Scanning through Value Line today, I didn’t find any stocks that just made me want to rush out and buy, but I did find some interesting picks. Some stocks are pricey ($75 and up), meaning it would take at least $7500 to buy 100 shares, which is about the point where you get a reasonable percentage for the commission. Here are some of the stocks I found and why I found them attractive:
Apartment Investment and Management Company (AIV): Apartment Investment and Management Company, aka Aimco, is an REIT that invests in apartment buildings. They currently own 265 apartment buildings, which includes 67,977 apartments. If you bought into this REIT, you could become a landlord without getting calls in the middle of the night to fix the heater. The REIT doesn’t offer a lot of appreciation potential, meaning that the price will probably stay fairly stable and isn’t expected to increase much, but it currently has a 3.5% payout to owners. If held for a long time, it is likely they would increase their payout, resulting in both an increase in the percentage an investor would get for the initial investment and a move up in price. This would be a good investment for an income account such as for a retiree who wanted current income, or maybe an educational IRA with only a few more years before the money will be needed.
Dow Chemical (DOW): Dow offers both price appreciation potential and a nice, 3% dividend. Value Line sees possible earnings increases of over 14% over the next five years, which in turn will provide price increases in the 7-12% range. The dividend is also expected to increase by about 10% per year, which will help move the price upwards. This is a more risky play than the Aimco since the is has traditionally been difficult to predict the company’s earnings. While Dow is a strong company that can weather some bad times, the stock might decline a bit if earnings disappoint.
BJ’s Restaurants (BJRI): As a disclaimer, I own several shares of BJ’s and have for a few years. Still, there is a reason I own so many shares – I think the company has a lot of long-term growth potential. The microbrew beer and gourmet pizza chain has some very popular and profitable restaurants out west, but they have yet to really enter the eastern market. I expect them to meet up with Old Chicago Pizza somewhere in the midwest, at which point there’ll be a brawl for domination. I like that they have a very successful concept and that they have a lot of room to expand. As regular blog readers will know, I’m looking for stocks that I can buy and forget about for several years while they grow and grow.
Value Line doesn’t expect them to perform much better than the market over the next year – they have a Timeliness Ranking of 3, which is average for the market. Still, they have a prediction of 16% annualized earnings growth over the next five years and an annualized rate of return of between 22 and 35% because the shares are so depressed in price. This is a stock that will require patience, however, since it may sit for a while before the spark finally catches and it goes up in price.
Pier One Imports (PIR): This stock has had disappointing numbers lately. The reason offered by management is that the snow (where is all of this global warming when you need it?) kept a lot of shoppers home during critical weekends. Value Line has therefore trimmed their earnings estimates. Still, they are expecting 13% earnings growth annualized over the next five years and, more exultingly, 36% annualized dividend growth over the same period. With a 25% Return on Equity, the company must be doing something right. Again, this may be a stock that doesn’t do much for a while, but you can be collecting the 1.2% dividend while you wait. If the dividends do grow as expected, you’ll see the price move up accordingly. Annualized returns of 7-20% are expected here. Once again, I hold an interest in this company.
Greenbrier (GBX): Another company I’ve been looking to acquire an interest in is Greenbrier Companies, Incorporated. This is a company that designs, makes, and repairs railroad freight cars. Railroad is booming right now – they are the third timeliest industry group in the Value Line universe of stocks. The energy boom is causing all sorts of oil shipments, and Greenbrier is supplying the cars for moving that black gold down from the drilling fields to the refineries. This is not a great long-term play – 3-5 year price appreciation potential is relatively flat and they don’t pay a dividend. The stock has been going up recently, however, and it may well continue to do so for a while. For those who are momentum investors, it might be worth taking a ride on this train. Just be ready to jump off – this isn’t something you want to hold once the momentum turns the other way.
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The SmallIvy Book of Investing, Book 1: Investing to Grow Wealthy
Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.
