The broad markets continue to reach record highs, after running hot and cold since the beginning of the year. The Dow Jones Industrial Average is now up 6.4% so far in 2016, and with Brexit behind it, the index seems to show no immediate signs of slowing down.
The economy continues its back-and-forth movements, with unemployment remaining stable and interest rates flat but retail sales taking a surprising turn, surpassing their forecasts. Yet muted economic sentiment lingers, as reflected in the Michigan Sentiment survey, which came in at 89.5, compared to the forecast of 94.
But while consumer sentiment may be less than stellar, advisor sentiment is more bullish than it’s been since early 2015.
And that bodes well for our Top Picks, which have so far killed market returns. The average return of our contributors’ January Top Picks is 20.5%. Congratulations to all of them!
And as you can see from the chart below, our Top Five Picks have had amazing gains, averaging 123%, with Sean Christian’s pick ratcheting up a fabulous return of 231%!
Wall Street’s Best Investments Top Five Picks 2016 YTD
Here’s what our contributors had to say when they recommended these stocks in January:
Freeport-McMoRan (FCX) Sean Christian, The Personal Capitalist: “FCX is a major resource company with interests in copper, gold, and oil and gas. This is a John Templeton play, (Buy when others are despondently selling). It’s a classic contrarian choice. The stock is selling not too far from its 52-week low.
We feel the company has positioned itself to weather the downturn by improving its balance sheet, cutting capital spending and operating costs. Plans to spin off oil and gas investments will contribute to FCX’s potential. Investor Carl Icahn has taken a major stake in the company indicating his belief in FCX’s future.
This is a very well-managed company that’s taking powerful steps to not only survive, but to eventually prosper, when commodities turn up.”
Royal Gold (RGLD) Adrian Day, Adrian Day’s Global Analyst: “RGLD is the second largest gold royalty company (approximately $2.4 billion market cap). It has resolved some of the issues the market had, most notably its lack of concentration. In the last quarter, it spent over $1.3 billion on four new royalties and streams, three of which are now cash-flowing. There was also concern with its debt, but it is quite manageable at just 11% of assets. The company plans to focus on using its cash flow to reduce its debt over the near term.
At the current level, Royal is an extremely strong buy, suitable for more conservative investors wanting exposure to the gold sector, but also a stock offering near-term potential as it recovers from these recent stumbles.”
TrovaGene (TROV) Mandeep Rai, Top Stocks under $10: “TROV develops non-invasive urine testing technology that can detect infectious diseases, cancer, and more. It has been beaten up—thanks to its need for cash, in secondary share offerings and debt issues. Those dilutions have been opportunities to buy the stock, which has the potential to double.
TROV is investing in developing and commercializing its cancer research tests, priming for a potential $5 billion market. The company is also currently underway in its Clinical Experience (CE) program, which was designed to assess clinical interest for TROV’s products by oncologists. In a 60-day period, 171 physicians signed up vs. expectations of 30, and roughly 20% have even started ordering tests—which can lead to reimbursement deals with benefits insurers.
With ample liquidity on its balance sheet—$74 million in cash—I expect to see favorable milestones to be hit at an increasing pace going forward.”
HemaCare (HEMA), William Velmer, S.A. Advisory: “HEMA is a leading global provider of human-derived biological products and services, and facilitates the implementation of cellular therapy-based clinical trials. The new direction during the past few years has created a dramatic revenue surge that we believe will continue for many years to come, and we also believe that HEMA will be acquired sooner than later.
The company’s revenue has been spiking by 100% during the past few years, and we anticipate that this will continue into 2016 & beyond. During 2014, HEMA had revenues of $4 million, and 2015 results are estimated to have grown to $9 million. We anticipate that HEMA will ramp up to $15-$18 million during 2016.
There are only 10 million shares outstanding, no debt, $0.25 in cash/share and attractive fundamentals. Our target for HEMA for 2016 is around $2.00. This stock is not actively traded. We rate HEMA with a Strong Buy recommendation.”
Gencor Industries (GENC), Stephen L. McKee, Stock Selections & Timing: “GENC produces highway construction materials like asphalt. It should benefit from the recently passed 5-year $305 billion highway construction bill. There are numerous state initiatives, like Proposition 7 in Texas that should also benefit the company.
The company has a pristine balance sheet. This is a very small company with a micro-cap market cap of $109 million. Be careful if you buy or sell it to only use limit orders. The company has no debt and cash or cash alternatives of $95 million. Revenues for the latest fiscal year ending September 30, 2015 were $39 million, with an operating loss of less than $1 million.
Based on the newly passed construction bill, we expect sales to surge in 2016. The company is well run. We expect net earnings to exceed $0.75 in fiscal 2016. Buy up to a limit of $14 with a 12-month target of $24.”
These picks exemplify stock picking at its best—experienced analysts looking for fundamentally strong companies with an array of advantages. Their strategies include seeking stocks as contrarian plays, companies who are managing their debt well, expanding into new customer bases and technologies, with healthy liquidity, strong cash flow, and rising earnings.
We congratulate them on their good work!