Sunday, January 6, 2008

Share Investor's 2008 Stock Picks

As the price of gas to starts to reach for the stars, fixed mortgage interest rates look like they are ready to go double figures, a continuation of the 2007 finance company meltdown set to drag on, and Helen Clark and her merry bunch set to plunder taxpayer wallets again in 2008, this writer is still in a holiday frame of mind.

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On that light note then id like to offer my completely unbiased opinion (yeah right) on what my picks are in 2008 for stocks to watch for.

Keep in mind that global stockmarkets this year are going to get a beating from the aforementioned and a probable recession in the US, and my picks are going to reflect the actual prospects of the companies and not the wider short term global influences mentioned.

My picks are long term, with a bare minimum of 5 years, and have an emphasis on companies with good long term prospects.

Without further ado and out clauses, here are my picks.

Like a lot of other stock pickers poking their heads above the parapet in 2008 I am going to put Fisher and Paykel Healthcare[FPH] at the top of my list.

Unlike its cousin Fisher and Paykel Appliances, FPH has good long term prospects and that is driven mainly by an R and D department that keeps coming up with cutting edge products with good margins that keep the revenues coming in.

Recent positive developments in the USA over increased health provider payments for FPH's sleep apnea products in-home mean this area is a driving force for profit and as new products are developed for the at home market profit looks set to rise.

The only negative is the weak US dollar, which is something quite frankly the company and analysts need to get over.


Pumpkin Patch Ltd[PPL]is on my buying list again for 2008. I have already picked up increased quantities of this 2007 beaten down stock and the short term punishment from slightly weaker global profit margins due to higher living costs means this stock will pick up when these pressures disappear.

Its strong global brand awareness and loyalty to that brand also helps during downturns.

Another retailer suffering from a mammoth stock slide in 2007, Hallenstein Glasson [HLG] is a pick for 2008.

A very well run company that shares the same reasons for its downturn with the likes of Pumpkin Patch and all other retailers.

Already retracing some of its 2007 slide, the stock price will be downwards volatile in the first part of the year and add some value as we come out to Christmas 2008.

Burger Fuel Worldwide[BFW] has heated up the Google box in 2007 and may gain interest as it expands in Australasia in 2008.

An indicator of what the share price will do will be sales figures from the Kings Cross Burger Fuel opened towards the end of 2007.

Indicators are that sales are good.

Like Pumpkin Patch, its strong brand awareness and loyalty will help it prosper long term. Although profit isn’t going to come in 2008.

I’m picking Burger Fuel as my wild card and recommend buying in the 20-30c range.

Mainfreight is another company that I have a shareholding in, and far be it from me to pick yet another already in the Share Investor Portfolio but I wouldn’t have picked it in the first place if it didn’t rate a mention in my 2008 picks.

Mainfreight[MFT]is a very well run company and perhaps more than any other listed on the NZX, management have set it up to succeed long term.

Everything has been set up with company long term sustainability and success in mind, and the pressures that Mainfreight will come under in 2008: increased fuel, wage, and interest rates, will be largely ameliorated because of careful forward planning.

The share price has been beaten down to around NZ$6.50 from a 2007 high of over 8 bucks, so the upside is obvious.


Other 2008 notables for me are:

Sky City Entertainment[SKC] if it isn’t sold it ain’t the end of the world and its new head that starts soon looks promising and has a track record of reorganizing casinos and making them tick.

Telecom New Zealand[TEL] if its new leader can change the whacked out culture of its workers and respond to its current and new customers in a preemptive instead of a reactive way then they have a good shot.

Serious money must be spent on infrastructure in 2008 to move Telecom’s technology into the 21st century.

If Michael Hill International [MHI] can build on its 2007 success, with good indicators for sales in Canada and material efforts to expand into Mainland USA, then the after 10 for 1 split share price of just over NZ$1.10, looks set to hit record highs in 2008.

Rakon’s [RAK] share price was slaughtered from highs over 5 dollars in 2007 and there were a few teething and integration of new business problems that put the foot on the brakes.

Higher than usual Kiwi dollar crosses wiped some profit off the balance sheet but management should focus on the business first before worrying about things they cant control.

A great long term prospect.

Two US stocks that I'm picking for 2008 are Yum Brands [YUM]and Starbucks [SBUX] I like Yum because of its potential for expansion of its operations in China and India and Starbucks for the same reason.

Yum's KFC operation seems to be the star of the show, especially in China, as increasingly wealthy Chinese get the taste for western protein such as chicken and the number of possible units there would dwarf the US store count.

Starbucks had a rough year in 2007 but this former bull star has room left to run in 2008 as its stock price was given a good frothing due to its slowing sales and profit and Asian expansion could put some cream on the lattes as 2008 goes forward.

2008 is going to be a tough year for investors but with the right research and focus on how the business you are going to invest in works, you are going to set yourself up well in the long term.

Like any picks from people like myself, they must be taken with caution and may not be the right ones for you.

My picks come from my own research and I have backed them mostly by plunking down hard earned cash, with the exception of Burger Fuel, Rakon , Telecom and Hallenstein Glasson.

Burger Fuel and Hallensteins are on my radar to add to my portfolio in 2008.

Happy investing for 2008!


Disclosure: I own Sky City, Mainfreight, Michael Hill, Hallenstein Glasson, Pumpkin Patch and Fisher & Paykel Shares.


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Share Investor's 2009 Stock Picks: Looking Back


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c Share Investor 2008