Stock Picks for December 2024
Today is December 6th, 2024 and It’s time for some new stock picks!
As usual, I’m going to review the performance of my picks from this time last year, then offer an overview of market and economic conditions and then proceed with 3 new stock picks for the next 12 months and beyond.
For the video of this article please click here.
Last year’s stock picks
This time last year, I picked grocery chain conglomerate, Koninklijke Ahold Delhaize , symbol ADRNY. The stock was up 28.4% including dividends in US dollars. Then I picked a consumer staple, Imperial Brands, symbol IMBBY. This one was up 49.6% including dividends. Lastly, I picked Komatsu, a heavy equipment manufacturer, symbol KMTUY. Komatsu was up 13.9% The average of these three stocks was 30.6% which compares with 24.9% for the MSCI World Index including dividends in US dollars, as represented by the URTH ETF.
Market Overview
The results of the US election have been met mostly with excitement by market participants that have pushed general stock price levels higher as well as the prices of other risk assets such as cryptocurrencies higher. Market participants view the potential deregulation efforts and potentially lower government deficit spending as more beneficial for stocks and other risk assets despite the likely negative effects on trade and the consumer from potential US tariffs on foreign made goods.
While I generally agree with this sentiment, I do not like buying when prices are high and stock valuations, especially in the US are quite high. With forward price to earnings ratios for large cap US stocks mostly in the 20s or higher, as investors we need to curb our enthusiasm about overall stock market returns for the next decade or so. That’s funny show by the way, Larry David’s “Curb Your Enthusiasm” 😀
Despite the US stock market being generally expensive, it is still probably the best place to invest. A lot of the world’s best companies do business there, are headquartered there and trade on their exchanges. I believe if we stick to our discipline and our motto of buying good businesses at good prices we will be handsomely rewarded.
LyondellBasell Industries
For my first pick, for the next 12 months and beyond, I have a petrochemical producer, LyondellBasell Industries, symbol LYB. LyondellBasell have operations in the United States, Europe and Asia. This company is the world’s largest producer of polypropylene and also a major producer of polyethylene and propylene oxide. Its chemicals are used in various consumer and industrial end products. Well over half of LyondellBasell’s production comes from its North American operations. The company has been very profitable over the years but lately its profitability has declined as well as its free cash flow. They are not in trouble but the stock is down about 19% in the last 3 months while the market is up nicely. While it can always go lower, the stock trades at a good enough price to buy. 11 times forward P/E ratio, 1.8 times book value for a company that usually delivers a very high return on equity is pretty, pretty good 😆.
Plumas Bancorp
My second pick will be Plumas Bancorp, symbol PLBC. A so called regional US bank headquartered in Reno, Nevada, with operations in California and Nevada. It has a market cap of only about $300 million. Plumas Bank offers a wide range of financial and investment services to consumers and businesses and has received nationwide Preferred Lender status with the U.S. Small Business Administration. They have been able to generate a high double digit return on equity in the last 10 years with the last couple of years being even better. With this kind of profitability the stock should be trading at about 2.5 to 3 times book value yet it trades at 1.6 times. So what we have here is quite possibly another good company at a good price. Plus with the recent de-inversion of the yield curve, meaning long term interest rates are now higher than short term rates, they have a favorable economic environment to operate under. Banks typically borrow on the short end of the curve through deposits and lend on 5 year terms or more, making a higher spread when short term rates are lower than medium and long term rates.
Ituran Location and Control
My third pick is Ituran Location and Control, symbol ITRN. Ituran Location and Control Ltd is an Israeli company that provides stolen vehicle recovery and tracking services. They are one of the global leaders in their business which is usually a good thing for investors, owning the higher quality businesses, when the price is right. Ths one trades at about 11.6 times forward Price to Earnings Ratio and it has good profitability and a strong balance sheet. The stock is also paying a dividend of about 4.5% which doesn’t hurt either, especially in flat or down markets, a solid dividend provides support for the price of a stock.
Give Us a Call
As always, if you have questions about whether these stocks fit in your portfolio or if you have any other investment related questions, give us a call! 604-288-2084
Thank you and enjoy the holidays!
- Stock Picks for December 2024 - December 10, 2024
- Stock Picks for November 2024 - November 18, 2024
- Stock Picks for October 2024 - October 17, 2024
