Some Ten-Baggers For You

August 2nd, 2009 at 6:31 pm

Some Ten-Baggers For You

A cognoscente is someone who has specialized knowledge. I’m not perfect. I wish that I had sold all of my stocks at the end of 2007 and started buying in March of this year. One of my 401K’s was down almost 50% last year, and a two of my stocks were down 66%. It’s always my feeling though that you need chips on the table, good or bad, or you don’t even have a chance of winning. One thing I’m proud of is that I held on to everything I had, and began a buying program in the face of the worst market since 1933. I’ll let you be the judge if I qualify as a card carrying member of the stock market cognoscenti.

If you review my blogs since I began, you will see that by and large, most of my recommendations and picks have panned out, many of them, spectacularly. I conservatively stated that most of my picks would gain 50% or more in one year, but many of them doubled, tripled and even quadrupled in the last 7 months !! If I had a lot of money to invest, I would have bought all of my own picks, but like you, I can only buy a few at a time.

You might think it’s time to sell. But you would be wrong. Let me give you some insight as to why I was so optimistic when I started.

As you know, I have been a student of the stock market and investing for over 35 years. You don’t have to work on Wall Street to be good at this game. Look at the smartest cognoscente in the world, Warren Buffet, he’s been watching from Omaha for the last 50 years and is to investing what Einstein was to Physics, a genius. What I’m getting at is the “bird’s eye view.”

As we descended into the abyss last October, everyone was asking “Is this going to be a repeat of the Great Depression ? “ I’m fully aware of the economic history behind that debacle. My answer was no. The reason for my optimism is that there was just too much money around. And there still is.

Once you take my supposition, and if you believe we’re emerging from a Great Recession rather than a Great Depression, then from my bird’s eye view, what was happening to the market was an outlier. Statisticians know what outliers are. They are temporary deviations from trend due to a cataclysmic type cause. Think of the market drop after Kennedy was assassinated. Think of September 11th. Last August, it all had to do with Treasury Secretary Paulson suddenly getting capitalist religion and deciding, wrongly, to let Lehman Brothers go under.

Let’s return to the present. Because the market has gained so much, you would think, under normal circumstances, that we’re going to have another crackdown. I don’t think we’re going to get a crackdown at all. We might get a 10 or 20% drop at some point. That mild drop (comparatively) won’t come until the outlier is erased, possibly as early as Labor Day, but more likely by the end of this year.

Cognoscenti have knowledge but to survive in the stock market, you have to have insights, hunches, or revelations. My current revelation is that we will not return to normal in this stock market until we have fully climbed the proverbial Wall of Worry. There are still too many people that are negative and think the market will drop. And the higher it goes, the more negative they get that it will drop. However, it will not drop, until they give up and transfer all their 401K money back in because they are afraid they’ll miss the next up wave.

If you are a novice to the stock market, what I’m saying to you may be contrary to common sense thinking. However, the stock market is not based upon common sense, it is based upon people’s expectations of stock supply and demand. No one explained this concept better than the great cognoscente John Templeton, on Louis Rukeyser’s old Wall Street Week program, every Friday night, at 8 pm, on public TV. What he said was, if you had an ailment and went to the doctor and got an opinion, then consulted another doctor and got an opinion, and then went to 10 doctors and got an opinion, and if all 10 of them were in consensus about your ailment and its cure, you would take that advice. However, using stock market logic, you would take the consensus of 10 stock advisers, and THEN DO THE EXACT OPPOSITE.

This is what Warren Buffet was trying to tell us last October when he said “sell when others are greedy, and buy when others are fearful”. He lent 5 Billion Dollars to Goldman Sachs for a 10% dividend forever, with warrants to buy the stock at 117. Goldman dipped down into the 60’s or 70’s, and last month they paid back their 25 billion in Tarp money, AND their stock price is now in the 160’s. And Warren is sitting on a massive unsold capital gain while he collects 500 million year after year until he decides he’d like to cash it in.

Ten Baggers

A ten bagger is a stock which goes up 10 times in price. Seem impossible ? OK, after September 11, I bought some shares of Amazon for my kids accounts at 6 dollars, and about 1 year or 2 years later I was selling them over 60 dollars per share. Amazon closed this week at 85, and I think you’re looking at another double at least by the end of next year.

Before I get to the 10 baggers which is what you do with speculative money you might lose, let me mention my personal 5 horsemen, stocks that I keep holding because they’ll probably double or triple pretty easily in the next 2 years, these are the type of stocks you can own more of without worrying about losing sleep– GOOG (Google), AAPL (Apple), Amazon (AMZN), Blue Nile (NILE), and Research in Motion (RIMM) the makers of Blackberry. Hey, I know there are also a bunch of other great stocks out there, but technology is my business and I like these particular stocks. Oh, don’t forget Brk.B that will double and you won’t lose a minute of sleep at all.

In your 401K’s, try to move your funds into International Funds, they are going to do well this next year. If you like funds, look at EWZ (Brazil), PBD (Global Clean Energy), GEX (Global Alternative Energy), and COW (Livestock Stocks).

Here are some potential 10-baggers (over the next 1-3 years) for you to consider not necessarily in priority order. I expect many of these to double by December.

OCNF – Dry Shipping , now at 1.36 a short-term double, it has a book value (if it were to be liquidated) of $11.
XTEX – Nat Gas, now at 3.39 , has a book value of $15 and pays 20% dividend
URE – a real estate mutual fund, now at 4.28 it pays 10%
CLZR – they make cosmetic surgery lasers, now at 1.13 book value $3 and no debt
ESCA – Sporting Goods, now at a buck, $6 book , looks like a quadruple in 1 year.
OBAS – Optibase, they’re into internet TV, now at $1, $2 book.
LYG – Lloyds of London insurance, now at $6, $10 book, pays 30% dividend.
SHS = Sauer Danfoss Heavy Machinery, now at $5, $6.5 book, pays 14%.
UYG – these are your biggest banks, 4.59 pays 4%

No one has enough money to buy all of these, but here are some more if you’d like to check them out.

XJT airlines 1.37 $11 book
WNC Trucking .83 $4 book

Real Estate
AHR Reit .58
BEE Hotels 1.18 $5 book
ABR Reit 1.81 $11 book, pays 53%
DDR Shopping Centers $5 , $16 book
TPGI Prop Mgt 1.37 $5 book

Oil and Gas

FTK drilling 1.88 $2.7 book
AHD Pipelines around 3 bucks, pays 7%
DPTR Nat Gas $2 , $6 book

Retail

TWMC Entertainment (owns FYE) 1.11 $7 book
FNET Toys and Games 1.15 $4 book
KDE Toy and Game Licensing 2 , $5 book, no debt
PERF umania Perfumes, 2.4 $7.8 book

Hodgepodge

MIC 4 , pays 20%
NWD .13 Asia Food and Bev
HTX Foreign Telecom 4

Remember what Cramer says, do your homework – these stocks are going to have some ups and downs, but from my birds eye view, even if they don’t become 10 baggers, some of them might double or triple, and that’s not a bad thing. You should diversify and spread some of your speculative money (10-20% of your overall) into these and I think overall, you will be rewarded.

Sorry, I am not a regular blogger, from my birds eye world I really only need to comment periodically. I only like to write when I get an inspiration. Stay tuned.


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