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Stocks and ETFs That Appear Ripe For The Picking

  • February 14, 2007

A subscriber recently wrote to me asking me to suggest five stocks from the InsideArbitrage model portfolio that I liked best so that he could start a new portfolio consisting of these stocks. Since I am not a registered investment advisor (RIA), I cannot legally offer individual investment advice and even RIAs cannot offer investment advice to individuals by email unless they already have an existing relationship with them.

This makes a lot of sense, as each investor may have different goals and risk tolerance levels. While a high growth and very volatile stock like Suntech Power (STP) may hold a place in the portfolio of an investor with a long investing horizon, it may not be appropriate for an investor who has to withdraw funds in the near future to pay for a child’s education.

Portfolios could also have various financial instruments like stocks, mutual funds, ETFs, closed-end funds, REITs and options to achieve diversification, maximize returns or to manage risk. Asset allocation (60% stocks, 30% bonds and 10% cash for example) is just as important as picking the right stocks or the appropriate financial instrument. Exploring these areas and concepts is beyond the scope of this blog and the following resources should prove helpful to investors who are interested in learning about them.

  1. The book Beyond The Basics by Mary Farrell.
  2. The excellent articles and blog of Paul Merriman.
  3. The asset allocation articles by Geoff Considine on Seeking Alpha.
  4. This gloomy but eye opening article on the Skilled Investor blog.

Getting back to the question asked by the subscriber, here is a small list of stocks and ETFs borrowed from the model portfolio, my list of Ten Stocks for 2007 and beyond that I would personally consider investing in right now.

Name Symbol Price* Comments
Medifast MED $8.79 This high growth company has been hurt by a couple of negative articles in Barron’s but looks inexpensive at these levels.
RealNetworks RNWK $10.35 A 74% increase in sales of MP3 players at SanDisk in Q4 2006 should bode well for RealNetworks. I expect the company to report strong results on Feb 14th.
Nautilus NLS $18.14 My recent blog entry says it all.
Electronic Data Systems EDS $28.27 High demand for data storage and expected margin improvement in 2007.
Barclays BCS $60.96 An excellent 3.4% dividend yield combined with strong growth in its ETF business makes this London based bank attractive.
PowerShares Water Resources Portfolio PHO $19.13 An ETF that invests in companies involved in the treatment and consumption of water. Potable water is becoming a highly valuable commodity in the developing world.
iShares MSCI Malaysia EWM $10.68 As the name implies, this ETF should allow you to capture the growth Malaysia is currently experiencing.

* Prices as of Feb 13, 2007.

Please note that both Nautilus and iShares MSCI Malaysia Index have appreciated a lot over the last few weeks and could be susceptible to a pull back. Consult with a broker or financial advisor before taking any action on any of the securities mentioned in this blog entry.

Voluntary Disclosure: I own shares of Medifast and may start a position in RealNetworks before quarterly earnings are announced on Feb 14th.