Best Buys for the New Year
11 Hottest China Stocks for 2011
Stocks had one of the best Decembers in recent years, and the internal and sentiment indicators are now very overbought for the best stock picks. But with an enormous inflow of cash into the system from pension, profit sharing and 401(k) plans, and other sources that generally put money to work early in the year, we are unlikely to see a correction before mid-January.
A pullback later in the month would be welcome, though, since it could provide an excellent opportunity to jump on some of our favorite growth and cyclical stocks. The following technical picks represent the best stocks to buy for the month ahead.
Top Stock #1 – Anadarko Petroleum Corp. (APC)
Oil and gas exploration and production company, Anadarko Petroleum Corporation (NYSE: APC), has operations primarily in the United States, the deepwater of the Gulf of Mexico, and Algeria.
APC is in a bull market that began in October 2008. The stock spent most of 2010 retracing a breakdown that occurred in April. In December, the stock broke out on a huge breakaway gap amid rumors that BHP Billiton Limited (NYSE: BHP) had its sights set on APC after it failed to acquire Potash Corp. of Saskatchewan (NYSE: POT). The rumors have not been confirmed, but based on the current price, the stock is still worth purchasing as a play on the continuing increase in the price of crude oil. Technically, the breakout has a target of $90-plus.
Top Stock #2 – Oracle Corp. (ORCL)
Enterprise software company Oracle Corp. (NASDAQ: ORCL) broke from a double-top in September to a new two-year high. The breakout was supported by very high volume and is a strong signal that even higher prices are in the stock’s future.
The acquisition of Sun Microsystems has “transformed ORCL into a software and systems vendor,” according to S&P. And S&P currently rates the stock a “five-star strong buy” with a fundamental price target of $37. The trading target for the breakout is $35.
Top Stock #3 – PowerShares DB Agriculture Fund (DBA)
The PowerShares DB Agriculture Fund (NYSE: DBA) seeks to track the price and performance of the Deutsche Bank Liquid Commodity Index. Food shortages and higher prices for commodities like wheat, corn, soybeans and sugar are being forecast by economists worldwide. And the recent move by China to raise interest rates is evidence that the country’s central planners are concerned about possible inflation in food prices that could cripple their economy.
Note the impressive pickup in volume on the chart, as well as the golden cross and the recent breakout from a double-top following a bounce from its 50-day moving average. Traders should target $36 for a quick trade since DBA broke down from $36 in August 2008, but long-term investors may want to hold this ETF as a cornerstone investment with a price objective north of $50.
Top Stock #4 – Rio Tinto (RIO)
Metal and mineral production company Rio Tinto (NYSE: RIO), which is based in London, is one of the world’s largest mining companies. It produces aluminum, copper, diamonds, coal, iron ore, uranium, gold and a variety of industrial minerals. The current demand from China and India for manufacturing metals, especially for base metals, particularly iron ore and copper, bodes well for the company.
S&P rates RIO a “five-star strong buy” with a 12-month price target of $75. Our trading target is $82 with a longer-term target of $100.
Top Stock #5 – Suntech Power Holdings (STP)
Suntech Power Holdings (NYSE: STP) is one of the leaders in the manufacturing of photovoltaic (PV) cells for use in both residential and commercial applications. Sales are expected to be up 24% in 2011, according to S&P, and annual profit margins are estimated to increase to 20% from 18% in 2010. Long-term demand from China and encouragement from the U.S. authorities are all positives for this solar company.
Daiwa Securities’ target was raised to $9.90 in early December. Technically, the stock is still in a downtrend, but recently got a buy signal from the stochastic. If it can reverse its trend with a strong close over the bearish resistance line at $8.50, the trading target would be $10. This is a “bottom-fishing” choice.
Top Stock #6 – Thermo Fisher Scientific (TMO)
Formed from the merger of Thermo Electron and Fisher Scientific, Thermo Fisher Scientific (NYSE: TMO) is a leading maker of lab and scientific instruments used in life sciences, drug discovery, etc. According to S&P, Thermo Fisher has made significant inroads in China and is undervalued versus its peers. S&P has a “five-star strong buy” rating on TMO with a 12-month price target of $68.
Technically, the stock has hesitated at $56, a double-top, and appears to be vulnerable to profit-taking. But a pullback to the open gap at just under $54 could be an excellent opportunity to buy TMO for a breakout target of $68.
