Car dealers

Americans love driving their cars, but buying them is another story. The BBB receives enough grievances about new-car dealers to consistently rank them in the five most-complained-about industries. But if you're looking for a stock to beat the market, you'll like the deal that Lithia Motors (LAD) offers you. Operating dealerships in suburban markets from Wasilla, Alaska, to Grand Forks, N.D., Lithia is often the only game in town. It may, for instance, operate the only Toyota Motor (TM) franchise in 100 miles, says analyst James Albertine, of Stifel Nicolaus. With the bulk of its dealerships located west of the Mississippi River, the Medford, Ore., company has suffered more from the sluggish economy than some of its competitors have. But Albertine says that there's a lot of pent-up demand for cars out West, where the recovery has been particularly slow, and that Lithia's fortunes will improve once the economy picks up steam.

Lithia has done a good job of keeping costs in line, which has helped keep profits on an upward trend even in a lackluster economy. Analysts expect earnings to grow at a 16% annual pace over the next several years.

He also likes Penske Automotive Group (PAG) and Group 1 Automotive (GPI). The first half of 2013 may be tough for these companies, because Superstorm Sandy affected about 20% of their dealerships. But by the end of 2013, Albertine thinks that both stocks will have zoomed forward. He has a target price of $35 on Penske and $80 on Group 1. 

Calamity insurers

Part of what makes insurers unpopular is the nature of their business: You pay them to reimburse you in the event of a disaster that you hope will never happen. But the other part of their unpopularity has to do with how hard they make it for you to cash in on your claims when you do get into trouble.

In the wake of Superstorm Sandy, for instance, many homeowners complained that insurers had sneaked "hurricane deductibles" into their policies, requiring them to pay more before their coverage kicked in. Moreover, homeowners insurance doesn't cover floods. Thus, the people with devastating losses from ocean surges that washed over whole neighborhoods were covered only to the extent that they had special flood coverage.

Travelers (TRV) was caught in the maelstrom, with roughly 10% of the market share in hurricane-affected states, according to SNL Financial. However, risks such as hurricanes aren't new problems for insurance companies, and insurance-rating firm A.M. Best says all of the big property companies were well prepared for the claims. RBC Capital Markets analyst Mark Dwelle says that even though Travelers is a big name in homeowners coverage, that line accounts for just one-third of its revenues. The rest comes from commercial lines and workers' compensation coverage, where growth prospects are better. In addition, the New York City insurer has been buying back billions of dollars' worth of its stock. Dwelle's one-year price target: $85, or 12% above today's price.

Health insurers

If property insurers are widely reviled, health insurers may do them one better. ConsumerAffairs.com notes that people who have health coverage don't like the terms, think they pay too much and believe they get nickel-and-dimed at every opportunity. Of the 19 health insurers the site rates, none gets an average grade as high as two stars (out of a maximum of five).

Humana (HUM) has been cited in several ConsumerAffairs.com posts for denying claims and providing miserable customer service. But S&P Capital IQ analyst Phillip Seligman thinks the Louisville, Ky., insurer is a great investment. Although he also has a "buy" rating on other health insurers, he says Humana stands out because it specializes in Medicare Advantage plans -- an alternative to traditional Medicare coverage offered by private companies -- at a time when the baby boom generation is generating big business for senior care.

Although health care reform will lead to lower premiums for Advantage programs, Seligman believes the reimbursement rate will be sufficient to keep Humana's profits growing. Seligman thinks the stock, $71.50 today, will trade at $90 within a year.

Wireless providers

Telecom giants AT&T (T) and Verizon Communications (VZ) provide plenty of services -- from land line phone service to Internet connections -- that most consumers find seamless. But when it comes to their cellphone operations, consumers complain about everything from spotty reception to miserable customer service -- not to mention exorbitant fees for getting out of a contract early. Yet rich dividends and near-captive markets have kept both stocks on recommended lists for years. Recently, several analysts downgraded AT&T, partly because its share price has become relatively dear. For example, AT&T's price is less than $2 shy of UBS analyst John Hodulik's one-year price target of $35. So, although he likes the company, he's neutral on the stock.

But he does recommend Verizon. He notes that Verizon Wireless -- owned by Verizon Communications and Britain's Vodafone (VOD) -- is making so much money that it recently said it would pay its parents an $8.5 billion dividend. The cash helps fund Verizon Communications' $2.06-per-share annual payout. You won't make a killing in Verizon, but with a lofty 4.7% yield, the stock needs to rise only around a couple of bucks to give you a double-digit total return

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