by Jamie Dlugosch | November 5, 2011 8:00 am
Nobody is having fun in this market with volatility that has absolutely no predictability.
Dare I say buy and hold is the antidote? I think so. The much-maligned strategy should be making a comeback, thanks to a highly correlated market where fundamentals don’t matter in the short term.
The goal should be to find bargains that stand a reasonable chance of doubling in value in 1-3 years. Given the explosiveness of recent moves, you probably won’t have to wait that long.
Here are three stocks you can buy and hold for double your money:
The aluminum business is primed for big things in coming quarters. Alcoa may have disappointed investors in the third quarter with an earnings report that widely missed expectations, but investors should be a bit more forgiving of the company, given that aluminum prices fell drastically in the period.
Alcoa shares have lost 20% of their value in the last 12 months, reflecting the challenging economic times. Much of the bad news is already priced into Alcoa shares. At the same time, key users of aluminum products, autos and aircraft are doing very well.
The whipsaw of the third quarter is unlikely to repeat. Investors in Alcoa today would be wise to reflect on the long term. At current prices, Alcoa trades for just 12 times current year estimated earnings.
I believe Alcoa will do better than expected as economic growth will be better than anticipated. Shares have the potential to double from here in a short period of time.
There are many out there suggesting that investors sell Apple today — that the company has enjoyed a great run that is unlikely to be sustainable. That is complete nonsense.
Apple is a must-own stock for any investor, and the stock is still cheap.
Now we get word of the soon-to-be-released Apple TV. The skeptics will claim that Apple’s entrance in this market is not likely to be a game-changer. I wouldn’t bet on it. From what the company has already accomplished in music and smartphones, it will likely accomplish with television.
More importantly, the Apple brand is rock solid. The millions of loyal customers will flock to television just as they did with other Apple innovations. I have no idea what they have up their sleeve, but it is likely to be quite impressive.
From a valuation standpoint, Apple shares are cheap without any new game-breaking products. Over the last year, the company made a profit of $27.67 a share. For the year ending September, 2012 Wall Street expects the company to make $34.49. That represents an impressive 25% jump in profit. You can buy shares of Apple for just 14 times last fiscal year’s profits.
Put this stock in your portfolio and hold for a double. You are likely to be impressed.
If Apple’s television is a game-changer, the entire industry is likely to benefit. To the extent large flat-screen televisions look more like personal computing devices, the evolution is likely to spur buying from many competitors. Supplying the glass behind these televisions is Corning.
It will be a welcome development for the company. Over the last year shares have declined by 24%, due to a topping out in the sales of flat-screen televisions. Innovation from Apple would greatly help boost sales.
At current prices, Corning trades for just 8 times current year estimated earnings. If there is a boom created by Apple, such a number is likely to be quite low. For now, Wall Street isn’t expecting much from the company. For the current year, profits are expected to hit $1.83 a share. In the following year, the estimate is for profits to grow by only 5% to $1.92 a share.
If Apple is successful in television investors can throw these numbers out the window. We’ve seen it before and we will likely see it again. I would buy Corning and hold. You just never know when the catalyst hits.
Source URL: http://investorplace.com/2011/11/remember-buy-and-hold-try-these-3-stocks/
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