As individual investors and traders, we need to continually scour the web and do our own research for our investments -- so here’s my list of 10 top investing ideas for 2012 including stocks, commodities, ETFs, and mutual funds. I hope it inspires you to do your own investigation of these and other investing choices, since our 401K, 403b, IRA, rollover retirement accounts, SEP and Roth IRAs portfolios are all generally under our own control.
CONCERNS FOR INVESTING IN 2012
Sure I’m concerned about our slow-growth jobless recovery, the plight of the Euro zone, and the interconnectedness of our global financial system. I am also concerned that rising costs for gas, heating fuel, food, fertilizer, and other commodities makes some of the natural post-recession recovery harder for many families and small businesses. I’m concerned that emerging markets like China, India, and others that have been co-dependent on the US economy for manufacturing orders, are ALSO suffering.
The fear and volatility of the markets over the last three years has made many investors simply turn to gold - through exchange-traded funds like the SPDR Gold Trust ETF (ticker: GLD), Market Vectors Gold Miners ETF (ticker: GDX), or bullion and various other forms of physical gold. I think the current gold price is largely supported by fear and speculation, and that any ‘good news’ in 2012 would make many rainy-day investors dump it and buy more traditional investments. Since some mutual funds in my 401K and retirement accounts carry a gold component, I stay away from it, and silver, for my own direct investing.
Many individuals also simply decided to cash out of the stock market completely, and purchase CDs (certificates of deposit), fixed-rate annuities, US treasuries, government bonds, and more. Personally I believe cash-based investments will suffer soon enough at the hand of inflation -- and I don’t think it’s a strategy that ever works over the long-term.
Others investors have become day traders and taken to all out speculation to recover their prior year losses. For some this means aggressive options strategies -- there are conservative ones!-- forex and currency trading and scalping, and penny stocks. I have had some success with these strategies, but also some failures. “Swinging for the fences”, “all or nothing”, and “all in” are not a viable stock investment strategies. I have friends that lost a ton of money speculating in these areas! Day trading is a disciplined art form that requires patience, study, capital, and immense emotional control over fear vs. greed and other emotions. I prefer a longer-term investment strategy at this time.
OVERALL STRATEGY FOR INVESTING IN 2012
With all that said, personally I believe that these and other market factors might slowly improve over the next year or two, so as long as individual stocks seem stable and fairly valued, I can buy them over a period of months. The great value investor John Neff, of Vanguard Windsor fame, said that he believed that perhaps everything was worth buying at some price! What I like to do is buy stocks monthly in separate lots over time, as I do in my Roth IRA account, or my DRIP accounts. This dollar-cost-averaging is one of the few things that can really help an individual investor. While most people don’t want to pay the transaction fee twice or three times, often buying more stock lower more than offsets the extra costs.
My TOP 10 INVESTING IDEAS 2012:
- Apple (AAPL) or Google (GOOG). I believe both of these tech giants are undervalued for their current growth prospects so either would make a great long-term investment. If you don’t believe me -- walk into any Apple retail store! As for Google, online commerce, advertising, and search is such a huge part of our economic recovery that their dominance in those areas assures future growth -- and is anyone even valuing their YouTube business properly? And what about their role in cloud computing? If you don’t want to buy both as stocks, consider the Nasdaq Powershares ETF (QQQ), or the Fidelity Contrafund (FCNTX).
- I think Caterpillar (CAT) is a great company. And I believe that no matter who wins the US election, we will have a renewed push to update our infrastructure (roads, bridges, etc) and Caterpillar stock is a great way to have exposure to that. In addition, you have a stock central to construction growth anywhere in the world, including the emerging and frontier markets -- plus an interesting Caterpillar finance division that helps boost sales, and the bonus of a 2% dividend yield (as of Dec 2011).
- The long awaited Facebook IPO is expected in mid-2012. This social media powerhouse will likely trade at a premium, but it might make a great long-term investment if they have clear growth strategies. If you can’t get in on the IPO, you could just buy stock once it trades publicly (day one, wait a week, or wait until after the six-month lock-up for insider sales). Goldman Sachs (GS), T. Rowe Price (TROW), Microsoft (MSFT) and others are a great way to get exposure to Facebook if you don’t want to buy the likely-volatile stock! I think you should buy the Facebook IPO in 2012 -- I will.
- Choose a solid consumer dividend stock like Procter and Gamble (PG), Johnson & Johnson (JNJ), Kellogg (K), Kraft Foods (KFT), CVS Caremark (CVS), Target (TGT), Walmart (WMT), or any other you know and use. These stocks handle recessions well, pay nice dividends, and their products are bought every day at every store around the world. They’re not about wild growth, and they’re not exciting, but if you buy the Facebook IPO, make sure you balance your portfolio with one of these!
- To me, foreign and emerging market cell phone companies are interesting for so many reasons. First they have growth - especially in countries where they will never build land-line telephone systems. I also like that many pay nice dividends. Here are some ideas: China Mobile (CHL); Turkcell Iletisim Hizmetleri (TKC), Telefonica, S.A. (TEF), Telecom Argentina S.A. (TEO), Tele Norte Leste Participacoes S.A. (TNE), and others.
- American banks and other financials need to recover for our economy to recover. I prefer Wells Fargo (WFC) and JP Morgan (JPM) as my main financial choices. MasterCard (MA) and Visa (V) make interesting choices as well, but they’re not as undervalued.
- Foreign banks and other foreign financial stocks have also been clobbered, and someday might seem like ridiculously smart investments. I like Banco Santander (STD) in Spain because of its global exposure (US, UK, South America plus Europe), and for its nice dividend. Consider researching UBS AG (UBS), Mitsubishi UFJ Financial group (MTU), Mizuho Financial Group (MFG), and others.
- Takeover target Interdigital (IDCC) is an interesting company. Patents, patents, patents... ensures a revenue stream for them, or whoever buys them. The stock also pays a small dividend so you’re paid to wait. Without an acquisition, I think it’s still a compelling company going forward.
- General Electric (GE) is a stock to buy in 2012. If you read their quarterly reports you can see that they’re in energy, health care, defense, green tech, finance, and so much more. It feels like a built-in mutual fund... with a 4% yield!
- Finally, my last idea for investing in 2012 is to remember to buy what you know. If you go to Dunkin Donuts (DNKN) every day then maybe it’s worth investigating. Maybe Walgreen’s (WAG), Hewlett-Packard (HPQ), Ford (F), or even a bottle of Heinz Ketchup (HNZ) inspires you to look at an investment in your favorite company.
As always, please do your own homework before making any investment and before committing any risk capital, and consult your own advisors (accountant, tax, and other financial advisors), before committing any risk capital. Full Disclosure: At the time of this writing I have investments in GE, IDCC, STD, WFC, K, KFT, CAT, AAPL, GOOG, and FCNTX. I plan to hold them all for at least five years or more.
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