9 Best Stock Ideas For 2016: Deep Discounts For Income And Growth

I recently moderated a panel of four investment advisory editors at the American Association of Individual Investor's biennial member conference at Bally's Hotel in Las Vegas. The goal of the hour and fifteen minute discussion was "best strategies and picks" for 2016 and my panelists were: value investor John Buckingham, editor of The Prudent Speculator newsletter, Richard Lehmann, fixed-income columnist and editor of Forbes/Lehmann Income Securities Investor and Forbes ISA Closed End and ETF Report, Taesik Yoon, editor of Forbes Special Situation Survey and Forbes Investor, and John Dobosz, editor of Forbes Dividend Investor and Forbes Premium Income Report.

Not a single editor on my panel was overly concerned about the supposedly imminent Federal Reserve interest rate hike.  In fact Richard Lehmann, the panelist most focused on the yield curve, doesn't expect Yellen to raise Fed Funds at all in December. Yoon and Buckingham mentioned that they were hoping for a small rate hike, just so some uncertainty was removed from the market.

The discussion ranged from Fed policy, to the virtues of value investing  versus growth, biotech stocks, Apple Computer, which two panelists thought was a buy,  and Tesla, which no one thought was worth its current price.

On the question of the 2016 Presidential Election and its effect on the markets, three of the four panelists thought Hillary Clinton would be the likely victor and that historically speaking this would be good for stocks.  At my prodding Richard Lehmann reluctantly offered a wild theory he had whereby  Clinton would be forced to bow out paving the way for Vice President Joe Biden to make an end run as the Democratic nominee, ultimately facing Marco Rubio on the Republican side. Lehmann felt that opening an FBI investigation of Clinton a few months ago was an ominous sign, and that Hillary would ultimately be forced out of the race.

During the last 20 minutes of the discussion each of the investment advisors offered his two best ideas for 2016. Here they are:

John Buckingham, The Prudent Speculator,

Focus: Value Investing

Seagate Technologies (STX)

In a recent article on Forbes Buckingham cites Apple and Seagate as his two favorite tech stocks. During the panel he singled out Seagate, which along with Western Digital , is a major storage provider in the form of disk and solid state drives found in pc and mobile devices. Its stock is down 40% this year thanks to slower pc sales and increased competition. Still Buckingham likes its excellent balance sheet, dominant position in a critical business and its low PE and 6.5% dividend yield.

Ensco PLC (ESV)

Ensco is a large offshore oil and gas driller and like Seagate is unloved by investors these days, given the downturn in offshore drilling. Shares are down 56% in the last 12 months. The company is profitable and has an excellent fleet according to Buckingham as well as a $6.6 billion backlog. ESV trades at a rock bottom 7 times forward earnings and has a 3.3% dividend yield.

Taesik Yoon, Forbes Special Situation Survey, Forbes Investor

Focus: Growth and Value

Roadrunner Transportation Systems (RRTS)

During the discussion Yoon said it was astonishing how good companies were being brutally punished in this market .  Cudahy, Wisconsin Transportation and truckload logistics provider Roadrunner is down more than 50% year to date, in part due to weak earnings, but Yoon says its a screaming buy. "If you assume that profits fall another 15% next year before stabilizing, the company would still earn more than it did in 2010 and 2011—its first two years as a public company—by a wide margin. Yet in neither of those years did the stock trade below where it is right now. " The trades for less than 8 times Yoon's estimate for 2016 earnings.

Everi Holdings (EVRI)

Yoon cited Las Vegas based Everi as his "local hero" pick. The company makes slot machines and other electronic high def video based gambling games like "Yardbirds and Antony & Cleopatra."  It also is in the business of making the kiosks that provide cash to gamblers on the casino floor. Thus, Evri is about as pure a play in the ubiquity and growth of destination video game gambling, as it gets. A recent earnings slip caused its shares to fall 50%. The stock sells for 5 times Yoon's estimate for 2016 earnings.

Deckers Outdoor (DECK)

Deckers Outdoor is a treasure trove of strong casual footwear brands including UGG, Teva and Sanuk. The laid back Goleta, California company was originally founded by a UC Santa Barbara graduate in 1973, and continues to push a hippie vibe, that promotes surf culture, diversity and its considerable charitable endeavors. Unfortunately  Wall Street hasn't been very chill about its recent earnings and revenue weakness. The stock is off 36% year to date but Yoon sees growth ahead and loves it's debt free balance sheet, superb management and the fact that it sells for less than 10 times his estimate for 2016 earnings.

John Dobosz, Forbes Dividend Investor, Forbes Premium Income Report

Douglass Dynamics (PLOW)

Despite unseasonably warm weather hitting the Northeast and other parts of the country, Dobosz is pounding the table for this Milwaukee-based maker of snow plows. "Dividends are comfortably covered by cash flow and have plenty of room to rise from their current rate which yields 4.1%," he points out. "The company's share price rises and falls with levels of snowfall, so after years of holding this stock and pocketing those dividends, you could sell it some cold, snowy winter when you want to cash out."

International Business Machines (IBM)

Armonk, N.Y-based IBM has been around for more than a century and several times in its long history the company has been forced to make major changes to adapt to new market realities, most strikingly in the early 1990s when CEO Louis V. Gerstner transformed "Big Blue" from a purveyor of expensive computer hardware into a more services-based business. More than two decades later, IBM is undergoing painful transformation again as cloud-based businesses encroach on its traditional turf. "Having Warren Buffett as one of the company's major shareholders, and the rich 3.8% yield, provide confidence that IBM will successfully make necessary changes to right the ship once again," says Dobosz.

Richard Lehmann, Forbes Lehmann Income Securities Investor, Forbes ISA Closed End and ETF Report

Omega Healthcare Investors (OHI) 

Richard likes selected real estate investment trusts (REITs) and this one, focused on nursing homes, assisted living and independent living facilities-- some 900 facilities in 41 states-- has some pretty strong demographic wind at its back. The REIT is down about 6% year to date, but current buyers will be treated to a yield of 6.9%.

Energy Transfer Partners (ETP)

Lehmann loves master limited partnerships (MLPS), particularly midstream pipeline properties that carry natural gas. Lehmann believes natural gas-focused ETP is an example of the market acting irrationally over the dive in oil prices . Indeed Energy Transfer, which has a $21 billion market cap, off 35% so far this year, but the drop means that its current yield is a tax advantaged (because MLP's return capital via its dividend)  10%.