Five Stocks for 2008 and Beyond

I manage a sector-focused mutual fund that covers the alcoholic beverages, tobacco, gaming and aerospace-and-defense sectors. As the calendar gets ready to turn, here are five of my top picks for the coming year and beyond.

Altria Group (MO - commentary - Cramer's Take): Besides a strong operating environment in Altria's tobacco businesses, a vastly improved legal environment and tremendous cost-cutting opportunities, further shareholder-friendly actions are coming through the spinoff of the company's international tobacco business, releveraging of the balance sheets at both domestic and international entities and combined stock buybacks to the tune of $30 billion to $40 billion.

Carolina Group (CG - commentary - Cramer's Take): As I wrote on Wednesday, Lorillard is the most profitable U.S. cigarette company, with above-average earnings growth, and its core Newport brand -- the menthol leader -- is enjoying increasing volumes, while overall industry volumes are in steady decline.

In June, Lorillard will be spun out from Loews. As a result, the tracking-stock discount will disappear, and the company will have newfound freedom to use its balance sheet to buy back stock and possibly participate in industry consolidation. The dividend is also likely to increase.

MGM Mirage (MGM - commentary - Cramer's Take): MGM offers the best exposure to the growth in Vegas. Around 80% of the company's total EBITDA comes from the Vegas Strip, and by selling half of CityCenter, the company reduced the development risk on the largest-scale project Las Vegas has ever seen.

Beyond Vegas, MGM's foray into Macau is a 50% joint venture, so it could be considered a lower-risk way to play the growth in Macau. I believe the mid-$80s to be a floor; Dubai World has been a buyer at $84, and the company is aggressively buying back stock.

International Game Technology (IGT - commentary - Cramer's Take): IGT should benefit from the confluence of two major events: new or expanded markets both domestically and internationally, and the forthcoming monster replacement cycle driven by server-based gaming.

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At time of publication, Norton's fund was long Altria, Carolina Group, MGM Mirage, International Game Technology and Diageo, though positions may change at any time.

Charles L. Norton, CFA is a principal of GNI Capital, an equity long/short money management firm that provides investment management services to institutional clients including mutual fund sponsors, trust companies, investment advisory firms, corporate retirement plans and family offices. Mr. Norton is responsible for portfolio management and investment research for all of the company's managed assets, including the Vice Fund (VICEX) and the Generation Wave Growth Fund (GWGFX). Previously, Mr. Norton had been a vice president in the equity research department of a New York-based hedge fund, where he also managed separate long/short equity accounts. Prior to his experience on the buy side, he was an investment banking analyst at Smith Barney. He has a bachelor of science in management degree in finance from Tulane University's A.B. Freeman School of Business, and is a CFA charterholder. He is a member of the CFA Institute and the CFA Society of Dallas-Fort Worth. While Mr. Norton cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.