Predictions for 2003 (2)
Here are some stock picks. Just remember that my last year's calls were absolutely horrible, so no guarantee that this year's would be any better. Let's hope regression to the mean applies.
1. Callon Petroleum (CPE) - 3.35/share
Small gas and oil company with small amounts of equity in a few areas with 'proven reserves' in the Gulf of Mexico - they had a recent setback where one of their proven reserves wasn't so provable, and their stock got crushed. Otherwise, the company has a fair bit of equity in the reserves they have left, and this will start being mined in the middle of 2003. When that happens, they just have to sit back and relax. Debt is worth $250M, trading at about 80-85 cents on the dollar, preferreds are trading at an equal premium, and common stock is trading at about $50M. Oil and gas shouldn't crash that badly in 2003, and so these guys should be able to take advantage. Some paper napkin calculations will give the equity a value of about $100-$150M, depending on what your gas/oil price parameters are, which is double current valuations.
2. ICOS Corp (ICOS) - 23.41/share
Two words: Viagra killer. They had a significant setback in the clinic with one of their products for Sepsis, but now that this has been officially canned, the company can be correctly valued for Cialis, the viagra killer. I expect the common stock to trade around 35 bucks by the end of the year.
3. Ligand Pharmaceuticals (LGND) - 5.37/share
Management made a deal late in 2002 which the public didn't like. This was a deal that was strictly short term pain for long term gain. They diluted the stock about 20-25% with a convertible debt offering, and also affecting the common stock is that ELN owns a huge chunk of the company (over 10 million common shares), and they can dump them in April. They probably will, which will probably be a rather good buying opportunity in the stock. But my guess is that the company is undervalued. Factoring in dilution, I'd estimate that the company should reach about $10/share by the end of the year.
4. Touch America (TAA) - 0.39/share
This stock had a recent run-up in the last little bit of 2002, which makes this less of a penny-stock opportunity, but the risk/reward still seems appropriate. The company will most likely be acquired for a dollar a share.
5. The Utilities Sector Spider (XLU) - 19.15/share
The market spent a great deal of 2002 finding out that utility companies had way too much debt. Now that this has mostly been discounted, I'm going to "cop out" and take the safe play, and buy a sector fund for the utility. XLU seems to fit the bill - all utility companies inside the S&P 500. I'd rather prefer a fund that had all of the utility companies inside the S&P 400, but since I'm too lazy to do the research, I'll settle with XLU for the year. I'm expecting a 20% return on this.
I invested a fake $10,000 amonst these five stocks (so $2000 inside each), and placed the portfolio link here:
siliconinvestor.com
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Index predictions.. predictions for the end of 2003:
^DJX: 7600. Ended 2002 at 8341.63. I think a couple index components may be in trouble, specifically GM and IBM. I'd pick JPM to be a top-3 performer on the DOW.
^NDX: 950. Ended 2002 at 984.36. I like the components of the QQQ better than last year, but when Microsoft doesn't go anywhere, the rest of the industry won't either.
^SPX: 840. Ended 2002 at 879.82. I think low interest rates will finally force more demand towards stocks that pay dividends, but this index is already hugely overpriced, and shouldn't prosper too much from the changes.
Generally speaking, I think the main indicies will bottom out (i.e. drop 20-30%) sometime in April-May, and chop their way slowly back to roughly 5% down for the year.
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More predictions, geopolitical and financial:
- Hussein is confirmed to be out of Iraq by mid-February. This will take the form of him being declared dead, exiled, arrested, or otherwise in some form where he is clearly not in power of the country of Iraq.
- 30-Year debt will gyrate from a 4.1% to 5.8% yield for the year.
- Oil will end 2003 at 22 bucks a barrel. |
