Nine Stocks to Watch in ’09

By Dave Dispennette, Founder of The Stock Playbook

Holding true to the optimism that only a New Year can bring, in the coming days you will likely see financial analysts across the country making predictions about their “best picks for 2009,” but before we get ahead of ourselves, let’s remind everyone of just a few of the recommendations made for 2008.  Last year at this time, a certain TV celebrity was calling for the Dow to hit 16,000 in 2008. Goldman Sachs said oil was on its way to $100, and they were right on, before they pushed their luck and started calling for it to hit $200.  Google was being upgraded by everyone on the street, and I can even remember a few calls for a $1,000 print for Google’s stock before 2008’s end.  Gold was supposed to be $2,000.  Apple was headed to $300, Potash was supposed to hit $400 and First Solar was going to be a $50 billion company. 

You get the point, so now I’ll make mine.  It is difficult to know what awaits us in the stock market over the next week, let alone the next year.  Sure, there are technical indicators and historical trends we can use as a guide, but if 2008 taught us anything, it was that we couldn’t have predicted just how volatile the market would become.  All of that being said, let me just caution you to tread lightly with these “Top Stocks for 2009” lists.  Do your homework on the company and stay on top of its performance and company news as the year progresses.

As a financial advisor, I would be remise if I didn’t share some of the positions I have my eye on as we head into the New Year.  The following ideas look good today and are poised to move in 2009 if the market cooperates and there is the rub, but remember, you need a market that is trending higher to buy and hold stocks, and we haven’t had a market like that for some time now.  We may be getting close though, and if so, here are my nine ideas for 2009.

Green Mountain Coffee Roasters (GMCR) distributes coffees and teas, single cup brewers and single cup portion packs to supermarkets and food stores.  As consumers tighten their belt and stop paying $6 for a coffee at Starbucks, they are moving toward Green Mountain, and the stock is poised to become a household name by the end of 2009.

Greatbatch (GB) develops electrical and power sources for implantable medical devices such as pacemakers and neurostimulators.  Quality Systems (QSII) develops healthcare practice and electronic records management software applications for medical and dental practices.  Almost Family (AFAM) provides in-home nursing services and personal custodial care for recuperating and disabled patients.  With the Obama administration’s attention to Healthcare and push for electronic medical records, all three of these companies stand to benefit from the incoming administration.

Oil prices have fallen over $100 a barrel over the last few months, and many have already forgotten about $4 a gallon gasoline prices.  Yet, I continue to keep my eyes peeled on two of my favorite alternative energy plays.  Fuel Systems Solutions (FSYS) manufactures alternative fuel components used in engines for the industrial, transportation and power generation industries.  Energy Conversion Devices (ENER) is engaged in the design, manufacturing and sale of photovoltaic products for alternative energy markets and is my favorite play on alternative energy.

There will always be an asset bubble somewhere.  Whether it’s the tulip craze centuries ago or internet stocks and real estate prices more recently, people will always be in search of the next big idea.  The next bandwagon may just be for those who facilitate life settlement transactions worldwide and my way of playing this trend will be to invest in Life Partners Holdings (LPHI), the architect of these life settlements.  We all will die some day, this is inevitable, and LPHI is finding a way to capitalize on this never-ending trend.  They buy existing life insurance policies from people who are terminally ill or elderly and need cash.  The price of the policy is negotiated at a discount to the face value, and then LPHI is paid in full under the policy upon that person’s death. 

ETF’s have come a long way in helping the individual investor play certain trends, and a couple I’ve been watching include Proshares Ultra Financials (UYG) and Ishares Xinhua China (FXI).  Our government has made it clear that they don’t plan on allowing our financial system to fail, so I’ll use UYG as my way to play Citigroup, JP Morgan, Wells Fargo and the rest of the financials.  FXI is my vehicle of choice to play a potential bottom in China.

The market is an ever changing beast that gives and takes at will.  Based on my experience and all of the technical information available, I believe these nine ideas will make money as we cross the threshold into 2009, but remember, it is impossible for me or anyone out there to see into the future.  If one of these ideas strikes your fancy, invest, but make sure you have an exit plan in place, especially on the downside.  Holding onto a losing position is what ultimately trips up both the professional and novice investor, so consider making “managing your loses” a New Year’s resolution you plan to keep. 

Dave Dispennette is the founder of The Stock Playbook, a do-it-yourself investment advisory service that boasts a 48% average annual return for its portfolio over the last five years.  Dave’s professional career represents over 20 years of experience with some of the biggest firms on Wall Street.  To see his latest stock recommendations, visit www.thestockplaybook.com .