In January 1995, I started offering readers a list of 10 stocks to consider for the year ahead, making my selections from the choices of market pros whose opinions I value. In five years of this exercise, my lists returned an annual average of 24 percent, compared with 28 percent for the benchmark Standard & Poor's 500-stock index. My sabbatical spared me the ignominy of almost certain losses from 2000 to 2001, but I'm back for another try for 2003 -- a bit early, so you can do your stock shopping in time for Christmas.
Before we get to the numbers, a few warnings:
Glassman's 2003 Picks|
Apple Computer (AAPL)
JetBlue Airways (JBLU)
MONY Group (MNY)
Nissan Motor Co. Ltd. (NSANY)
Procter & Gamble (PG)
S. Joe Co. (JOE)
Standard Commercial Corp. (STW)
United Online (UNTD)
(Picks listed in alphabetixcal order)
1. It's never easy to beat the market as a whole. Although my picks did pretty well, you would have been better off with an index fund from 1995 to 1999.
2. While the stocks below are selected for their prospective performance over the next 12 months, I do not believe in owning stocks for only a year. Think of this list as a set of ideas for further study and, among the 10, search for the companies you want to own forever.
3. As it turned out, the portfolio is weighted toward smaller stocks, perhaps because they are simply more interesting than the big brand-name companies. The final list is well balanced by sector, but it includes four large-caps, four mid-caps and two small-caps.
4. No guarantees.
Here, then, is the list for 2003, in alphabetical order . . .
Apple Computer (AAPL): "Although I have no plans to switch my Windows allegiance to the Macintosh, I have always marveled at Apple's ability to persevere with the odds so often stacked against its survival." So writes John Buckingham in the most recent issue of the Prudent Speculator (877-817-4394), the stock-picking newsletter that's ranked No. 1 over the past 20 years by the scorekeepers at the Hulbert Financial Digest. Apple has been crushed lately, dropping 40 percent from its April high, and it posted a loss in the most recent quarter. Still, Buckingham thinks the "future is bright," and Apple has an attractive lineup of products, including the tune-toting iPod, and a fine balance sheet. Buckingham named Apple "Stock of the Month" for December and points out that the last time it won such an honor was under similar conditions in 1997. Two years later, the newsletter issued a "sell" recommendation at a 500 percent profit. Apple certainly appears cheap -- with more than $4 billion in cash and short-term investments and virtually no debt for a company that has a market capitalization (value according to investors) of $5.6 billion.
• JetBlue Airways (JBLU). Since its inception in December 1995, the Raymond James & Associates list of 10 best picks for the year ahead has returned an annual average of 47 percent, compared with just 9 percent for the S&P, an index it thoroughly whipped in each of the seven years. That's a fantastic record, and each year I pay close attention to the choices. The new list, just out last week, includes my favorite initial public offering of 2001: JetBlue Airways, which has just about everything going for it -- strong balance sheet, low costs, new fleet of planes, excellent routes, highly productive nonunion workforce, good cash flow, access to capital markets to fund its growth, demoralized competitors teetering on bankruptcy and customers (like me) who love the product. In a commodity business, JetBlue stands out for its use of technology and its great service (for example, live TV at each seat and a wonderful Web site for booking flights). Remember, however, that JetBlue is still small (market cap, $1.8 billion; revenue, $624 million) and the airline industry is highly volatile and at the mercy of oil prices and economic cycles. JetBlue's price has come back to reality after soaring to $55 shortly after the IPO, and, at $38 a share on Thursday, the stock's P/E (price to earnings) ratio, based on Raymond James's projections for 2003 profits, is 22 -- absurdly tame for a company that, if analyst Jim Parker is correct, could double its earnings in each of the next three years.
MONY Group (MNY): James Roumell, a Chevy Chase money manager with a sensational record and a deep-value style, won the Wall Street Journal's "dartboard" stock-picking title twice before the contest was discontinued. His pick for our 2003 list has been a public company for only four years. It's the former Mutual of New York, a venerable life insurance company that also owns a small mutual fund business (Enterprise), a brokerage firm (Advest) and a municipal-bond house (Lebenthal). Roumell admits that MONY Group's management "cannot be described as stellar operators," but shares appear very cheap. The stock trades at about half its book value (net worth on the balance sheet). Also, says Roumell, "there is a real consolidation angle. MONY, with a market cap of $1 billion, has excellent assets to sell to other companies in a fragmented industry, and in November 2003 the firm reaches its fifth anniversary of "de-mutualization," which means that, by law, outsiders can acquire more than 5 percent of the stock without getting insurance commission approval. That could significantly boost demand for the stock, which is down 40 percent from its April high.