2010 Stock Picks

As a follow up to last year’s contest for the four best stock picks over a full calendar year, I’m honored to join the same group of other financial bloggers in a friendly contest for the top stock picks of 2010.  We all agreed to post our four best ETF and/or stocks picks and track them throughout the year with quarterly updates.   The difference this year is that we’re including dividends with our returns which we didn’t do last year for some reason.

Before getting to my stock picks I have to admit that I’m starting the year a less bullish and maybe even a little bearish in the near term.  I’d like to see a little correction again before jumping in fully with all of these great stock picks, but that’s not how the contest works.  We play by the calendar, not by timing the trend lines and moving averages like I like to incorporate into my real investments.  I think we’ll get at least a 10% correction (maybe it’s already started) in Q1 and then more investors will come off the benches and enter the playing field again to help this rally continue.  I’m still mostly in cash as 2010 begins, but the contest must go on.

My top stock picks for 2010 in no particular order are UUP, DVY, UCO and SSO.  I’m choosing my best picks a little differently this year.  Actually, I have no individual stocks picked for 2010.  All of my choices are ETFs.  I changed my strategy for two reasons.  First, I think these are all good picks.  Second, I don’t want a repeat of last year where I finish the contest second from the bottom, so I’m not shooting for the moon with any of these.

  • UUP – Closed 12/31/09 at $23.08.  I’m calling for a stronger dollar in 2010 and the most pure play way in ETF form to chase that is with the ETF UUP.  Some of my next picks could have a harder time with a stronger dollar, so this is somewhat of a hedge on those.  I think we could see a year when the dollar could improve at the same time as the following picks improving too.
  • DVY – Closed 12/31/09 at $43.91.  Since we changed the rules of our contest to include dividends in our overall performance I felt it only logical to have a dividend focused ETF in my top picks of the year. The iShares Dow Jones Select Dividend Index yields 4.16% and has some more room for growth with a P/E ratio of 14.68 as of the end of 2009 (that’s less than the Dow Jones and S&P 500 P/E ratios).  Without the expectation of a huge up year, dividends should be more important in 2010.
  • UCO – Closed 12/31/09 at $12.68.  The demand for oil should improve with my expectation for an improving economy.  As jobs return, more cars hit the road and more people buy goods which require higher transportation costs.  It all adds up to more oil used which pushes prices higher.  I chose the double the index ETF to try to capitalize on the increase in prices.  I expect it to be a bumpy road, but by December 31, 2010 oil will be higher than it is today.  USO was my top ETF pick from 2009 and since I think oil prices will continue to climb I’m going with the more volatile ETF in 2010.
  • SSO – Closed 12/31/09 at $38.24.  I expect a positive year for the markets again in 2010 (with a correction or two in the mix) and on a broad basis I like to use the S&P 500 as my benchmark.  With that in mind, I’m targeting the ETF that attempts to double the daily return of the index.  With the focus for the ETF on daily returns, it does not necessarily mean SSO would be double the index over a full year, but it should have better gains in good years and worse losses in bad years.  Admittedly, this pick isn’t too insightful, but if the goal is to beat the average, this one should be a winner, as it was in 2009.  I thought about using SPY instead, but with my competition being so tough I wanted to push for a little extra.  With up to 47% of S&P 500 companies’ earnings coming from overseas, the dollar’s strength (or lack thereof) could be a big factor for SSO.

Last year I was didn’t start the contest with enough respect for my competitors.  If history repeats, some real gems are to be found on the sites below.  Expect to see me selling options on many of their ideas through 2010. You can see the other financial bloggers’ top stock picks at the following sites:

« « 2009 Stock Picks – End of Year Review - | - Year End Account Summary – 2009 » »

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  1. Comment by Matt SF

    I like the picks… especially the UUP.

    But don’t you think it’s risky to hold two LETFs since they yield *just* the daily 2x return? I know LETFs work well in an uptrend, but if the market goes sideways, the ups and downs of daily compounding returns could work against the owner.

    Please note that I’m not being confrontational, just curious.

  2. Comment by Alex Fotopoulos

    Matt, You are correct about the risk with leveraged ETFs, but this is just a *fun* contest, so I’m pushing for a little extra. I was very tempted to go with USO and SPY instead of both of those LETFs, but since there’s no money on the line I opted for the riskier picks. I expect a lot of sideways movement in 2010 with at least one decent correction, maybe two thrown in. If I’m right I picked poorly. As I said at the beginning though, in real life I wouldn’t buy these yet.

    I didn’t take this as confrontational – constructive comments are always welcome.

  3. Comment by Bryan D.

    RHIE is a definite buy in my opinion.

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