Here's a quick stab at things. Not getting on top of the mountain and predicting what's going to happen with everything... just picking a few stocks, that's all.
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Caterpillar (CAT)
Not exactly a “stimulus package” play (I think any reasonable effect of a stim program is already built into prices, sadly), but rather a pretty standard cyclical play. With the economy and real estate both massive depressed, this construction-related blue chip is trading at embarrassingly low ratios – right now its P/E ratio is around 7, that’s just silly (earnings may dent that short term, admittedly). This company is **not** going out of business. The dividend is not a firm one from year to year – but at today’s rates, that itself is around a 4% yield at today’s prices of around $40. Highway robbery for what sits right now as a great value stock.
Forecast: eventually the world starts building shit again, and we need big rigs to move dirt around. CAT makes them. Stock goes to $56 or better in two years, and the dividend is pretty secure.
Hecla Mining (HL)
In the wake of a commodities meltdown, I think there’s real value in a number of related stocks. Precious metals took a massive thumping last year (full disclosure: I suffered) and mining stocks seemed to take a double whammy from not only a loss in the commodity price, but also a sell-of effect just by virtue of being equities. Where does that leave a silver and copper mining company like Hecla? Looking at a $11/oz price for silver, and wondering what the hell happened to them? This is a well run company where I’m already very long, but I see the current price in the $2.20-2.40 range being a complete steal. The gold/silver price ratio is too high, that usually means that silver is heading upwards… but even if silver stays at $11-12 an ounce for the next two years, Hecla should be at $3.50 rather than $2.25.
Forecast: ups and downs in the short run (profitable themselves if you move on both) but this thing has a bounce-back in the next 18 months, and should end 2009 over $3.00, possibly over $4.00.
Cedar Fair (FUN)
My bias is strong here, as I grew up practically in the shadows of their flagship amusement park and worked summers there. But the company has a lot going for it – among the operators of regional amusement parks, they are the one who obviously “gets it” and offers the best mix of entertainment, rides, food, and (underrated) appearance/cleanliness.
This is also a dividend play, almost completely. A share of FUN pays a quarterly dividend of 48 cents – that means you’re getting nearly two bucks a share back in dividends, at a share price right now of only $13. **IF** that remains intact, this is a monstrous yield, completely unsustainable.
There’s a real risk here. The company (a limited partnership) recently bought out Paramount Parks, and did so mostly with leveraged debt, so their books look bad. Their long time CEO is resigning (or just has), and he has been really good. So, it’s possible that this company simply loses its way, slashes its dividend, and the stock price drops to six bucks.
Why like it? Because I like their market position (and I think I understand it). In concept, sure, they lose out when a midwestern family says they can’t afford two hundred bucks for a weekend at Cedar Point this summer due to tight times. But they also make out well when a similar family says they can’t afford twelve hundred for a trip to Disneyland, and so they opt instead to go to a nearby regional attraction like Cedar Point . It’s like Wal-Mart, in a way – neither the top nor the bottom of the ladder, and that’s not too bad in these times.
I also know the driving mentality of this stock… they are a darling of "income investors" and realize that the dividend is essentially sacrosanct. It may not be the smartest move in toto, but I think they want to protect that dividend as best they can for fear of massive investor backlash.
Forecast: 2/3 chance that the company retains its dividends, has a solid 2009, and finishes 2010 with a stock price in the low 20s… 1/3 chance that they are in fairly serious trouble, drop the dividend, and the stock price is halved to 7 by then
Woodward Governor (WGOV)
This NASDAQ listing is somewhere amidst the seas of growth plays, energy plays, and technical plays. I think it has a decent case on each front. They make energy-related equipment, including nearly universal parts for aircraft – a pretty down industry right now. In time, that should promote a cyclical rebound.
However, the area for growth is that their transmission technologies are well suited for… windmills. If you buy the general notion that we have momentum toward renewable energy sources (I do, in part) then this seems like a fruitful area.
On the technical side, the stock is selling at a pretty modest P?E of 13. That’s not criminally low, but if you think this stock has any growth potential, it’s still pretty attractive. The stock price has really been punished of late, and while getting in at around $21 (today’s price) might not be the actual bottom, signs point to this stock heading upwards before long.
Forecast: Immediate future partially tied to oil/gas prices (when they are down, the fervor for alternative energy is lessened) but in the next several years this is a growth company with several reasons to like it – I think it hits $30 by the end of 2010, and has more potential past that, likely back to $40 or better within five years.
Cynosure (CYNO)
A bit of a goofy play here, but I am enamored for two reasons. First, I am becoming an old fart, increasingly out of touch with the young crowd, and thus I just love their company niche – tattoo removal technology.
From a technical standpoint, I also love that they have a ton of cash on their books – fairly odd for a somewhat new company. Even if all that happens is that they get bought out by someone big (and that’s not unthinkable given their balance sheet), that’s still a solid win for a shareholder.
No dividend, no history, nothing to say “solid” but this is an interesting spec play that has a chance to work out really well. Stock price right now is around eight bucks (after a mini-bump the last couple of weeks) and where it goes from here is anyone’s guess.
Forecast: Flip a coin. It could finish 2009 at $6 or $16. Or $36, I suppose. Might need to make that a 20-sided die after all, this thing could land just about anywhere.