Saturday, February 18, 2012

Five Long Term Investment and 18 Trades


In an article recently published by Seeking Alpha a reader commented that a recommendation was better suited as a trade rather than a long term investment. I had expressed the same thoughts in the article by stressing that the stock required close monitoring and that the upside was limited. This exchange suggested to me that I could more clearly distinguish between my selections for long term investment and picks that are more suited to trading.

This first group of companies is suggested for the long term. Each of these companies exhibit strong operating results over the last five years. They grow earnings, free cash flow, sales and equity at a rate of at least seven percent. Analysts estimate earnings will grow at a minimum rate of seven percent over the next 3-5 years. Balance sheets appear solid with little or manageable levels of debt.


 
On the other hand, there are companies better suited to a more active trading profile. Each of the following companies generates plenty of free cash flow, is inexpensive based on enterprise value to EBITDA and is profitable. The companies are also showing signs of price momentum and are trading near their 52-week highs.


 
Lists such as these are just starting points for more detailed analysis and should not be taken as a recommendation. Due diligence is always required.

 
Disclosure: I have a long position in MDF and may initiate a position in other stocks mentioned here.
Seeking Alpha Certified