Adds and drops for 2013
Now, on to my adds and drops for 2013.
The big question on the drop side is how long the current commodity price bust will last. I don't think the decline in the price of everything from oil to iron ore to copper to fertilizer has put an end to the long-term trend in favor of these commodities. Demand will continue to rise, especially from developing economies, and it will continue to be harder and more expensive to add new supply.
But the current supply glut in many of these commodities isn't going to go away quickly. For many commodities, I think it's with us through this year and into next. The question, then, is which companies are strong enough in the short term to survive to the long term.
That's the background for my first two drops for 2013: Fortescue Metals Group (FSUMF), where the iron ore supply glut has caught the company with a very overextended balance sheet, and Petrobras (PBR), where a drop in the price of oil has left the company with a huge discovery of very-deep-water oil and a huge capital spending budget.
My other three drops are Baidu (BIDU), because the company is stuck in a desktop PC search strategy when the world has gone mobile; Infosys (INFY), because the information technology outsourcing model, at least in India, has run into serious barriers; and Nokia (NOK), because although I think the company can survive (and might even make you a buck or two in the short run), I find it hard to see how it claws its way back to relevance in the smartphone market or recovers anything like its former profit margins in the feature phone market.
And the adds?
Cheniere Energy (LNG), because owning the first license to export liquefied natural gas from the United States is a hugely attractive way to exploit the U.S. natural gas boom; Cummins (CMI), because the company's technology lead gives it growing market share in the diesel engine market driven by tighter emissions standards and the need for energy efficiency; eBay (EBAY), because PayPal has grown into one of the leading platforms for mobile payments; Middleby (MIDD), because its cooking systems offer restaurant operators a way out of the central problem in a world where everyone wants to eat out more but wants to pay less; and Novo Nordisk (NVO), because diabetes is a growing global scourge.
As usual I will have fuller write-ups in the next few days when I post my individual drops and adds for this portfolio.
Picking the potential best performers out of the existing portfolio is even tougher this year than last. There are relatively few undervalued stocks on the list, thanks to the huge rally in the U.S. market. And it doesn't look as if we'll see big improvements in the economies of China, the United States and the eurozone in the second half of 2013.
That said, my picks for 2013 are Cemex, because although I don't expect a repeat of 2012's extraordinary returns on the company's balance sheet restructuring, I do expect better performance in cement sales in Mexico and the United States; Itau Unibanco (ITUB), because the Brazilian economy looks to be improving and nonperforming loans are falling at Brazil's second-largest bank; PepsiCo (PEP), because comparisons are easier this year than in 2012, because commodity costs are down and North American soda volumes look to be recovering, and because cost-cutting looks likely to deliver in 2013; Potash of Saskatchewan, because potash volumes are likely to pick up in the second half on higher demand from Asia and Latin America and because the end of the Israel Chemicals acquisition attempt is likely to bring a buyback and dividend increase this summer; and, finally, Yamana Gold, because I think the already low-cost miner has a chance for dramatic cost improvements in a market worried about rising costs at mining companies.
Look for the usual sporadic updates on stocks in this portfolio over the rest of 2013.
Updates to Jubak's picks
These recent blog posts contain updates to the stocks in Jubak's market-beating portfolios.
- Yamana Gold shares suffer after earnings miss
- Why it's time to sell Banco Santander
- Newmont Mining surprises with a dividend cut
- EBay becomes an attractive financial stock
- Apple's new reality: Stock tied to product cycles
- Citigroup has some upside for investors
Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.
Click here to find Jubak's most recent articles, blog posts and stock picks.
Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares Cheniere Energy, eBay, Home Inns and Hotels Management, Lynas, Novo Nordisk and Yamana Gold as of the end of March. For a full list of the stocks in the fund as of the end of December see the fund's portfolio here.
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Q: I saw an article last week that I can’t find much info about. Seems Congress voted and passed by a wide margin the ability to trade in the markets again. I thought this had been stopped, members of Congress had to put their holdings in a “passive” account, they could not trade with their “inside” knowledge. What have I missed? ~ Jeff H.
These guys are like sports prognasticators. They give you their picks and pat themselves on the back if they can win 51% of the time. I love how when everything blows up in their face they can read the box score and give a perfect explanation why they made such dumb picks. jim Cramer is the World's Worst...
At least it's not another article about Asian. Jim loves those rice babes!
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