Introducing The Top 10 Blue Chips for 2014
Top Drug Stock for 2014
AmerisourceBergen Co. (ABC) is one of the world's largest pharmaceutical services companies—serving an industry that's expected to reach $370 billion to $390 billion by 2015. In other words, the profit potential is stunning. Moreover, because it helps drug makers and healthcare providers cut costs, it stands to win big from the healthcare shift that's just getting underway here in the U.S.
The company is on track to meet its 2013 financial objectives and is in a good position to generate sustainable growth in 2014. Analysts expect the company to grow sales 30% and earnings nearly 20% over 2013.
Just recently, the company's board approved $750 million in stock buybacks—that's on top of the $450 million or so it has left on its existing program. Even more impressively, since 2006 the company has increased its quarterly dividend nearly tenfold.
As a result, investors are being paid 1.3% per year just to hold the stock, the second highest dividend in the Wholesale Drugs industry. Between its industry leading position, its commitment to shareholders and its earnings prospects, I consider this conservative industry leader among my top healthcare picks.
Top Biotech Stock for 2014
One of my top picks for 2014 is Celgene Corp. (CELG), which I consider to be one of the most exciting biotech plays around. Just how exciting? Well, this company is working overtime to double sales by 2017!
This is a pharmaceutical company specializing in cancer treatments as well as therapies for immune-inflammatory related diseases. It currently has several drugs on the market—one that treats a blood cancer that begins in the bone marrow—and a blockbuster chemotherapy treatment currently used in breast cancer patients.
But what really excites me about this company is what's in its pipeline—this company has over 20 drugs in either late-stage development or development. This includes new applications for Abraxane. Celgene has an impressive lineup of strategic partnerships:
Top Grocery Stock for 2014
My next recommendation, Kroger Co. (KR) is one that you'll definitely want to consider "ringing up." With over 2,600 supermarkets across the U.S., Kroger is one of the nation's largest grocery store chains. On top of this, this $97 billion company's empire covers nearly 1,200 gas stations, 800 convenience stores, over 300 jewelry stores (yes, jewelry!) and 37 food processing facilities.
Kroger is on my radar as it is benefitting from lower food costs and higher grocery spending. But the big catalyst for this company is a multibillion dollar merger. Our grocery retailer is about to combine with one of its biggest competitors–Harris Teeter Supermarkets Inc. (HTSI)–in a $2.5 billion cash deal.
Harris Teeter is a smaller, higher-end grocery chain based in the Southeast and Mid-Atlantic. Harris Teeter will operate as a subsidiary of Kroger but maintain much of its executive team. Analysts expect the deal to add $0.06 to $0.09 a share to this company's earnings in the first full year following the merger, which is expected to close sometime this quarter.
On top of this, the analyst community has been steadily revising up this year and next year's earnings estimates for Kroger. The fact that analysts can't get a solid grip on Kroger's earnings potential suggests that the company will continue to surprise analysts at earnings time. So I'm telling my Blue Chip Growth readers to add this stock immediately because it won't be long before it takes off.
Top Auto Stock for 2014
Next up is Magna International Inc. (MGA), which just so happens to be a leading supplier to the auto industry. From vehicle engineering and assembly to production of exterior trim and building interior door panels, this company has it covered. Fiat—including Chrysler and Dodge—Ford and General Motors are all long-time clients of this up-and-comer. Now is a great time to buy because this auto parts maker is still flying under the radar of many investors.
But I don't expect this stock to remain a secret for long. First, Magna International is cash rich and using its cash hoard to reward shareholders. It boasts a strong dividend track record—in the past five years it has hiked up its quarterly payment by 78%. The company is also in the middle of a 12 million share repurchase program, which ends in November.
And then there's profit potential. This Magna International is benefitting from all the outsourcing and just-in-time manufacturing demands on the auto industry. And while it is based in Canada, it's a global company that is largely immune to currency valuations that would otherwise hurt its competitiveness. That's because it has the ability to transplant its manufacturing operators to the most competitive countries.
For now, the stock remains a steal, but I look for it to blast away analyst estimates in the coming months. Consider this: The analyst community has hiked up this year's EPS consensus estimate $0.26 to $6.20 per share, representing 8% annual earnings growth. Looking ahead to 2014, that estimate more than doubles to 19% forecast earnings growth!
Top Technology Stock for 2014
Chances are that you know the story behind Yahoo! Inc. (YHOO) already. With nearly 12,000 employees and operations in 25 countries, Yahoo is widely recognized for its web portal, search engine and email service.
This stock is a testament to how quickly new opportunities can open up in the tech sector. That's because it is more than just a comeback story–it's a Hail Mary. Or perhaps I should say Hail Mayer. That's because Yahoo's star quarterback, so to speak, is CEO Marissa Mayer. As you probably know, Mayer took the helm of the struggling internet company in 2012, and has since overhauled it. Mayer's vision comes in several parts. First, she aims to make the company's online services more engaging and user-friendly in order to boost web surfers' duration and frequency of visits. This in turn drives more advertising revenue.
Mayer has also recast Yahoo's services so they are better suited for smartphone and tablet users. As part of this makeover under Mayer, Yahoo has redesigned its home page, email service and Flickr photo-sharing service. In a bid to be more mobile-friendly, Yahoo has also been snapping up app developers and start-up internet companies like Tumblr and Rockmelt. Through this buying spree, Yahoo has amassed a team of engineers with expertise in mobile applications and social networking.
The company even redesigned its iconic purple logo–which had been used since 1995.
Initiatives like this helped the company beat sales and earnings expectations in the third quarter. And analysts are calling for double-digit earnings growth in 2014. Analysts expect Yahoo's 24% stake in Chinese e-commerce giant Alibaba Group and Yahoo Japan to bolster the company's performance next year.
Top Energy Stock for 2014
Oil companies are finding it increasingly difficult to extract gas from traditional deposits and are now being forced to look to alternative sources and methods of extraction. And Core Laboratories (CLB) is a Netherlands-based company that provides the technology that oil producers use to develop their oil and gas properties–including reservoir description, production enhancement and reservoir management services. Here's a quick rundown of those services:
The company's reservoir description services comprise the characterization of petroleum reservoir rock, fluid and gas samples; and provision of analytical and field services to characterize properties of crude oil and petroleum products.
Its production enhancement products and services relate to reservoir well completions, perforations, stimulations and production, as well as include integrated services to evaluate the effectiveness of well completions and to develop solutions to increase the effectiveness of enhanced oil recovery projects.
Core Laboratories' reservoir management services consist of the combination and integration of information from reservoir description and production enhancement services to increase production and enhance recovery of oil and gas from clients' reservoirs.
It's clear that CLB is a solid play on the energy market. And given that this company's services are in such demand, it's small wonder that Core Laboratories is expected to post upwards of 10% sales growth and 17% earnings growth next year.
Top Business Services Stock for 2014
My next recommendation for the New Year is FleetCor (FLT). This company operates in a niche market with tremendous profit potential: fuel cards. FleetCor is best known for providing payment processing services and private label fuel credit cards to gas station operators and owners of vehicle fleets. In addition to fleet cards, the company's other payment products include food cards and corporate lodging discount cards. Currently, FleetCor serves over half a million commercial accounts, covering millions of cardholders across North America, Europe, Africa and Asia. Last year alone, the company processed nearly 304 million transactions.
Lately FleetCor has been on a buying spree. Recently, the company agreed to buy out Telenav's mobile business–an operation that serves 8,000 business clients by tracking the location of mobile workers in field-based businesses. FleetCor aims to adopt the business to add value to its ongoing fuel card programs. More recently, FleetCor scooped up GE Capital Australia's fuel card business. GE Capital's Fleet Card is currently accepted at 6,000 fuel outlets and 7,000 automotive service centers across the country. This deal is expected to add $0.03 per share to FleetCor's earnings this year.
And I wouldn't be even mentioning this company unless its earnings prospects were strong. This year FleetCor is expected to post 31% annual earnings growth and 22% sales growth. And for 2014, it's double-digit sales and earnings growth as far as the eye can see.
Top Entertainment Stock for 2014
Melco Crown (MPEL) knows how to get people to spend money. The company owns and develops casinos and resorts in Macau, a region located on the southeast tip of China.
The company is known for operating the City of Dreams, an integrated casino resort with 1,400 guest rooms and 450 gaming tables. As one of the three largest casinos in land-locked Macau, the City of Dreams has been a big success since opening six years ago. On top of this, the company operates Altira Macau (formerly the Crown Macau), a resort that features some 170 tables and a luxury hotel with about 200 deluxe rooms.
The company also has several other casinos operating in Macau under the Mocha Clubs brand, which primarily features gaming machines. If you're a gambler, you want to go to Macau and you want to do it at a Melco Crown facility.
Now, what's special about Macau is that it is the only place in the whole of China where it is legal to gamble in a casino. This means that Macau has a virtual monopoly on satisfying the gaming needs of the 1.3 billion people in China, a fact that is translating into tremendous top-line growth. Located just an hour away from Hong Kong by ferry, Macau officially overtook the Las Vegas Strip as the largest gaming market seven years ago.
This is all great for Melco Crown. For 2014, Melco Crown is expected to post nearly 11% annual sales growth and 27% earnings growth. When it comes to MPEL shareholders, the odds are stacked in our favor.
Top Consumer Staples Stock for 2014
Ecolab (ECL) has a squeaky clean reputation. What began as an onsite carpet cleaning business in 1923 has grown into a global industry leader with 40,000 employees and customers across 160 countries. What sets Ecolab apart from the competition is the breadth of its cleanings product business: Ecolab serves a wide range of clients in foodservice, healthcare, lodging and energy.
Whether its facility cleaning, equipment care, pest elimination or water safety, Ecolab has it covered. That's because Ecolab employs some of the brightest scientific minds in the business to come up with new solutions. With a staff of 1,600 scientists working at 16 research and development (R&D) facilities, Ecolab is on the cutting edge of everything from oil and gas process technology to antimicrobial science to water chemistry. Last year alone, the company invested $183 million in R&D. So it's small wonder that Ecolab has made Forbes magazine's list of "The World's Most Innovative Companies" ever since the annual ranking began in 2011.
This company has a pulse on what companies and organizations need, and this translates into strong sales and earnings potential. The company is primed to post double-digit top- and bottom-line growth through the end of next year.
Top Generic Drug Stock for 2014
Actavis Plc. (ACT) is one of the world's largest generic drugmakers. With a portfolio of more than 750 pharmaceutical products, Actavis has its name on everything from antibiotics to contraceptives to smoking-cessation treatments. ACT operates in more than 60 countries and out-licenses generic products in more than 100 countries, so it is a direct beneficiary of the falling dollar.
What really caught my eye about Actavis is its work on biosimilars – generic versions of biologic drugs. Biologic drugs are at the cutting edge of modern medicine, so many treatments run at tens of thousands of dollars. Generic biosimilars are potentially cheaper, and to date they're not available in the U.S. Thus, right now there is a race between biotechs to develop and get their biosimilars approved. Considering that the global market for biosimilars is forecast to be between $10 billion to $20 billion by 2020, this is a lucrative opportunity.
Actavis is based in Dublin, Ireland. For the better part of the past three decades, Actavis (formerly known as Watson Pharmaceuticals) was headquartered in the United States. But just a few months ago, the company acquired Warner Chilcott and took advantage of the $8.5 billion deal to make the leap across the pond.
With Warner Chilcott now under the Actavis umbrella, the company has increased expertise in gastroenterology and dermatology. And now that the company is based in Ireland, Actavis will pay lower taxes. In fact, management estimates that the deal will add a sizable 30% to earnings per share in 2014.
The new Actavis Plc is a company that dominates the global market for generic drugs – taking in $11 billion in annual sales – and enjoys tremendous tax savings by being based in Ireland. All this makes ACT an excellent drug stock for 2014.