StreetAuthority’s Top Picks of the Year

It’s been a roller-coaster year for stocks, but one that will ultimately end well. Barring any unforeseen events, the S&P 500 will end the year with a gain of about 15.0%. This year brought with it a myriad of opportunities for profits and losses, from the commodities boom and M&A frenzy to health care reform and the “flash crash.” Through it all, our experts at were able to identify stocks that went on to post impressive gains.

Here’s what our experts had to say about their biggest gainers in 2010 and whether they expect the winning streak to continue into 2011…

My pick for 2010 was also my top pick for 2009, and is still among my favorite ideas for 2011. I’m talking about Ford Motor (NYSE: F), which is up another 70.0% since I told our readers about it back in early July. I don’t see another move like that coming, but I think that investors could well see a 30.0% gain in 2011 and another 30.0% gain in 2012, as shares still seem quite inexpensive at eight times next year’s projected profits.

For the last two years, Ford’s stock has been on a constant rise. The road ahead will likely be a bit choppier. On its way to yet higher gains, shares may take short-term hits in any given month if U.S. car sales are weak. Shares may also be spooked if Europe, where Ford derives 25.0% of sales, really hits the skids. But all of the hard work of Ford’s management team should pay off for years to come. The economic crisis enabled management to enact some tough changes in terms of costs, which it otherwise wouldn’t have had the option to. If I had a crystal ball, it would tell me that shares may rise from a current $17 into the low $20s in 2011 and the upper $20s by 2012, at which time Ford may look to install a very nice dividend. When it finally arrives and shares are much higher, that dividend may only yield 3.0%. If you buy shares now and wait, the effective eventual yield on that dividend would likely top 5.0%.

— David Sterman
StreetAuthority Staff Writer


My top pick for 2010 was Israeli software company Formula Systems (1985) Ltd. (Nasdaq: FORTY). The stock has soared more than 60.0% since mid-May.

As I mentioned, the red-hot Israeli tech sector is spawning some excellent companies. Formula provides software and information technology to businesses in more than 50 countries. Its products and services are used to lower costs, reduce complexity and extend the life of older computer systems.

As the global business environment has improved, Formula Systems’ net income soared 28.0% in the first three quarters of 2010. The positive prognosis for the U.S. economy in 2011 should enable the company to boost earnings going forward.

Despite the impressive performance, the stock still sells at price-to-earnings ratio of less than 12, well below the S&P 500 average, and pays a trailing 12-month dividend yield of 7.8%. However, I still consider the stock to be a buy.

— Tom Hutchinson
StreetAuthority Staff Writer

I have profiled dozens of stocks this year and can’t tell you for sure which recommendation racked up the biggest return. But with a powerful gain of 144.0%, my guess is that Silver Wheaton (NYSE: SLW) took home the gold medal.
On Jan. 14, just two weeks into the New Year, I pinpointed Silver Wheaton as my single favorite pick for 2010.
At the time, I felt confident that silver prices could easily rise 50.0% or more. If that happened, I thought, no other company would cash in quite like Silver Wheaton.
The company buys silver production from gold miners at fixed prices (typically below $4 per ounce). These tidy arrangements eliminate the heavy exploration and development costs that other miners have to bear — partners such as Barrick Gold (NYSE: ABX) do all the heavy lifting. They also mean that small gains on the top line can lead to big swings on the bottom. During the past year, the firm’s silver acquisition costs have remained level at $3.98 per ounce, but its selling prices have risen from $15.16 to $19.81 an ounce. Thanks to that 30.0% increase in prices, cash flows have more than doubled.
As predicted, the market has cheered — sending Silver Wheaton on a wild 47.0% ride during the past three months alone. So there could be more to come.
With silver prices ascending to 30-year record highs above $30 per ounce, the company’s already lofty profit margins continue to head even higher. In addition, production is expected to climb from 24 million ounces in 2010 to 40 million in 2013 — without a penny in capital expenditures. Therefore, the shares could remain in rally mode, particularly with the Federal Reserve doing everything in its power to devalue the dollar.

— Nathan Slaughter
Chief Investment Strategist of Market Advisor

My top pick for 2010 was Rockhopper Exploration, a tiny oil-exploration outift. It was part of a group of several wildcatters drilling separately in an area that had long been abandoned by the major petroleum companies. After researching the company and the area in which it was drilling, I added the stock to my portfolio. In less than three months, the shares delivered more than 287.0% after the company found oil off the Falkland Islands — sparking a dispute between Argentina and Britain in the process. Had this discovery been made by ExxonMobil Corporation (NYSE: XOM) or Chevron (NYSE: CVX), no one would have blinked, but the find moved the needle for Rockhopper. That idea — a small company with a compelling strategy to dominate its market and deliver outsize gains to shareholders — is what I look for in my Fast-Track Millionaire newsletter.

— Andy Obermueller
Chief Investment Strategist, Fast-Track Millionaire

MV Oil Trust (NYSE: MVO) is a U.S. royalty trust that receives 80.0% of the royalties on all properties of MV Partners. These properties are located in the oil-prone regions of Kansas and Colorado, and contain an estimated 90.0% of oil reserves.

The trust has proved reserves of 8.8 million barrels of oil equivalent (MMBOE) as of Dec. 31, 2009, from which it produced about 780,000 barrels of oil equivalent, giving it an estimated 11.3 years of remaining reserve life.

However, the trust will terminate on June 30, 2026, or when 11.5 MMBOE have been produced. To date, less than 4 MMBOE have been produced since inception in 2006. At the current rate, the trust is expected to have about 10 more years before it expires.

The average price MVO receives for its oil has varied dramatically depending on market conditions. This variation has led to historically wide fluctuations in quarterly distributions. Over the past four quarters, MVO has distributed a total of $2.76 in variable quarterly payments, for a trailing yield of close to 8.0% at recent prices. Most of the distributions are treated as return of capital, so the trust can be held in a taxable brokerage account.

At less than 13 times trailing earnings of $2.76 per unit, shares are trading at a discount relative to the S&P 500’s almost 15 times. Considering the shares carry a yield that’s about four times more than that of the U.S. equity benchmark, they look extremely attractive. The average daily volume of around 118,000 shares also provides reasonable liquidity. This trust offers a superior yield and capital gains upside for income investors looking for an oil play. The Texas-based trust can be contacted for more information at 800-852-1422.

— Carla Pasternak
Director of Income Research for High-Yield Investing

This year I booked two 58.0% gainers in my Stock of the Month portfolio. One of them was in Olin Corporation (NYSE: OLN). Olin is an unusual company: about a third of its revenue comes from gun ammunition sales, while the balance comes from the chlor-alkali production. When I bought the position in 2009, the chemical side of the business was sagging, hampered by the economic slowdown. However, the gun ammunition side of the business was just starting to turn in record profits.

Since I sold Olin in May 2010, it has gained just 6.2%, trailing the performance of the S&P 500 by 5.3%. I believe the chemical side of Olin’s business will improve in 2011 as I think all basic material companies will benefit from a recovering global economy. But I also think there are probably better basic material plays next year. In fact, my January 2011 Stock of the Month is a basic material play.

I particularly like copper and steel companies going forward. Next year, the demand for copper is set to outpace demand. Steel demand is estimated to grow 5.3% next year, although this is a conservative estimate, tempered by the uncertainties in China. But we have to consider the rapid recovery taking place in other parts of the world, so I wouldn’t be surprised to see the demand for steel grow in excess of 7.0% next year.   

— Amy Calistri
Lead Investment Analyst for StreetAuthority’s Stock of the Month