Two thousand three will be like a good bottle of wine. Much like wine improves with age, investments at today’s depressed levels will improve over time. However, just as great wine requires patience, so does investing. The following stocks are my picks (in alphabetical order) for 2003, but investors will have to have patience to reap the anticipated rewards. The first list of companies offers non-U.S. citizens direct investment options.
Air Products (APD, industrial) is a mid-size supplier of industrial gasses and specialty chemicals. As the U.S. economy turns around, so shall APD’s fortunes. Cascade Natural Gas (CGC, utility) is a small distributor of natural gas in eastern Washington and northern Oregon. CGC serves both residential and commercial customers and is growing its customer count faster than the industry average. Electronic Data Systems (EDS, technology) is a large provider of computer services. While current earnings have been under pressure and no one seems to like the stock right now, over the next 3 years, EDS should regain its footing and amply reward new investors. Investors Financial Services (IFIN, financial) is one of my favorite companies. Well positioned to continue its 20%+ EPS growth, IFIN offers back-office services to the mutual fund industry. Lowes (LOW, specialty retail) offers investors greater potential EPS growth than its big brother, Home Depot (HD). The key to successful investing in the retail sector is locating companies that are opening new stores at a fast clip. LOW is opening stores faster than HD. MeadWestvaco (MWV, cyclical) is a second-tier specialty paper company and is the result of the merger of Mead and Westvaco. Cost cutting and merger synergies will result in higher earnings during the next up cycle in paper. While I am not a fan of mutual funds, closed-end fund Petroleum Resources (PEO, energy) has been around since before Mr. Merrill met Mr. Lynch. PEO currently trades at a 10% discount to its portfolio of oil stocks. Philadelphia Suburban (PSC, utility) will be the largest U.S. investor-owned water utility after American Water Works (AWK) completes its acquisition by BME, a German utility company. You have to love the dramatic consolidation going on in the U.S. water sector. PSC is growing faster than its competitors using an aggressive municipal water district acquisition strategy.
In the non-U.S. arena, two non-DRIP companies that trade ADRs on U.S. exchanges and may be of interest are Suez (SZE, French, utility) and Heineken (HINKY, Netherlands, beverages). SZE has a large exposure to the U.S. water business and HINKY is just beginning to receive the investor attention it deserves.
Above all, maintain a diversified portfolio and have persistence. Investing is more like a marathon than a 150 meter dash. For those willing to do their research and have patience, these companies should provide more than acceptable returns.
George Fisher, author of "The StreetSmart Guide to Overlooked Stocks" (McGraw Hill, 2002) and "All About DRIPs and DSPs" (McGraw Hill, 2001),Sagamore Beach, MA firstname.lastname@example.org
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Copyright North Shore Associates 2003