LanczGlobal Year End Favorites



 2013 Energy Transfer Partners, L.P.


LanczGlobal has had a wide variety of year end favorites, since we started publishing the list back in 1996, this is the time we have featured a master limited partnership. Energy Transfer Partners, L.P. (ETP - $42.93) has traded most of the past 3 years in the $50’s per share and at today’s level, just off multiyear lows, the investment is too tempting to pass up. A generous annual yield of over 8.3% in the midst of this continued, historically low interest rate environment should provide half of the total return for the potential investor.



 2012 Harsco Corporation


For the past several years we have favored Harsco Corp. (HSC - $20.04) into weakness of the high teens. In each of the last 3 years, it has rewarded investors with a move well into the thirties per share. An annual yield of over 4%, only adds to the attraction of this diversified provider of both industrial and engineered products. For investors with a more speculative desire, LanczGlobal’s favorite speculative investment for 2012 is Cadence Pharm (CADX - $3.55) a stock with tremendous upside potential with its drug Ofirmev®, the first injectable form of acetaminophen.



 2011 Merck & Company, Inc.


This high quality global health care leader is our favorite for 2011 at its current depressed valuation. Merck & Company (MRK - $34.47) has an excellent balance sheet, allowing it to pay a dividend yielding over 4.4% annual. We expect quality total return investments, like Merck, to do well and regain favor, as management establishes an annual dividend increases and buybacks that were so prevalent throughout the 1990’s investors with a greater risk tolerance.



 2010 Year End Favorite


China Mobile Our favorite for 2010 offers similar potential for both the short and intermediate term. China Mobile (CHL $45.12), which has been trading below $45 every day over the past week is down from $60 this past summer. We consider it an outstanding opportunity up to $48 a share. Similar to Goldman Sachs, our favorite from last year, China Mobile has the potential to far exceed our buy limits and target price range back toward the $60 a share area over the next two years. The company has $37B in cash with only $5B of debt and an impressive 70% share of the cell phone market in China. The cell phone penetration rate in China is currently around the 50% area compared to over 70% in India, for example. Trading at less than 11x current earnings and having solid opportunity to expand their dominance into rural China all bodes well for CHL into the 2010-2011 timeframe and beyond. A growing dividend yield of over 3.85% is an added bonus while waiting for China Mobile to re-establish investor interest.



 2009 Year End Favorites


Goldman Sachs J.P. Morgan After warning about the excess valuations and risk in real estate and financial stocks as early as the summer of 2007, we were asked many times as these sectors subsequently plunged in value when it was time to get back into financials. In January 2008, we stated it was not the time as another shoe is expected to drop. We thought that by the second half of 2008, we would be actively recommending select financials, but because of the procrastination and mistakes regarding even acknowledging the global credit crisis in October 2008 we remained very cautious. Panic selling has created an opportunity to buy two quality ("survivors") financials at extremely attractive valuations. Goldman Sachs (GS $52.62) and J.P. Morgan (JPM $20.55) are well managed, high quality leaders that should be able to take advantage of the industry turmoil and much weaker competition. While we are still worried about the unintended consequences of all these bail-outs and government involvement, the bottom line is that Goldman and J.P. Morgan at current levels spell long term opportunity. Investors will enjoy yields of 2.5% and 5.9% for GS and JPM respectively while they wait for the cream to rise to the top. When we told both Mark Haines and Erin Burnett from CNBC at the start of the year that sometime in 2008 we will recommend getting back in financials, we did not think there would be less than 6 weeks left in 2008 before we finally felt comfortable enough to strongly recommend two companies in the sector. These selections are just as much a statement on many ETFs and asset allocation programs that are over diversified. Even though we feel there will be many more failures and other shoes to drop in the financial arena, buying the two leaders at such depressed levels makes sense. An ETF in financials would have exposure in many of their weaker competitors whose prospects are still bleak. For investors that feel that even the best financials will take an extended time to recover:
  • Investors should buy 1/3 of their typical position and save monies to fill positions at even lower levels
  • Take at least partial profits on any gains of 30-40% during those times investors are looking at the glass half full
  • Finally, look at our top selection from last month Goldcorp Inc. (GG) on any weakness back into the mid-teens (click here to read full research report)




 2008 Year End Favorite: Staples, Inc.(SPLS)


Staples Staples, Inc. (SPLS $20.79) - On November 13, 2007 we selected our 2008 top stock pick and strongly recommended purchasing Staples into the current weakness below $21 a share, being particularly aggressive into any further weakness into the upper teens. Investors should take advantage of buying a well managed industry leader whenever it is near historic lows and this is the case with Staples. We feel so confident that Staples will continue to take advantage of their competitors that our Lancz Long/Short Portfolio has initiated purchases of Staples in conjunction with a "short" position in Office Depot (ODP $22.06). If Staples continues to decline over the short term, we would expect Office Depot to decline up to 3x more due to their inferior positioning and deteriorating outlook versus Staples. This will be even more apparent over the difficult retail environment expected over the next few quarters. This is similar to last month's purchase recommendation of Best Buy when it was hitting new lows, and subsequently shorting Circuit City after Best Buy's better than expected earnings when Circuit City moved up in sympathy. Staples advantages over Office Depot are similar to Best Buy's over their main competitor Circuit City. For many of the reasons outlined in this report, we feel very confident that Staples will outperform the S&P 500 over the next two years as well as outpace the specialty retailers as a group.



 2008 Year End Aggressive Favorite: Palm, Inc.(PALM)


Palm Palm, Inc. (PALM $5.34) - Once again Wall Street is missing long term prospects by focusing solely on short term. Palm has just announced disappointing earnings and Wall Street, as a result, is bringing the stock down to new lows. However, the company has recently brought in Jonathan Rubinstein who was instrumental in the development of the iMac and iPod at Apple, and we feel the company will make strong inroads in the vastly expanding smart phone market during the second half of 2008. Some of our best recommendations have come after Wall Street becomes so emotional that they throw out the company and no longer look at it objectively. We feel this way in regards to Palm's stock at current depressed valuations and have confidence that new management will deliver. Wall Street has been burnt on Palm and are so against the company that they are missing the outstanding upside potential in the stock. The company already has a hot lower end product with the Centro and we expect a successful launch of new higher end products next year. Palm's total market cap of only $560M makes the stock extremely appealing and we strongly recommend buying the stock for the long term.



 2007 Year End Favorite: P.H. Glatfelter (GLT)


P.H. Glatfelter P.H. Glatfelter (GLT $13.75) - Similar to our top selection from last year, we made GLT our top pick for 2007 in the first half of the fourth quarter rather than at year end. Both years we expected year end rallies, so an earlier selection made sense. P.H. Glatfelter is one of the world's leading manufacturer's of specialty papers and engineered paper products. The company targets smaller, niche markets with limited number of suppliers that serve book publishing, digital imaging, and many other technical markets. Last year net sales in the U.S. were 69% of total with another 25% coming from Germany. The stock is down from nearly $20 a share earlier this year after recent results proved disappointing. Most of the shortfall has come from a recent acquisition of a mill in Chillicothe, Ohio that will take more time than expected to reach intended profit margins. We feel by this time next year the company will be running on all cylinders and Wall Street will respond by pushing the stock back toward new highs. In the interim, a dividend yield of over 2.6% will be paid while you wait, but even more importantly management has indicated that over the next 3-5 years the company will sell approximately 40,000 acres of its timberland holdings which should generate proceeds around $150M. We feel management is focused on enhancing shareholder value over the long term (also announced will sell 20,000 acres of properties in Pennsylvania in addition to the aforementioned 40,000 timberland acres). When you combine all this with improving fundamental results, you have a stock with 10-15% downside and up to 50% upside over the next 1-2 years. While P.H. Glatfelter is a much smaller company than our typical top pick for the new year, we like its potential compared to its peers.

UPDATE (11/14/07) - Exactly one year later P.H. Glatfelter appreciated 18.9% since making it our stock of the year on November 15, 2006. Including dividends, this works out to a total return over 20% versus the S&P 500 5.3% total return during the same period.



 2006 Year End Favorite: PetSmart (PETM)


PetSmart PetSmart, Inc. (PETM $21.51) - This year we decided to select our top pick for 2006 in mid-October rather than in December for two reasons. First of all, stocks in general are down YTD creating a good buying opportunity for most equities. Secondly, our top pick, PetSmart, is now down nearly 40% for the year making it one of the worst performing retailers in 2005 and we feel Wall Street has it all wrong. PetSmart has had disappointing earnings results of late, but we feel management is doing the right things to enhance shareholder value. Some of their strategy is temporarily hurting short term results and scaring Wall Street, and this is what makes PetSmart a misunderstood investment that we favor. We feel the company's added expenditures in initiating doggie day care and grooming services bode well for enhancing margins and customer loyalty over the longer term. Similar to our past favorites, PetSmart offers solid appreciation potential of upwards of 50% over the next two years with much less risk now that the stock has plunged from the mid-thirties to the low twenties per share. While we would never place too large a bet on only one stock and recommend a properly diversified portfolio of various investments, we do like the potential in PetSmart for investors seeking capital gains into 2006-2007.

UPDATE: During the summer of 2007, investors finally caught on to the progress PetSmart was making with their pet hotels and grooming services. After doing very little the initial 9 months after our making PetSmart our Top Pick, the stock surged over 50% and we have utilized the strength to lock-in long term gains.



 Historical Year End Favorites Performance (1996-2010)


(Green designates the Aggressive Pick)

Year

Symbol

Description

Recommended
Price/Share

One Year
Return

Two Year
Return

2010

CHL

China Mobile LTD

$45.12

8.38%***

N/A

2010

BSX

Boston Scientific

$8.82

-21.99%***

N/A

2009

GS

Goldman Sachs

$52.62

220.14%**

175.94%***

2009

JPM

J.P. Morgan

$20.55

102.29%**

107.20%***

2008

SPLS

Staples Inc.

$20.79

-13.80%

17.84%**

2008

PALM

Palm Inc.

$5.34

-42.51%

87.83%**

2007

GLT

P.H. Glatfelter

$13.75

5.77%

-32.36%

2007

CTXS

Citrix Systems

$27.05

40.52%

-12.87%

2006

PETM

PetSmart

$21.51

34.17%

9.39%

2006

PDCO

Patterson Companies

$33.84

4.94%

0.33%

2005

THE

Todco

$18.37

107.18%

86.00%

2005

PSMT

PriceSmart

$7.25

15.31%

147.03%

2004

NWL

Newell Rubbermaid

$20.30

19.16%

17.14%

2004

SDS

Sungard Data Systems

$25.99

9.00%

38.32%*

2003

PHA

Pharmacia

$40.50

11.31%

N/A

2003

ELN

Elan Corp.

$1.80

282.78%

1413.89%

2002

ALL

Allstate

$30.88

19.78%

39.31%

2002

BLSI

Boston Life Sciences

$2.66

-57.89%

-53.38%

2001

MOT

Motorola

$18.75

-19.89%

-53.87%

2001

SYMC

Symantec Corp.

$27.50

141.20%

47.31%

2000

BSX

Boston Scientific

$20.81

-34.22%

15.91%

2000

DIS

Disney

$28.625

1.09%

-27.62%

1999

BSX

Boston Scientific

$25.875

-15.46%

-47.10%

1999

DOL

Dole Food Co.

$28.5625

-43.11%

-42.67%

1998

DIVE

American Oilfield

$11.875

68.42%

N/A

1998

FDC

First Data Corp.

$26.8125

18.88%

83.92%

1997

PYX

Playtex

$7.50

36.67%

114.17%

1997

ART

A.C. Nielsen Co.

$14.75

65.25%

91.53%

1996

PGA

Personnel Group

$13.125

83.81%

151.43%

1996

ICI

Imperial Chemical Industries

$44.75

-2.93%

26.75%

Stock of the Year Average =

45.47%

19.43%

Risk Average =

39.77%

249.12%

* As of 8/10/05 acquisition
** As of 12/31/09 close
*** As of 4/30/10 close