Usually, around this
time, I suggest five stocks to hold for the year.
examining my track record over the years, I’ve discovered that my
picks do a lot better after six months than they do for the whole
For instance, looking
at last year’s results, my picks averaged a 24% return compared to
9% for the S&P 500 when sold in July (six months). By contrast,
holding them for the full year cut my average return to 20%, only
one percent better than the S&P over the same period. I found
similar results when checking previous years.
Thus, starting this
year, I’ll publish two lists, one in January and
another in July. So, here’s my January 2018 list. As usual,
they are all dividend payers.
Electric cars are on the way. And
what to all electric vehicles have in common? Lithium batteries!
Albemarle is the world’s largest and among the lowest cost producers
of lithium. Albemarle also produces chemicals for a variety of other
applications. Lithium currently accounts for more than 30% of sales
and 50% of profits, but those numbers are headed higher. For
instance, in its recently reported September quarter, Lithium sales
rose 62% compared to September 2016. Dividend yield is 1.0%.
The Napa/Sonoma fires destroyed more
than 8,000 homes and Hurricane Harvey wiped out more than 15,000
homes in Texas alone. Even more were damaged and require substantial
repairs. The rebuilding and repair efforts will consume lots of
lumber. Timber producer Potlatch owns timberlands in Arkansas,
Idaho, Minnesota and Wisconsin. Its wood products unit manufactures
lumber, plywood and particleboard. Potlatch is organized as a Real
Estate Investment Trust (REIT). As such, it pays no federal income
tax as long as it distributes 90% of profits to shareholders. Its
dividend yield is 3.1%, but a recent acquisition could trigger a
substantial special dividend prior to year’s-end.
Moelis & Co.
Moelis is an investment bank that
provides advisory services to corporations involved in mergers and
acquisitions, financing and restructuring, etc. Media reports say
that Moelis has been selected to be the sole independent adviser for
the planned initial public offering of Saudi Aramco, which is
expected to be the world’s biggest IPO (initial public stock
offering). The IPO is an important piece of Saudi Arabia’s plan to
attract foreign investment and diversify its economy. Moelis pays
5.2% dividend yield (including $1.00 per year of expected special
Texas Instruments (TXN)
TI produces semiconductor chips used
in smart cars, factory automation, and other hot sectors. TI pays a
2.4% dividend yield.
Six Flags Entertainment (SIX)
Operates 20 regional theme parks in
the U.S., Canada, and Mexico. By itself,
that doesn’t sound very exciting. But Six Flags’ global expansion
has generally been overlooked by the market. For instance, it has
six parks under construction in China, all expected to open within
three years. Six Flags pays a 3.8% dividend yield, and plans to
boost its payout by 11% in February.
As always, consider my picks to be
research candidates, not a buy list. The more you know about your
stocks, the better your results.