Stock Picks for 2013!

Who out here has been reading DQYDJ for the last year… show of hands?  Remember last year we entered into a friendly contest at Financial Uproar where we wanted to demonstrate our stock picking prowess to a skeptical audience (because auditing my returns wasn’t enough!).

So, even though we beat the S&P in 2012, we didn’t win (we got trounced, in fact).  Let’s fix that in 2013, shall we?  Here is our entry into the 2013 Financial Uproar Stock Picking Contest.  (Scroll down for a post-mortemon 2012).

DQYDJ’s Picks For 2013

  • TTM – Tata Motors – Even though the book value doesn’t inspire massive amounts of confidence in a value investor and folks like JT will caution me against trusting any measure which relies on Free Cash Flow in a foreign company, I’m a believer in Tata in 2013.  No guesses as to what a dominant position in cars and trucks in India means in 2013, but I like it regardless.
  • KLIC – Kulicke & Soffa Industries - Last year I picked a technology stock in my fantasy portfolio.  It killed my returns.  (Note: as an engineer, I never touch tech in my portfolio.)  But this year?  KLIC, if you go buy the numbers, is a value investor’s dream.  It hits high in every category, except love from the street.  Here’s to hoping that changes in 2013!
  • EBIX – Ebix, Inc. – 9.69% Return on Assets, 21.02% on Equity hit approximately the right notes in this economy, but here’s a value stock which has some crossover value as a growth play.  Two tech stocks – am I crazy?  Yes.  This is fantasy, not my real portfolio… so why not go for the gold?  I heard the loser wins a plunger.
  • CACC – Credit Acceptance Corp. – I know, you don’t need to tell me – credit, especially at the low end, might be a top target of the recently minted Consumer Financial Protection Bureau.  I’m not particularly worried – the CFPB generally targeted larger banks in 2012, and most regulation is done at the state level.  I’m confident in this pick for ’13.

DQYDJ 2012 Stock Contest Post-Mortem

My portfolio: + 17.81%
Jan 3, 2012 S&P 500 Open: 1,262.82
Dec 31, 2012 S&P 500 Close: 1,426.19
S&P Return: +12.93% (add another 2% for dividends… when S&P releases dividend totals we’ll know for sure), call it 15%.

So, roughly 3% market out-performance.

Yep, you’re right.  Inteliquent was a dumb choice, down 75% (although it did pay a $3.00 special dividend, so I escaped with my scalp intact).  However, the other three choices killed it, especially Vascular SolutionsAFL and PDLI I owned both in the contest and in reality, and both were solid performers – returning greater than the S&P 500 and paying a divided, to boot.

So yeah, 3/4.  Oh well.  May as well double down, right?

Full Disclosure: I own shares in TTM and PDLI.  Even though I don’t own shares of the other companies listed today, I may purchase them in the future – especially the non-technology stocks.

Tweet about this on Twitter0Share on Facebook0Share on Google+0Share on Reddit0Share on StumbleUpon0Email this to someone

Comments

  1. Joe says

    Domestically (and this is based on a very quick Google not financial statement analysis), Tata seems to have slowed a lot domestically, but is really trying to grow aggressively abroad, namely in China. That’s the sort of pick that, despite being a big company, still has good potential for a breakout performance. Good luck PK! I’m about 99% certain you’ll at least beat me.

    • says

      There’s one thing that’s really funny about Nelson’s contest last year – I beat the S&P by ~ 2.5%… and I came in 8th. A full 85% of contestants beat. Take that mutual fund managers!

      On the topic of my picks, I might eventually pick up CACC. As an engineer in a tech company, I won’t touch other tech companies… which rules out half the list. When I looked at TTM I got excited enough to buy it (and got my dad excited enough to buy it, as well). Pretty rare moment.

  2. Pat says

    KLIC has been a heartbreaker for decades. It is a pure cyclical, so don’t buy it unless you know what your trigger will be for getting out of it. Just run a long-term chart. You’ll see lots of volatility, and no long-term growth trend.

    • says

      For the contest we’re looking at a one year time-frame – but, no, I didn’t purchase it for my portfolio. However, I like KLIC’s numbers. I’m not sure you can blame them for that spike and drop after the bubble, but I see the ground scraping that you’re talking about.

      Still, feeling it for 2013, heh.

  3. JT says

    CACC was an obsession of mine for a really long time. I have my notes on them on another computer, but IIRC they have a delinquincy/default rate of something like 70% yet they still manage to make money. That is, 70% of their notes go into delinquency eventually…something ridiculously high. Of course, they’re lending money on crappy cars at an astronomical interest rate, so it’s a great business to be in. It’s insanity!

    Supposedly subprime is the fastest growing part of the auto segment right now.. Good news is that used car prices are high so you can lend to people you might otherwise not lend to as a repo brings back your original investment. I wish I knew more about auto finance. Not sure if they have a moat or not based on how their financing deals work, but their ROA/ROE tops most consumer finance companies…even the payday loan firms! Need to find someone who works in a dealership…could be a good real money pick with enough background.

    • says

      Yep – even with massive charge-offs and average repo numbers they can have some pretty epic margins. The big risk with them is the CFPB – at any point they could be hit with the fine club, which would also put them on notice to change their business. Hit me up if you want to talk more CACC?

Trackbacks

Leave a Reply

Your email address will not be published. Required fields are marked *