tmd6966 (< 20)

10 Stocks for the New Bull Market...

June 08, 2009 – Comments (4) | RELATED TICKERS: BPI , GMCR , PBR

I think the most important piece of information I would like to know is this: Are in a bull or bear market?  It is impossible to know for certain until it is too late, but one thought gives me hope that it is the former.  If the market climbs a wall of worry, then this could be a new bull market.  When has there been so much to worry about?  The nightly news brings doom and gloom piled on top of yesterday's doom, and gloom, and yet the market has climbed higher and higher, and every dip has reversed within days or even intra-day, only to go higher still.  And yet, there are scores of skeptics, who daily speak with the same authority as the last Bull on the way down, who was sure everything was going to turn any day, and that the market could not possibly go any lower. And yet, the market schooled me by falling so much lower so much faster, for 20 days straight to the bottom on March 9th, that I wonder why we are so amazed that it can go up, consolidate, and then go higher still. 

If we are in a bull market, then wouldn't you rather know now than 6 months from now after the easy money is made?  After all, in a bull market, you buy the dips, and sell a little after a good run up, and then buy the dips again.  In a bear market, you sell every rally, and then go play golf and pay your friends to distract you from buying back in until the 4th or 5th down day in a row, and even then you better invest no more than 20% of your cash because it's going lower, and that is so hard to believe until it does.  So, why can't the market go up in the face of the worst economic news in decades?  

After all, there are so many things that no one is really considering, but my buddy Jim, from Oregon, stock picker extraordinaire, points them out to me every Thursday night:

Some of America's greatest companies, the ones with strong balance sheets, the survivors, are in even better shape than anyone has mentioned in the media, with the possible exception of Cramer.

If CAT lays off 20,000 workers, and global demand picks up, won't they make more money and be even more profitable?  How can their stock command such a low multiple when so much profitable growth lay ahead?

Truck traffic is at an all-time high, if you count truck on the intersate, and yet, we are still hearing there will be no economic growth or earnings for years to come.

Look at GBX, which owns ports in the Northwest, and has a strong position in the railcar repair and manufacturing business, as well as a thriving marine business building barges for hauling lumber and steel and other commodities to China, among other places.  This company has slashed its workforce, trimmed expenses to the bone, and moved aggressively into its higher margin businesses to offset losses in the railcar sector.  GE tried to cancel their contract, but the company so far has dodged that bullet, and every day the economy recovers, their prospects grow stronger and stronger, and yet the stock trades for 2/3's of their break-up value.

Or take Walter Investment Management.  Spun off by WLT (Walter's Energy) and merged with Hanover Capital Mortgage, is a REIT that manages a 1.8 billion dollar portfolio of Sub-prime, prime and non-conformingl (ie Moblil Homes) Mortgages (with a delinquency rate under 6%). Insiders have recently gobbled up shares at a furious clip taking the stock price from 7 to just under 14 in less than 2 weeks. This, in spite of generous stock grants. One director, also Chairman of WLT, took down almost 2 million dollars worth of stock in three separate buys in the open market. The only revenue this company has at present is the yield from the mortgages, but with all the gov't programs, and the mortgage servicing and insurance divisions, there could be substantial earnings power hidden by all the recent machinations required to merge the companies. Not much info available since the merger was completed only a month ago, so you really need to read every SEC filing. Could be a real sleeper. 

I have tried to put together a portfolio that will withstand the much ballyhooed "downdraft" that has been predicted for two months now, as well as capitalize on the recovery in housing, and the overall economy.

Here are my picks:

1. AAPL

2. GMCR

3. BPI

4. WAC

5. V

6. BA

7. CAT

8. PBR

9. GBX

10. SHLD 

Let me know yours. 

Disclosure:  Author is long, or plans to be long every stock mentioned in this article.