WASHINGTON, December 21, 2016 – As promised in Tuesday’s column, here are the remaining stocks in our Trading Diary’s 2016 Year-End Bounceback list:
Blackstone (BX). Here’s one financial stock we’re already in, but we could pick up another 100 shares if it gets hit hard, and it’s getting hit Wednesday for the second day in a row. Blackstone is, essentially what some cranks like to call a “vulture capitalist” company. In other words, they’re the guys who scoop up beleaguered companies, pump them up into profitability once again, then bring them public, hopefully (for them) selling the new shares for an obscene profit. Which profit shareholders can enjoy as well. The flat, low-interest rate economy of the last two years put BX and other vultures in limbo, investment-wise. On the other hand, they accumulated a massive war chest of cash, which they’ve been deploying in 2016 picking up distressed merchandise at bargain-basement prices. This augurs for dividend increases and share price increases in 2017 and beyond. An added point of interest: some of these companies, like Blackstone, are increasingly taking on functions once reserved for banks, given how tough it is for the average small-cap or mid-cap to get loans from Dodd-Frank constricted major banks. This may be a trend to follow, no matter how or if this act is revised under the new administration.
Bank of America (BAC). We also jumped into long-beleaguered Bank of America, about 2 days after November 8’s surprise conclusion. We’ve hated this stock for years, largely due to this mega-bank’s being in the constant crosshairs of the Federal government. This in turn was due, ironically, to BAC’s virtually government-forced acquisition of Angelo Mozillo’s massive criminal enterprise, otherwise known as Countrywide. The government appears (at great cost to shareholders) to have finally concluded most of its predatory BAC extortion racket, now allowing the bank to return at last to genuine profitability for the first time in nearly a decade. Plus, BAC might even get leave to raise its still-anemic dividend. We jumped into this one as of about a month ago when it became a virtual certainty that the Fed really would raise interest rates again. (That’s is a good thing for all bank and insurance stocks.) BAC is likely to plateau now through the end of 2016. But as a longer-term hold (not usually what we do with bounceback stocks), it could gain another 10-20 points over the next 1-3 years. So we’re looking to pick up some more on any significant dips.
Allergan and Allergan Convertible Preferred A shares (AGN, and AGN/PRA, though the latter symbol may vary depending on your brokerage). We’ve been unintentionally flogging the preferred issue in this column, as we’ve established an unnaturally huge position in the latter position in it due to its high relative dividend as well as the fact that these shares will be called (redeemed) on March 1, 2018 at $1,000 per share. Under pressure now like most pharmaceuticals, we’re down on this position, which we’ve actually held since earlier in the year. But on big dips, we’ve averaged down over time. With both stocks weak in light trading, (AGN is circa $190 per share, AGN/PRA roughly $707 per share) newcomers will get a better deal even than the one we got. (Our average per share acquisition price is now about $804 per share.) Keep in mind that both issues are volatile and move very fast up and down and only veteran investors should consider either of these stocks. Neither is for the faint-of-heart.
Pfizer (PFE). Like Allergan (AGN)—the company it tried to merge with until the Obama Administration shot that deal down—Pfizer and most pharmaceutical stocks have been crushed in the second half of 2016 due to pricing scandals and also to Donald Trump’s negative post-election comments on the drug pricing issue. PFE, however, remains in good shape otherwise. Its finances, post-Allergan, are tip-top and may bode well for another M&A bid under the new Trump administration. Plus, Pfizer pays a nice dividend, currently around 4 percent. There’s lot to like in 2017, barring any more negative political flak for the industry.
AbbVie (ABBV). Ditto Pfizer (PFE). Plus, the company’s dividend is even nicer.
Apple (AAPL). Here’s another bounceback stock that already seems to be bouncing back, having apparently bottomed earlier this fall somewhere between $100 and $109 per share. As of 3:30 p.m. EST Wednesday, the shares now stand at $117.21, give or take. Several analysts think AAPL will get to at least $130, but the better part of the move could start around mid-summer when iPhone 8 excitement builds. Tech stocks still tend to make their move in the second half of each calendar year even though most of the industry’s products are no longer as cyclical as they once were. Investment-wise, we’re already in this one, too, but may add to the position on any significant pullback.