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Top Stocks to Buy this Year

Every year, I ask our contributors to Wall Street’s Best Dividend Stocks and Wall Street’s Best Investments to select the one investment that they believe will be their biggest winner that year. And earlier this month, I published the winners in our special Top Picks issue.

On the income-paying side, our two best performers were Preferred Apartment Communities (APTS), a Real Estate Investment Trust that returned 46.1%. The REIT was recommended by Chris Temple of The National Investor. Our next best dividend recommendation was Cincinnati Financial (CINF), picked by Bob Howard of Positive Patterns, and that bank stock gained 19.68%.

For growth stocks, John McCamant, editor of Medical Technology Stock Letter earned the gold, selecting Five Prime (FPRX), a biotech that rose 60.54%. Our second-place winner was another biotech, Incyte (INCY), recommended by Nadine Wong of Wong’s BioTech Stock Report, with a 40.12% return.

You have to agree that in a year when the Dow Jones Industrial Average lost -2.24%, the S&P 500 was down -0.73%, and the NASDAQ Composite increased by just 5.75%, our top four recommendations gave subscribers excellent value!

The Top Picks reflect the stock-picking expertise of our contributors. They constantly demonstrate that they have a keen eye on markets and economic events, and have long and strong track records of choosing companies with attractive qualities, including fundamental strength, accelerating revenues, unique products, fat and rising dividends, healthy insider ownership, rising revenues and earnings, leading market share and a tendency for stock repurchases. And in another year that has started out with extreme volatility, I think that stock-picking talent is going to serve investors very well.

Some Top Picks for 2016

For 2016, our contributors recommended 78 stocks, bonds, funds and ETFs that they think have “all the right stuff” to weather an environment with rising rates, a year of Presidential politics, a slowly-recovering economy, and a choppy market.

Here is a sampling of their 2016 Top Picks.

Nordstrom (JWN), recommended by John Dobosz, Forbes Dividend Investor: John says:
“Retailers of all types have been in an awful funk for most of the second half of 2015. Even Seattle-based Nordstrom (JWN), which caters to high-income shoppers, has felt the pull of gravity. Shares of Nordstrom (JWN) tumbled nearly 40% from July through December, putting the stock at a three-year low. At less than 14 times earnings, Nordstrom trades at a 20% discount to its five-year average P/E, and 30% below its average price-sales ratio. Gaping discounts to historical averages also show on other valuation metrics like price-to-cash flow, price-to-book value, and enterprise value to EBITDA.

“Despite the fire-sale price of Nordstrom stock, revenue has yet to take a hit, with analysts forecasting sales in the current year that ends January 2016 to climb 7.5% to $14.5 billion. Nordstrom has enriched shareholders with consistent and sizable dividend hikes, raising the payout at a compound annual rate of 18.6% since 2005. At a rate of $1.48 per year, the dividend yield is around 3%, and the dividend has plenty of room to keep on rising, with Nordstrom expected to generate $9.81 per share in cash flow from operations this year.”

Dycom (DY), recommended by Tom Bishop of BI Research: Tom says:

“Dycom (DY) installs infrastructure for telecom and cable companies, including wireless companies, whether it be stringing fiber optic cable down the street, burying cable in a trench, running it right into a building, erecting and outfitting a cell tower, etc.

“Clearly the explosion of video over the Internet (including mobile devices) is largely behind the need for expanded gigabyte capacity. While Dycom has grown over the years in part by making dozens of acquisitions of smaller companies that do this type of work, it is important to note that an impressive 22% of the 29% growth in fiscal Q1 was organic.

“Dycom is currently forecasted to earn $3.92 this year (FY 7/16) and $4.40 in next year. So what is driving this growth in an economy growing overall at 2%? From the company’s latest quarterly report, ‘This quarter was impacted by a broad increase in demand from each and every one of our top five customers as we deployed 1 gigabit wireline networks and grew core market share. These newly deployed networks are generally designed to provision bandwidth enabling 1 gigabit speeds to individual consumers. One industry participant has articulated plans to deploy speeds to 10 gigabits, while others are preparing to do so.

“ ‘These services are being provided across the country in dozens of metropolitan areas for a number of customers. It is clear that calendar 2015 has been the foundational year for a massive investment cycle in wireline networks, which will be even more meaningful than the one that occurred for us in the 1990s. During the quarter we experienced the effects of an overall industry environment, which showed clear signs of acceleration.’ ”

Our 2016 Top Picks came from every sector and industry, and were further diversified with small-, mid-, and large-cap companies, and are typical examples of the types of companies we include in each newsletter.

I think that diversification will be extremely important in 2016’s volatile marketplace. A balanced portfolio—with dividend-paying and growth stocks—will help you maximize your gains, utilizing your big winners, and also aid in minimizing your losses on holdings that may not live up to your expectations.

It promises to be an interesting year—one in which you will need to carefully select and monitor your holdings, and very importantly—don’t hesitate to weed out the losers when needed. For a little help with that, here is an article from our website that addresses the topic of selling: How to be a Successful Stock Seller

Happy investing,

Nancy Zambell
Editor, Wall Street’s Best Investments and Wall Street’s Best Dividend Stocks

Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.