the crisis are now loosening the purse strings a bit.
For example, many regional banks are starting to reinstate and raise dividends. As residential and commercial real estate markets continue to stabilize, banks should start to grow once again and higher earnings will lead to very high rates of dividend growth.
These bank stocks should be part of every income investor's portfolio right now as the long-term prospects for capital gains in addition to income are excellent.
Here are a few that rank among the regional bank stocks to buy as they raise payouts.
Why Not All Good Companies Are Among the Best Stocks to Buy
Sometimes it's easy to mislabel fantastic companies as great stocks to buy, but the two attributes don't always go hand in hand.
That's because sometimes these great companies watch their share prices climb faster than the underlying fundamentals.
Since these companies are overpriced, they are usually most vulnerable to a market correction.
Investors should sweep their portfolios now to make sure they aren't holding any of these "high-risk" stocks.
To identify them, investors should look at the price/earnings ratio and price/earnings/growth ratio of the companies they hold.
High P/E and P/E/G ratios often indicate companies whose share prices have been bid up to a point that is no longer justified by fundamentals. The companies themselves might be good investments, but not at the current share price.
Here are two companies that fall into this category right now.