Top picks 2013: PulteGroup, Green Mountain

Here's an investment to build value and a speculative play to wake up to.

By TheStockAdvisors Dec 31, 2012 11:08AM
Home under construction CorbisBy Todd Salamone, Schaeffer's Investment Research

Thanks to an improving string of housing data, 2012 was a very good year for PulteGroup (PHM). The stock of this homebuilder soared more than 180%, putting the major market indexes to shame along the way. It is our top pick for 2013.

For more speculative investors, Vermont-based Green Mountain Coffee Roasters (GMCR) is our top risk-oriented pick for the coming year.

PulteGroup
With the Fed continuing its plans to purchase mortgage-backed securities, the future looks bright for this overlooked homebuilder. In light of PHM's strong price action, there's plenty of room for the stock to benefit from future upgrades.

Currently, only 13 analysts out of 23 consider the shares worthy of a "buy" rating, so a round of upward revisions could be on the horizon. Any positive notes from the brokerage community could help to draw more buyers to the table.

Elsewhere, short interest is retreating from a multi-year high, but still accounts for more than 7% of the stock's float.

As PHM explores its own multi-year highs on the charts, a capitulation by the remaining bears could keep the wind at the homebuilder's back.

Green Mountain Coffee Roasters
As for Green Mountain, the stock was recently removed from the Nasdaq-100 Index, but that's no reason to panic over the stock's future prospects.

In fact, our research suggests stocks outperform significantly in the year following their removal from the benchmark, which bodes well for GMCR as we enter 2013.

Plus, three out of the company's last four earnings reports were positive surprises, pointing to a strong fundamental backdrop for the Keurig parent.

Even though GMCR is now trading back above several key short-term, intermediate-term, and long-term moving averages we follow, there's plenty of skepticism still levied against the stock.

Following a nosedive by GMCR in the first half of 2012, short interest surged, and is now lingering at an all-time high. This sets the stage for GMCR to benefit from short-covering support as the security extends its recent technical rebound.

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