Companies to Watch in 2013

Isaac Pino: That leads me to my next question. Who are you looking at for the year ahead? Who do you really like, whether it's a growth company or a value company?

Blake Bos: I am a value-constrained investor, I guess you could say, so I go against the grain most of the time. I think 2013 is an especially good year for stocks. You've seen yields on treasuries, fixed income at historic lows, and you have a lot of cash on the sidelines.

You want to see people trying to get that yield -- I think we'll see a lot of equity flow into the equity market -- but as far as stocks go, I don't really like to pick stocks for one year. It's just one year, and it takes more than one year, when you're a huge company, to do anything.

But companies I've been looking at are LeapFrog (LF.DL), I like them a lot. I feel like they're a good takeover target. They have a niche industry with those low price point tablets they do for children.

Isaac: LeapFrog is specifically tablets that introduce kids to games, education, very interactive ...

Blake: Yeah. Parents are probably familiar with them more so than investors, so I should highlight. They did the Learning Tablet. It's like $99, then you go and you buy all the software for these tablets that are for children, so they'll stop playing with your iPad.

You buy the software and they can learn from it. It's a great educational tool, and we saw them sell phenomenally well over the holidays. They sold out at some retailers for a period of time, and they were top sellers on Amazon. They had, I want to say 6 of the top 10 selling spots in toys.

They've been around for a little bit, and their valuation is pretty cheap. It's just a great takeover target. Michael Milken likes them. I don't know if you remember him from the '80s.

Isaac: Michael Milken? That guy's still around?

Blake: He's got about a 6% stake, if I remember right, in the company.

Isaac: He's trying to relearn the way to invest through a LeapFrog tablet ...

Blake: He's definitely a talented investor. He had his bad run back in the '80s, but ...

Isaac: Interesting. LeapFrog, that's kind of a play like iPad. It's targeted on a certain demographic that I think there's not as many competitors, at least at this point in the space.

Are there any other companies that you're looking at, similar to that?

Blake: Yeah, I like solar. I do. I like that it's out of vogue, with the coming natural gas boom. There's a lot of hype around natural gas, and it's driving energy prices down, which is true. It is, but people have taken solar and they've kind of forgotten about it, in my opinion.

You've seen a lot of these companies suffer. I don't really like the actual solar panel makers, per se, but I like the middlemen. A company like Power-One (NASDAQ: PWER), for example, I'm a shareholder in them. I like them because they don't have any debt.

This industry is going through a flux right now. They have no debt, and it's a good opportunity for them to snatch up market share. You've seen them suffer in the European market recently, but valuation-wise, they're really cheap.

They trade below book value, and I think as a value investor if you're willing to put in the time and wait this out, in the next 5-10 years you could see big things there. But it is a small company. It is risky.

I'm also really curious, in 2013, I have a little skin in the game with Radio Shack (RSHCQ) and I have some options with Best Buy (BBY 1.09%) currently as well, but I'm kind of curious to see how the retail story plays out. The big theme here, you see a ton of articles, "Retail is Dead," "Brick & Mortar is Dead," "Amazon is going to come in and they're going to take over."

I have a hard time believing that. These companies' profits aren't just vanishing overnight. Best Buy is still a profitable company.

Radio Shack is kind of "meh." They're kind of sinking right now, but they were going to refocus. They got rid of their target thing.

I just feel like there's a lot of pessimism in there. I have a hard time believing, when you hear companies like Target and Wal-Mart wanting to get into these small retail footprints, and you've got a company like Radio Shack that has all these locations across the world and small retail footprints, that that's not advantageous in some way.

I think the margin of safety is pretty high there. Not tremendously -- it is speculative -- but it will be really interesting in 2013 to see how this plays out; see if they get a CEO in that spot, see how Best Buy tries to turn things around, if they get a buyout offer.

There's a lot of exciting things in retail, and I think it's a really interesting year for investors to look at that. Not necessarily invest in it, but keep an eye on it because it is transformative.

Isaac: Yeah. I think with Radio Shack and Best Buy you're looking at kind of a binary outcome. Either these companies are going to stick around for the long haul, you're going to get a good leadership plan in there, or it could be a sinking ship that you don't want to jump on.

It's true, sometimes there's a sentiment that's either too bullish or too bearish, and right now it does seem a little bit overly bearish on these companies. We'll see how they figure it out.

I really appreciate your analysis, Blake.

Blake: Thank you.

Isaac: For more information about all the companies that we've just discussed, check out Fool.com. Thanks for watching, and Fool on!