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Chris Katje's Top 10 Stock Picks For 2016 Part 1


CBS and Disney top media picks for the 2016 year.

Inventure Foods my top small cap stock pick for the year.

Grupo Aeroportuario del Sureste could benefit from airline growth in Mexico and new U.S air agreements.

Brookfield Infrastructure Partners a great high quality asset company with great dividend and steady growth.

My top ten stock picks for the year is an annual tradition that began here on Seeking Alpha back in 2009. Each year I pick ten stocks that I believe will outperform the market. I try to select stocks that are familiar and unfamiliar names for investors. I will check back with updates throughout the year on these selections as well. Here are my returns from the seven years of the list:

As you can see, 2015 was a year to forget as I produced my worst performance in this annual challenge. This also marked back to back losing years for the first time. My write-up on the reasons why the 2015 picks failed and what could be in their future will be written soon. Investing 10,000 in my ten stock picks every year and selling at the end of the year would now be worth $21,860. Despite the poor performance of 2015, my picks have averaged a gain of 18.7% annually.

Brookfield Infrastructure Partners (NYSE:BIP)

Start Price: $37.91

52 Week Range: $36.66 to $46.95

Top Three Reasons to Buy:

1. Strong dividend yield

2. Valuation near 52 week low

3. Company exploring new regions and segments

Brookfield Infrastructure Partners is the type of stock you put in your portfolio or retirement account and can forget about it for years. Along the way it appreciates and provides a great dividend yield. For the case of 2016, I think the dividend will rise providing a yield of close to 6%, and also think the stock is undervalued trading near its 52 week low. I'm not expecting a double or anything crazy here, but with the dividend factored in, think a yearly gain of 20 to 30% should be expected.

Brookfield Infrastructure is in the middle of trying to get a big acquisition accomplished. The company is trying to buy Asciano, a leading Australian port and railroad operator. The purchase price of $6.6 billion is more than the entire market capitalization of Brookfield Infrastructure. Under the terms of the buyout, Asciano would be 55% owned by Brookfield Infrastructure, 32% owned by Brookfield Asset Management (NYSE:BAM)(Brookfield's parent), and 22% owned by two institutions (11% ownership each).

In the third quarter, revenue declined 4.7% to $468 million. Earnings per share of $0.46 came in above consensus. The company's FFO (fund from operations) were a reported $0.91 vs. $0.85 a year ago. The increase came from the new communication infrastructure.

Brookfield Infrastructure plans on paying out 60 to 70% of its FFO annually. In 2014, the company reported FFO of $1.92. Since 2009, the FFO figure has risen at an annual rate of 12%. The company said back in October it was forecasting 11 to 13% distribution growth in 2016.

During an October investor presentation, the company's big focus was on its port and rail assets. The company has 30 bulk and container terminals in the port segment along with 1 landlord port. In the rail segment, the company has 10,000 kilometers of railroad track, 700 locomotives, 17,000 wagons, and 6 rail loading terminals in Australia and Brazil. A key figure from the presentation was the company's valuation of these assets. Based on recent acquisitions across the sector, the port assets would be valued at $1.2 to $1.5 billion. The company's rail assets would be valued at $4.1 to $4.6 billion. You can see how quickly the company might be undervalued with a sum of the parts valuation, given its $6 billion market capitalization.

Brookfield continues to diversify and acquire cheap assets to strengthen its position and also its FFO yield. The company acquired French telecom towers earlier in 2015 that helped boost the FFO. The company has singled out the Brazil crisis as an opportunity to buy premier assets cheaply. New offices have been opened in India, Mexico, and China. This should lead to further acquisitions and entries into new markets in the short term. The company highlighted North America as an opportunity market to grow in. New sectors of airports and water infrastructure were also mentioned.

Brookfield Infrastructure Partners was spinoff from Brookfield Asset Management back in 2008. At that time, the new company had five businesses and a market capitalization of $500 million. The diversification was only two sectors: utilities (54% of revenue) and timber (46%). Since that time, the company has now grown to be made up of 30 businesses, a market capitalization of $10.5 billion and better diversification. The revenue sector breakdown is now 30% utilities, 46% transportation, 17% energy, and 7% communications. These current figures include the pending Asciano acquisition.


Start Price: $47.13

52 Week Range: $38.51 to $63.95

Top Three Reasons to Buy

1. Super Bowl 50

2. Star Trek

3. Valuation

Shares of CBS are trading towards the low end of their 52 week range, making it one of the most attractive media stocks heading into 2016. CBS is a dominant leader in television with some of the top shows, and with the upcoming Super Bowl 50 and 50th Anniversary of Star Trek serving as additional catalysts, should be a top performing stock.

In 2015, CBS had five of the top ten watched shows in America. The Big Bang Theory ranked second 2ith 21.1 million viewers per episode and NCIS ranked third with 20.9 million viewers. The other CBS shows in the top ten were Thursday Night Football (#6), NCIS New Orleans (#7), and Blue Bloods (#9). CBS was the number one network for the 2015-2016 Primetime season.

The Super Bowl will be a huge catalyst for CBS, with advertising rates once again setting new records. Last year, 115.2 million people tuned in to the Super Bowl. For 2016, 30 second advertisements will cost $5 million, up from last year's $4.5 million cost. On the latest earnings call, the company said "Super Bowl sales are going extremely well" and said it was in fact receiving record pricing and only had a few units left.

Star Trek is going to be a catalyst in...