Reviewing Barron's Top 10 for 2013
Dec 19th 2012 9:28AM
Updated Dec 19th 2012 9:48AM
For 2012, Barron's did a respectable job of choosing the year's top stocks. The financial magazine's picks beat the market by an average of four points -- an absolute return of 17%. Barron's chose tech companies, banks, commodities, media released its top 10 stocks for 2013. Let's take a second look at some of these stocks and see whether they deserve the hype.
The obvious ones
Perennial favorite Apple , having made the list last year, is back in the running for 2013. In the past, I have not been a big fan of the company, and my arguments against the stock are common ones these days: supply chain issues (too much time spent on certain parts, resulting in shortages), iffy management decisions (letting go of Google Maps, allowing manufacturing in plants known to have poor working conditions), and the general market fervor surrounding the company. Much of that continues today, but the stock has taken a steep correction: It now has a forward P/E of 8 when you take out the company's giant cash hoard.
Apple is, of course, a top-notch company that will continue to show strong results, regardless of a couple of weak quarters. At today's prices, Barron's recommendation makes sense, as this is probably as good an entry point as one will get into the technology leader.
JP Morgan also takes a spot on the list for 2013. Barron's describes the company as a "best-in-class bank trading at a below-average price." While it's certainly one of the cheapest big banks on the market today, it is a difficult one to evaluate for retail investors. This behemoth of a company was the lone strongman during the financial crisis, and many argue its businesses today are still the healthiest among its peers.
For me, it's a tough nut to crack, and you really need to know your banking and regulating before taking a substantial position in the company. Back in 2009, it was easy to see that banks were trading at near-death prices and that failing was not an option, given the U.S. government. Since the valuations have come up, though, banks are once again a complex beast to value. Unless you have some priceless insight from a trusted source, I might stick to a company whose model you can more easily understand.
The less obvious and more intriguing
One of the more interesting picks on the list is an unloved company in the minds of many: Barnes &Noble . While the death of traditional retail stores is all too common these days, Barnes & Noble is a cash-generating business that is priced to go almost nowhere. The company's venture into the e-reading business has been impressive given the juggernauts it faces as competition. The Nook has successfully bitten into a small but still relevant portion of the market share dominated by Amazon.com and Apple.
Like many troubled retailers, Barnes & Noble's stock reflects only portions of the company, giving a negligible value to things such as real estate and the Nook business. For those who believe in the cash-generating power of a retail business, Barnes & Noble is a great company to keep an eye on in 2013.
Smart and easy
Contrary to popular opinion, it doesn't take a genius to find a decent big company to buy into. If you aren't searching for value, special situations, or high growth stocks, there are plenty of good companies that will be reliable holdings.
Barron's includes Marathon Petroleum on its list, and I think this qualifies as a no-brainer for the passive investor. With the big-time rise in U.S. oil production this year and its expected continued expansion, a high-quality refinery is a great business to own. Barron's mentions MPC's recent Gulf Coast refinery purchase, which they say will increase capacity by a staggering 38%.
The $21 billion company trades at just seven times forward earnings, despite the favorable growth prospects given the relatively low-priced oil reserves in the U.S. and Canada. Margins should remain sweet for the company going forward, keeping that bottom line in prime shape.
Do your homework
I've only mentioned a few of the more noteworthy stocks from the Barron's list. I would highly recommend taking a look yourself to see if there are any other companies that grab your interest. You can read the article here.
Furthermore, remember that just because Barron's (or myself, for that matter) recommends a stock, it doesn't mean it's a guaranteed pick for your portfolio. Everyone has their own risk tolerance and strategy that suits their specific needs. I hope at least one of these stocks piqued your interest; if so, do some more research to try to determine if you may be interested in picking up some shares. Fool on!
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The article Reviewing Barron's Top 10 for 2013 originally appeared on Fool.com.Fool contributor Michael B. Lewis has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, Google, and JPMorgan Chase & Co. Motley Fool newsletter services recommend Apple, Amazon.com, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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