At the beginning of the year, I set a few financial goals for myself. Number one was to stop using credit cards frivolously and work on paying off a decade of debt. Number two, perhaps more important, was the building of my retirement portfolio through the purchase of stocks.
I started off with the purchase of mega-conglomerate Berkshire Hathaway, whose broad company base and relative cheapness was attractive. I then added a couple of dividend-payers in Waste Management and Ford to grow my portfolio through income afforded by a dividend reinvestment program. Now, with a fresh contribution itching to be spent, I have decided to narrow down the choices for my next purchase.
And the nominees are…
When selecting these companies, I simply chose companies that interest me based on what they do or other aspects of the company. They all have relatively high P/E ratios, or had negative earnings last year, but I think that they will eventually retreat off of these valuations. I have followed three of the companies relatively closely, while I am just beginning to really research the other two. Without further ado, let's look at the five companies on my list:
Source: Finviz.com; ttm = trailing twelve months; NM = not meaningful; company had negative earnings.
The one-stop online shop
I have been a faithful Amazon customer for as long as I can remember. The majority of the books on my bookshelf were purchased from the e-tailer, with many starting out as recommendations based on previous purchases. I upgraded my Kindle twice in the past year, eventually picking a Kindle Fire as a birthday present to myself. My Amazon Prime membership not only gets me my orders quickly, but also allows me to watch movies and television shows for no extra charge.
But it's not the retail business that has me convinced that Amazon will come down from its lofty P/E heights. While the low-margin retail business will continue to contribute to the company's performance, Amazon's future may be in the cloud. It has one of the top supercomputers in the world running its cloud, allowing it to offer a cheaper alternative to its customers. Furthermore, its size gives it an advantage over cloud-dedicated companies like Rackspace Hosting.
Two athletic apparel companies
I have been unabashed in my love for Under Armour. It sells products that I use frequently, and I like that CEO Kevin Plank is compensated based on the performance of his company. However, like many investors in the company, I have been hesitant to invest in the company because of inventory issues, specifically the fact that its inventory growth has exceeded its revenue growth. That said, I still think that 2012 will be a great year for the company, and this has been confirmed thus far, with shares of the company up 28% since the end of last year.
The company that is often compared to Under Armour is yoga-apparel maker lululemon athletica. It is easy to see why. Both sell similar products and have similar stock trajectories, though lululemon's stock has risen more rapidly this year, up a staggering 51% in the last two months. Though I have just started to really look into this company, I was impressed with its retail presence, and it was easy to see how the company scored $1,800 in sales per square foot last year. With a recent upgrade from analysts, lululemon might actually be the better choice of the two.
Two companies shaking the establishment
Do you like more than one type of soda? Having numerous types available at one given time can be expensive, which may indicate why people often identify themselves with their favorite brands. With a SodaStream system, however, your flavor options are unlimited, based on the flavor syrups that you purchase. I probably drink too much Dr Pepper for my own good, but SodaStream's equivalent, Dr. Pete, tastes remarkably similar and is actually better for you (well, as good as much better as soda can be for you). Even if I don't end up buying SodaStream stock, I will be purchasing my own SodaStream machine in the next month.
My last choice is shaking up car ownership in many large cities across the United States. While I don't see myself becoming a Zipster while living here in Salt Lake City, if I were to move to a larger city, I would probably bypass buying a car for this car-sharing service. I first took notice of Zipcar when two of our top analysts independently recommended the company at our annual investor conference last September. I was further intrigued by my colleague John Maxfield's thesis in his article about the company, and have kept an eye on them ever since.
Who will win?
The winner of this latest battle for a spot in my portfolio won't be decided for a few weeks, as I do some further due diligence on these companies. However, one of these companies will make the cut and will be added to my portfolio by the end of the month. To find out which one makes the cut, be sure to add the companies to MyWatchlist so you are kept up to date on the latest news.
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Fool contributor Robert Eberhard owns shares of Berkshire Hathaway, Waste Management, and Ford Motor, but he holds no other position in any company mentioned. Follow him on Twitter, or click here to see his holdings and a short bio.
The Motley Fool owns shares of Ford, Zipcar, Amazon.com, Waste Management, lululemon athletica, Berkshire Hathaway, and Under Armour. Motley Fool newsletter services have recommended buying shares of Waste Management, Berkshire Hathaway, lululemon athletica, Under Armour, Zipcar, Ford, SodaStream International, Amazon.com, and Rackspace, as well as writing a covered strangle position in Waste Management and creating a synthetic long position in Ford.
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