Top 10 Warren Buffett Companies To Watch For 2014

 There are times, dear friend, when it pays to be a "pig." Today, I'll explore the idea with you. But... a word of particular warning before you begin reading...

 

I'm about to write about doing something dangerous... Something you probably already do (and you shouldn't). And I'm about to encourage you to do it more often. For lots of you now reading, this advice will almost surely prove to be catastrophic.

 

And so, if you don't have at least five years of successful investing under your belt – that is, five years of profitable, safe investing – just stop reading right now. This is not for inexperienced investors. It is not for anyone who hasn't mastered the emotions of trading. And it is emphatically not for anyone who is just a gambler at heart.

 

With that warning... let me show you how you can make a fortune, from time to time, in the markets.

 

 The most obvious difference between the average "at home gambler" and the average professional investor is position sizing. The professional is never, ever a pig. That is, professional investors never allow themselves to build huge positions – not even in their best ideas. They would never pile 20% of their portfolios into a single idea. They know there are too many things that can go wrong, factors that are impossible to foresee.

 

As a result, professionals always diversify their equity portfolios. The most focused professional investors will usually have at least 20 different positions. Meanwhile, the most diversified individual investors rarely have more than 20 different positions. Thus, individual investors are sometimes "pigs" – overloaded into an idea – without even knowing it.

 

 We consistently remind our readers not to put more than 4% or 5% of their portfolios into any single security. We might as well be talking to a tree. No one listens to us. Not until they've taken a beating once or twice. Not until they realize there's just too much volatility in the market to survive holding onto a 10% or 20% weighted position. But from time to time... we do advocate being a pig. In fact, I'd argue that if you want to make a lot of money in stocks in any given year (more than 10% or 12%), you have to be a pig sooner or later.

 

 What's a pig? In 1988, legendary investor Warren Buffett bought 7% of Coca-Cola. The position made up 35% of Buffett's entire portfolio. That's a big, determined bet... that had better pay off.

 

Buffett, of course, knew what he was doing. He had studied the company for nearly 40 years. He knew it was one of the greatest businesses the world had ever seen. And he knew why the business was so great: the company sold sugary syrup at a huge markup, to fanatical customers, via bottlers who shouldered almost all the real capital costs. Coke is a study in capital efficiency.

 

 To be a successful pig, you have to know the investment inside and out. And it has to be trading at a price that's so extremely cheap, there's no way you can possibly get hurt buying it. (The stock market crash of 1987 allowed Buffett to begin building his position in Coke, a stock he'd wanted to buy for years.) You can't go looking for something to pig out on... it has to be so big, so obvious and so well-known, you literally couldn't miss it. Let me give you an example...

 

 I've been studying the oil and gas industry closely since the mid-2000s because I believed natural gas prices trading above $15 per thousand cubic feet (mcf) represented a massive bubble.

 

Likewise, I thought West Texas Intermediate (WTI) oil prices – the benchmark for U.S. oil – trading above $100 a barrel made no sense from a fundamental standpoint. I also knew that the theory driving these bubbles forward (Peak Oil) was nonsense. Anyone studying the data of oil and gas production could have seen this, too. Simply put, production rates were not falling the way geophysicist M. King Hubbard predicted they would.

 

I famously told a room full of energy investors in March 2009 that anyone who was still long natural gas "should have their heads examined." (I even won a bet with master resource investor Rick Rule about whether or not prices would go below $3 per mcf. They did.) And I told a group of oil investors last spring that anyone still long oil was "screwed." (No, oil hasn't collapsed to below $60 a barrel yet, but trust me... it will.)

 

 Following the natural gas market from the peak of the cycle all the way to the bottom allowed me to see clearly that prices for natural gas had bottomed last spring. As I wrote a year ago in my Investment Advisory...

 

As you probably know, natural gas now trades for less than $2 per mcf, a price that's lost all relationship with its utility in the world's economy. There's no reasonable fundamental explanation for the size of the spread between oil prices and natural gas prices. Natural gas is trading at the lowest price I've ever seen compared to the price of oil.

Top 10 Warren Buffett Companies To Watch For 2014: New Oriental Education & Technology Group Inc.(EDU)

New Oriental Education & Technology Group Inc. provides private educational services primarily in the People?s Republic of China. It offers a range of educational programs, services, and products consisting primarily of English and other foreign language training; test preparation courses for admissions and assessment tests; primary and secondary school education; development and distribution of educational content; software and other technology; and online education. The company?s language training courses primarily consist of various types of English language training courses, and other foreign languages, including German, Japanese, French, Korean, and Spanish. It offers test preparation courses for language and entrance exams used by educational institutions in the United States, the People?s Republic of China, and commonwealth countries. The company also operates primary and secondary schools in Yangzhou. In addition, New Oriental Education & Technology Group Inc. deve lops and edits content for educational materials for language training and test preparation, such as books, software, CD-ROMs, magazines, and other periodicals. It distributes these materials through various distribution channels consisting of own classrooms and bookstores, as well as third-party distributors. Further, the company offers various online education programs on its Web site, koolearn.com. Additionally, it provides consulting services to help students through the application and admission process for overseas educational institutions, as well as post-secondary educational programs to help students seek career opportunities; and operates two pre-schools. The company offers educational services under the ?New Oriental? brand name. As of May 31, 2010, it offered education programs, services, and products through a network of 48 schools, 319 learning centers, and 25 bookstores. The company was founded in 1993 and is headquartered in Beijing, the People?s Republic of China.

Advisors' Opinion:

• [By Robert Hsu]

  The company will change the ratio of its shares on August 18—essentially the same thing as a four-for-one split. So, if EDU is trading at $120, shareholders will receive four shares worth $30 each.

  As I’ve mentioned, I think the stock split is bullish for stock performance, because more small retail investors may be interested in purchasing EDU stock at the lower price.

  A good example of this stock split effect is Baidu. Baidu did a 10-for-1 split last year when the share price was around $800. Since then, Baidu’s price has almost doubled! EDU is a buy.

• [By Kevin1977]

  The demand for English-language education is particularly strong in China right now, and people are willing to pay a lot of money for training that will enable them to communicate and conduct business globally. As China’s largest private education services company, New Oriental Education & Technology (EDU) is the way to play this powerful trend.

• [By James K. Glassman]

   New Oriental Education & Technology Group (symbol: EDU), which I recommended for 2010, gained a lovely 48% over the following 12 months. For the past year, however, New Oriental -- which dominates the market for private educational services in China (55 schools and 726 learning centers) -- has taken a dive, as have many Chinese stocks. It's now close to its early-2010 price, even though revenues have doubled.

Top 10 Warren Buffett Companies To Watch For 2014: Micron Technology Inc.(MU)

Micron Technology, Inc., together with its subsidiaries, engages in the manufacture and marketing of semiconductor devices worldwide. Its products include dynamic random access memory (DRAM) products that provide data storage and retrieval, which include DDR2 and DDR3; and other specialty DRAM memory products, including DDR, SDRAM, DDR and DDR2 mobile low power DRAM, pseudo-static RAM, and reduced latency DRAM. The company also offers NAND flash memory products, which are electrically re-writeable and non-volatile semiconductor devices that retain content when power is turned off. In addition, it provides NOR flash memory products that are electrically re-writeable and non-volatile semiconductor memory devices; phase change memory products; and image sensor products. Micron Technology?s products are used in a range of electronic applications, including personal computers, workstations, network servers, mobile phones, flash memory cards, USB storage devices, digital still c ameras, MP3/4 players, and in automotive applications. It sells its products to original equipment manufacturers and retailers through internal sales force, independent sales representatives, and distributors, as well as through a Web-based customer direct sales channel. The company was founded in 1978 and is headquartered in Boise, Idaho.

Advisors' Opinion:

• [By Jonas Elmerraji]

  Nearest Support: $10
  
  Catalyst: Technical Setup

   

  Micron Technology (MU) is unlike most of the high-volume names on our list today because it's not an earnings mover. Instead, this large-cap semiconductor stock is seeing huge trading activity thanks to a technical breakout in shares.

  Micron has spent the last few months consolidating sideways in a rectangle pattern with resistance at $10 and support at $9. That well-formed rectangle was providing investors with a chance for the stock to bleed off some overbought momentum after rallying more than 100% since the end of November. The breakout above $10 is a buy signal at this point.

• [By Fitz Gerald]  

  The company's management has indicated a positive and more-balanced DRAM and NAND flash demand/supply outlook for 2011. The company also indicated a more-resilient near-term business model with low exposure to the weak PC DRAM segment (25 percent of revenues).

  Micron also indicated strong demand for NAND flash and price reductions consistent with learning curve cost reductions. With many smartphone and iPad/new Web tablets ramping, Micron management expects the benign pricing environment for NAND flash to continue in 2012.

Top 5 Rising Stocks To Buy For 2014: Mohawk Industries Inc. (MHK)

Mohawk Industries, Inc., together with its subsidiaries, engages in the production and sale of floor covering products for residential and commercial applications primarily in the United States and Europe. The company operates through three segments: Mohawk, Dal-Tile, and Unilin. The Mohawk segment designs, manufactures, sources, distributes, and markets floor covering product lines, which include carpets, ceramic tiles, laminates, rugs, carpet pads, hardwood, and resilient. This segment offers its products under the brand names of Mohawk, Aladdin, Mohawk ColorCenters, Mohawk Floorscapes, Portico, Mohawk Home, Bigelow, Durkan, Horizon, Karastan, Lees, and Merit. In addition, this segment markets and distributes its soft and hard surface products through independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers, and commercial end users, as well as through private labeling programs. The Dal-Tile segment designs, manufactur es, sources, distributes, and markets a line of ceramic tile, porcelain tile, and natural stone products. This segment offers its products primarily under the Dal-Tile and American Olean brand names through company-owned service centers, independent distributors, home center retailers, tile and flooring retailers, and contractors. The Unilin segment offers laminate and hardwood flooring under the brand names of Quick-Step, Columbia Flooring, Century Flooring, and Universal Flooring through retailers, independent distributors, and home centers. This segment also produces roofing systems, insulation panels, and other wood products. Mohawk Industries, Inc. was founded in 1988 and is headquartered in Calhoun, Georgia.

Top 10 Warren Buffett Companies To Watch For 2014: TFS Financial Corporation(TFSL)

TFS Financial Corporation operates as a holding company for Third Federal Savings and Loan Association of Cleveland. The company provides retail consumer banking, including mortgage lending, deposit gathering, and other financial services in Ohio and Florida. Its deposit accounts consist of savings accounts, negotiable order of withdrawal accounts, certificates of deposit accounts, individual retirement accounts, and other qualified plan accounts. The company also offers residential real estate mortgage loans, home equity loans, lines of credit, residential construction loans, and consumer loans. It operates 39 full-service branches and 8 loan production offices. TFS Financial Corporation, through its subsidiary, Third Capital, Inc. engages in net lease transactions of commercial buildings; maintains minority investments in private equity funds, and provide escrow and settlement services; and reinsures private mortgage insurance on residential mortgage loans. The company w as founded in 1938 and is headquartered in Cleveland, Ohio.

Top 10 Warren Buffett Companies To Watch For 2014: Ishares Nasdaq Biotechnology (IBB.W)

iShares Nasdaq Biotechnology Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the NASDAQ Biotechnology Index (the Index). The Index consists of securities of NASDAQ-listed companies that are classified according to the Industry Classification Benchmark as either biotechnology or pharmaceuticals, and which also meet other eligibility criteria. The Index is one of the eight sub-indices of the NASDAQ Composite, which measures all common stocks listed on The NASDAQ Stock Market, Inc.

The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. The Fund�� investment advisor is Barclays Global Fund Advisors.

Top 10 Warren Buffett Companies To Watch For 2014: Fermiscan Holdings Ltd(FER.AX)

Fermiscan Holdings Limited focuses on the commercialization of Fermiscan Test, the non-invasive breast cancer screening test for women of all ages. Its Fermiscan Test is based on detecting change in the structure of hair by the X-ray diffraction technique using an intense X-ray beam generated from synchrotron. The company is headquartered in Sydney, Australia.

Top 10 Warren Buffett Companies To Watch For 2014: Aqua America Inc.(WTR)

Aqua America, Inc., through its subsidiaries, operates regulated utilities that provide water or wastewater services in the United States. The company serves residential, commercial, fire protection, industrial, and other water and wastewater customers in Pennsylvania, Texas, North Carolina, Ohio, Illinois, New Jersey, New York, Florida, Indiana, Virginia, Maine, Missouri, and Georgia. It also provides water and wastewater services through operating and maintenance contracts with municipal authorities and other parties, as well as sludge hauling, septage and grease services, and backflow prevention services. The company was formerly known as Philadelphia Suburban Corporation and changed its name to Aqua America, Inc. in 2004. Aqua America, Inc. was founded in 1968 and is based in Bryn Mawr, Pennsylvania.

Advisors' Opinion:

• [By Chuck]

  Private water utilities own only about 16% of the nation's water supply infrastructure. That leaves 84% of the nation's waterworks in the hands of America's cities and towns. The long-term trend in the water utility business will be toward their privatization, and Aqua America will continue to grow through smart acquisitions of mismanaged utilities, both public and private. You can see Aqua America's strong upward trend since the middle of June. After its breakout over its November 2008 highs, the next point of resistance is near $25 a share.

Top 10 Warren Buffett Companies To Watch For 2014: Kaminak Gold Corporation (KAM.V)

Kaminak Gold Corporation, an exploration stage company, focuses on the acquisition, exploration, and development of gold, and other precious and base metal properties in Canada and the United States. It primarily explores the Coffee Gold Project, a 150,000 acres property located in Yukon Territory, Canada. The company also holds interests in various other properties located in Quebec, Nunavut, Ontario, Yukon, British Columbia, and Manitoba, as well as in Nevada. Kaminak Gold Corporation was incorporated in 2005 and is headquartered in Vancouver, Canada.

Top 10 Warren Buffett Companies To Watch For 2014: August Metal Corporation (AGP.V)

August Metal Corporation, a development stage company, engages in the acquisition, exploration, and evaluation of mineral resource properties in Mexico. The company holds interest in the 16,310 hectare Las Lajas Gold Project, located in southern Sonora, Mexico, which contains precious and base metal deposits. It also holds interests in the Thurlow Property located on British Columbia�s southwestern coast near Phillips Arm; and the El Capitan Property and the Cottonwood Showing that are located in Vancouver Island. The company was formerly known as Cuda Capital Corp. and changed its name to August Metal Corporation in November 2009. August Metal Corporation was incorporated in 2006 and is based in Vancouver, Canada.

Top 10 Warren Buffett Companies To Watch For 2014: FuelCell Energy Inc.(FCEL)

FuelCell Energy, Inc., together with its subsidiaries, engages in the development, manufacturing, and sale of high temperature fuel cells for clean electric power generation primarily in South Korea, the United States, Germany, Canada, and Japan. The company offers proprietary carbonate Direct FuelCell Power Plants that electrochemically produce electricity from hydrocarbon fuels, such as natural gas and biogas. Its fuel cells operate on a range of hydrocarbon fuels, including natural gas, renewable biogas, propane, methanol, coal gas, and coal mine methane. The company also develops carbonate fuel cells, planar solid oxide fuel cell technology, and other fuel cell technologies. It provides its products to universities; manufacturers; mission critical institutions, such as correction facilities and government installations; hotels; and natural gas letdown stations, as well as to customers who use renewable biogas for fuel, including municipal water treatment facilities, br eweries, and food processors. The company was founded in 1969 and is headquartered in Danbury, Connecticut.

Advisors' Opinion:

• [By Roberto Pedone]

   Fuelcell Energy (FCEL) designs, manufactures, sells, installs and services ultra-clean, highly efficient stationary fuel cell power plants for distributed baseload power generation. This stock is trading up 7.2% to $1.01 in recent trading.

  Today’s Range: $0.94-$1.01

  52-Week Range: $0.83-$1.95

  Volume: 1.27 million

  Three-Month Average Volume: 1.04 million

  From a technical perspective, FCEL is ripping higher here right above its 50-day moving average of 92 cents per share with above-average volume. This move is quickly pushing shares of FCEL within range of triggering a near-term breakout trade. That trade will hit if FCEL manages to take out its 200-day moving average at $1.05 and then once it takes out more overhead resistance at $1.06 with high volume.

  Traders should now look for long-biased trades in FCEL as long as it’s trending above its 50-day at 92 cents per share, and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.04 million shares. If that breakout hits soon, then FCEL will set up to re-test or possibly take out its next major overhead resistance level at $1.18. Any high-volume move above $1.18 will then put $1.39 into range for shares of FCEL.