Ten Stocks for 2009

After taking a little holiday inspired break from Prudent Speculations, I have decided to rededicate myself as there are simply too many interesting things going on in the markets to stand idly by on the sidelines.  Given how awful 2008 was, 2009 should be better as I doubt we can go any lower then the November lows that were set late last year.  I still believe that when invested in the right companies investors should be able to beat the market.  Below, I have compiled a list of some of the most interesting stocks for 2009 that I put together before the New Year but that I am just now getting around to posting here on the blog.       

1. Allied Irish Bank (AIB)

An Irish bank with significant overseas assets in Eastern Europe, the U.K. and the U.S, when these assets are coupled with the company’s strong position in Ireland, the stock has a strong risk/return ratio going forward.  The bank has been battered by financial market turmoil but the bank’s balance sheet appears to be in decent shape relative to its Irish peers.  With newly added capital, Allied Irish should be able to hold onto its international divisions making it a rising international banking star.  

2. CapitalSource (CSE)

One of the more fascinating financial plays, this former MREIT acquired a California state industrial bank this last summer, securing a funding source that it can control.  The company has some of the highest capital ratios out there and limited exposure to the California residential mortgage market.  As the company begins funding an increasing number of loans through its deposits as opposed to its credit lines, the company should see a dramatic decline in its funding costs.  The bank’s large net interest margins will most likely become the stuff of legends, as its competitors will be unable to match its strong corporate client list. 

3. The Bancorp (TBBK)

A Philadelphia bank with innovative deposit gathering techniques, strong management and capital ratios and a new subsidiary that will be taken public in the near future with a mandate to acquire other bank’s payment processing and technological infrastructures.   

4. Dow Chemical (DOW)

With commodity prices declining, Dow’s costs have declined significantly.  Given these declines, the company should be able to overcome any significant demand destruction that occurs during the recession.  The stock’s recent decline should be alleviated by a new partner to replace the Kuwaitis and a lower offer for Rohm & Hass.  

5. The Phoenix Companies (PNX)

An Insurance company and asset manager that is currently engaged in a restructuring that will result in a spin off of the company’s asset management division.  This spin off should create immense value for shareholders and leave them with two companies that would both be ideal to own.   

6. Rambus (RMBS)

I have been a longtime holder of the company and it finally appears that the patience that I have had with it is finally going to be rewarded.  The company’s ability to defend its patents are going to dictate its future; however, substantial rulings against Hynix and Samsung should be handed down before a large patent trial commences in late January.  I believe that the trial will amount to little, as the cartel lined up against Rambus will begin to settle over the next two weeks causing the stock to rocket higher.  Given that the company is on the verge of a massive multi-billion dollar patent settlement with the world’s largest semiconductor companies, its current price is appalling and it likely represents the buy of the year.

7. 21^st Century Holding Co. (TCHC)

A Florida insurer that should benefit from the dismantling of Florida’s state run insurance company and a general rise in rates.  The company is cheap on all levels and a new management team appears to be running the company in a manner that allows one to realize how poor the prior management team truly was.   

8. Chesapeake Energy Corporation (CHK)

Chesapeake’s large debt load, attractive properties and cheap valuation make it a definitive buyout target for any major produce looking to replenish dwindling reserves. 

9. Sprint Nextel Corp. (S)

A Kansas City telecom giant trading at a relatively cheap valuation when compared with its peers, assuming the level of its customer defection has peaked.  The company’s new management team appears to be making strong progress in turning around a long time laggard of the telecom industry. 

10. Lorillard Tobacco (LO)

Lorillard is the cheapest of the big tobacco companies with the ability to buyback a significant amount of stock and raise its dividend substantially.  In addition, it appears that the fear of a menthol ban is significantly overdone. 

Best of luck to all in 2009 and remember to watch for the next bubble as there is far to much money floating around the system for one not to develop.  My guess is that its going to show up in government bonds; however, should the economy continue to weaken all bets are off.