Evaluating Barrons 10 Favorite Stocks for 2014

Barrons 10 Favorite Stocks for 2014

For the last four years, Barrons has produced a list of 10 stocks thought to be good investments for the following year. Last year’s picks performed quite well, outperforming a surprisingly strong S&P 500. For 2014, Barrons has once again created a list of 10 stocks they consider their favorite. We agree with some but not all of their choices. For more on our take, read more.

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The Annaly Knife May Have Stopped Falling

Do not catch a falling knife

When interest rates spiked over the Summer, the share prices of Annaly and other mortgage REITs were punished and it was painful to hold on to these stocks despite the mid to double digit dividend yields they were paying. Now that the economic situation has settled down a bit and visibility on the Fed’s tapering intentions has become clearer, the mortgage REIT shares have been much less volatile. While there may still be some downside risks, such as unexpected spikes in interest rates, quicker Fed tapering, and another increase in prepayment rates, to name a few, the shares of Annaly and other mortgage REITs look compelling.

 

We think that interest rates WILL rise in 2014, but we think it will happen slowly and that the impact this will have on the mREITS has already been discounted into the stock price. These types of investments are not for investors who can’t deal with volatility in share price movements, but if your time horizon is long-term, it may be a good time to take a closer look.

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Fantasy Football Investing

Fantasy Football excuses

As the NFL regular season comes to an end, the Fantasy Football season is fast approaching its championship week. Since some NFL teams do not make the playoffs, the fantasy season must come to an end while all players are still participating. Usually by the last game of the NFL season, Fantasy Football owners around the world have collected their winnings and established bragging rights for the next year.  

While watching my closest friends and family participating in this ever more popular activity, I can’t help but notice the similarities of fantasy football coaching to investing in a diversified portfolio of stocks and bonds.  

Can the GOP Pull a Rocky?

Rocky Balboa as a symbol of the GOP party

It shouldn’t have been a surprise to anyone that the budget deal was so overwhelmingly approved by the House. After the public backlash received by the Grand Ole Party (what a misnomer that is) over the last several budget and debt ceiling talks, politicians, and I never thought I would say this, are licking their wounds. There were still some conservative extremists that criticized the deal, but those guys are like Rocky Balboa….they seem to take a beating and never stay down.

The deal doesn’t solve either party’s deep philosophical issues and according to some articles, it won’t have any impact on the US deficit, either. What it does do is limit the amount of bickering we have to listen to over the next two years. So basically, it sounds like they just kicked the can down the road again, the difference being they used Matt Prater to really boot the can down the road. For those of you unfamiliar with Matt, he set an NFL record last week for the longest field goal in NFL history…64 yards. We expect the Senate to do the same next week when the deal is voted on by those clowns.

Then we can look forward to early 2014 and the debt ceiling discussion. With the Republicans giving in so easily to the budget deal, we might assume they will drive a bit harder of a bargain this time around. Will they pull a late round upset a la Rocky? Maybe, but from where we sit, they’re all BUMS!

“Yo Adrian, I did it.”

Retail Sales Trends are Clear as Mud

Is this a good or bad sign for retail sales?

It is difficult to look at the retail sales data this week and figure out the state of the economy and/or the direction it is heading in. On the one hand, the National Retail Federation reported a higher number of shoppers compared to last year, but the average shopper kept to a tighter budget. The result was a decrease of 2.9 percent in sales from the comparable Thanksgiving weekend period from last year.

Dendreon Can’t Deliver on Its Pioneering Prostate Treatment

Provenge Prostate Cancer Dendreon

If you found out a company developed a ground-breaking new way to treat prostate cancer, you might seriously consider investing in that company in the hope that it produces a billion dollar drug, the pharmaceutical equivalent of a home run!!

Dendreon Corp (DNDN) did just that, with its Active Cellular Immunotherapy (ACI) drug Provenge, which essentially treats a patient’s immune system to recognize and fight cancer. The problem is that Dendreon is a one-trick pony and competition in ACI is heating up and coming from the pharmaceutical giants with much broader product lines and much deeper pockets.

In our view, Dendreon is a lame duck. The only hope for investors is that it gets acquired by one of the large pharmaceutical companies looking to leverage the technology that Dendreon pioneered. But we don’t see a catalyst for this to happen in the near future and while it is looking at partnership opportunities for the European market, it may need to raise more capital to continue to operate until it becomes cash flow positive.

We understand how investors can be excited by ACI, we just don’t think Dendreon is the way to play it.