If you had to pick just one stock to invest in for 2009, what would it be, and why?
I posed that question to the Motley Fool CAPS community on my CAPS blog, and the responses I received were phenomenal. The insight and cooperative spirit of the CAPS community continues to reflect what it means to be a Fool. Let's explore some pet stocks to see whether they generate some fresh ideas for your portfolio.
The good egg
Fools are considering strong plays for a recession. CAPS member catoismymotor made a case for egg producer Cal-Maine Foods (Nasdaq: CALM ) :
Times are hard for small mom and pop operations. Many of them are looking to sell. This creates opportunities for companies like Cal-Maine. They just picked up a smaller egg producer in Florida, making it possible to expand their territory and increase their sales. This is a great small cap that is simple, dull and profitable. Who is going to stop eating eggs in a recession?
That introduced me to Cal-Maine Foods, and I wanted to take a closer look. According to quarterly results released this week, although retail demand for eggs held up well, a notable decline in demand from the food service industry has cut into the company's profits. Then again, the balance sheet looks reasonably healthy, and the shares are already off 40% from their 52-week high. I like this pick and will put Cal-Maine Foods on my CAPS watch list.
Energized about energy
Because oil and gas prices have fallen off a cliff since last summer, CAPS members are going bargain-hunting. If these prices stay this way, Harvest Energy Trust (NYSE: HTE ) could be forced to reduce its dividend, though it has approved its monthly dividend payments through February 2009 for an annualized yield of more than 30%. CAPS member Gingerbreadman55 says:
Harvest is encouraging for its continued strength and ability to pay out a substantial dividend.... It carries the promise to further shrink its margins and stands to gain a lot if(when) oil creeps up again. Plus it makes a strong hedge against a falling dollar and increasing inflation from the trillions of dollars America is spending on bailouts and buyouts.
Meanwhile, Enigmadude believes the double-digit dividend yields will be safe at Energy Transfer Partners (NYSE: ETP ) . Here's what the dude had to say about this company: "This atmosphere of fear and over-reaction has created attractive opportunities to own quality energy infrastructure [master limited partnerships] with low risk profiles and juicy yields."
CAPS All-Star goldminingXpert, whose score is in the top 10, prefers Western Refining (NYSE: WNR ) . In a conference call, "the only thing the CEO wanted to talk about was reducing debt and boosting the balance sheet." With long-term debt that's nearly three times the company's market cap, though, I'd say management has its work cut out for it.
Burgers and baby powder
After watching the Dow Jones Industrial Average lose 34% in 2008 -- the index's worst showing since 1931 -- Fools are scouring the blue chips for some long-term investing opportunities. CAPS All-Star rd80 selected McDonald's (NYSE: MCD ) as his pet stock:
In summary, [McDonald's] is growing revenues and earnings in a tough economy and they're doing it in around the world. The company has beat analysts' earnings estimates each of the last four quarters. The dividend was recently raised to $0.50 per share per quarter, yielding 3.77% based on Friday's close. For reference, that's a higher rate than a 10-year Treasury.
One can hardly argue with the resilience of McDonald's shares, and the franchise's global reach insulates earnings from the potential ravages of a declining U.S. dollar. Fellow Dow component Johnson & Johnson (NYSE: JNJ ) did not fare quite as well, but CAPS member StockSpreadsheet believes that "brings the stock down into value territory and is a stock that can be owned for years to come". I think Johnson & Johnson has some clown-sized shoes to fill to keep up with the likes of McDonald's.
For the record, my selection for best stock for 2009 was Agnico-Eagle Mines (NYSE: AEM ) . I see gold going much higher this year as the dollar faces massive headwinds. I'm far more interested in knowing your favorite stock. Please share your pick in the comments section below, or better yet, become active in the CAPS blogosphere and see firsthand just how valuable community intelligence can be.
On Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool's own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.