Streetwise for Sunday, January 6, 2019

It is time for my annual list of 12 investment suggestions. Before delving into my 2019 selections, let’s summarize the companies that were picked for the January 6, 2018 column.

The defense industry was likely destined to play a major role in 2018, hence General Dynamics (GD) and Lockheed Martin (LMT). The airline industry was improving so Boeing (BA) was a pick. 

Johnson & Johnson (JNJ) with its triple A credit rating, 53 years of increasing dividends and solid respect among consumers appeared to be a good candidate. The issue of asbestos and the company’s possible culpability is still unknown, but the situation has hurt the stock price.

Intuitive Surgical (ISRG) was selected given the popularity of its da Vinci robotic surgical system. A new candidate for 2018 was Praxair (PX), although the merger with Linde plc (LIN) was on the horizon. That merger has taken place and the symbol for the combined companies is now LIN.

From a technology perspective, Apple (APPL) and Microsoft (MSFT) remained with the addition of STMicroelectronics (STM). United Technologies (UTX) was added and Bank of New York Mellon (BK) held down the finance sector once again. The 12th company was Take-Two Interactive Software (TTWO).

The 12-Stock portfolio produced a 2018 return of a negative 4.09 percent, as compared to the S&P 500 total return of a negative 4.38 percent. No, 2018 was not a good year for Wall Street. Nonetheless, here are some key points to consider.

The portfolio did well up until the third quarter where upon it took a hit of over 17 percent. Except for Johnson& Johnson, none of the companies could be faulted for poor performance. Factors such as tariffs have driven Wall Street batty. 

Finally, the only way to buy the S&P 500 index is via its ETF (SPY), which chalked up a negative 4.56 percent return for the year, giving the 12-stock portfolio and advantage of 47 basis points or 0.47 percent. 

There was no rocket science or higher mathematics employed in the selection process. Every company is practically a household name. No international, emerging markets, or high-tech start-ups. Just a portfolio that anyone with a modicum of investment experience could build utilizing a discount brokerage account.

However, everything discussed so far is ancient history, although you could continue to hold those same stocks for another year and probably produce an above average return at the end of 2019, under the assumption that we return to a degree of normalcy on certain economic issues. 

Or you could listen to the prognosticators of doom, who continually point out that the markets are going to “correct,” although they never say when, why or by how much (convenient). Or you could investigate the 12-Stock portfolio for 2019.

So, what are my research recommendations for this year? The defense industry is going to continue to play a major role in 2019, so General Dynamics and Lockheed Martin remain, in addition to Intuitive Surgical and Linde.

Technology will be held down by Apple, Microsoft and Take-Two Interactive Software. For finance, let’s continue with Bank of New York Mellon.

The four new companies include Church & Dwight (CHD), a company whose 2018 share price appreciation was over 30 percent, Ecolab (ECL), AT&T (T) (hoping the Time Warner purchase meets with judicial approval), and Toro (TTC).

Please keep in mind that the 12-Stock portfolio is designed only to be a catalyst to stimulate your own research efforts.

Note to Readers:

Save the Date: I will be teaching Advanced Investment Analysis, starting Monday, January 14, for the Ringling’s Osher Lifelong Learning Institute. Call 941-309-5111 for registration and information. About 14 seats left.

My 9th annual talk sponsored by the non-profit American Association of Individual Investors (AAII), titled: “Tactics for Tough Times – Deciphering Wall Street in 2019”, will be on Thursday, January 24, at the Hyatt Regency, 1000 Blvd. of the Arts. Registration/Social/Refreshments 3:30 P.M., Program 4:00 to 5:30, Q&A 5:30. Please call 941-706-3449 to register. $15 per person at the door.

Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.