Stockpickr: How to Win a Stock-Picking Contest

If you want credit quality in your portfolio, then you should go with U.S. Bancorp(USB Quote - Cramer on USB - Stock Picks), which is one of Warren Buffett's new holdings. The company's credit quality actually went up quarter over quarter, despite the housing bust.

Perhaps shares of U.S. Bancorp will go up 100% as well, but I bet Accredited Home is more likely to see that kind of increase. Shares of Accredited Home are trading near $16, on a quick move down from $60.

Hedge fund Second Curve Capital, run by Tom Brown -- a top portfolio manager for investment guru Julian Robertson before Robertson retired -- has a large stake in Accredited Home. Second Curve is getting destroyed by the media of late, but like many things, it's not as bad as it seems. The fund was up 60% last year; now it's down about 10%. That's pretty bad, but it's had periods like that before and has been able to recover.

Second Curve specializes in specialty finance, and lending to subprime borrowers is considered a specialty. The fund has come out and said that it stands behind these lenders and is not bailing. I would argue that all of the stocks in the Second Curve portfolio are for sale now.

Another interesting name to own in a stock-picking contest is Crystallex(KRY Quote - Cramer on KRY - Stock Picks), which engages in the mining and processing of gold, primarily in Venezuela. The stock has been hit hard ever since Venezuela decided to start nationalizing oil interests, although it's worth noting that President Hugo Chavez has said nothing about gold companies. As long as a company is producing gold, the general theory is that Chavez will leave it alone.

Something else worth noting about Crystallex is that is a Canadian company, not an American company. I don't have much experience in these matters, but my lawyer happens to own part of a gold company in Venezuela that's right next to some of the Crystallex properties, and he doesn't seem worried.

When you want to win a contest, you don't have to care about how the company is going to do in 2010. You only need to find beaten-down companies that have a chance at seeing good news, causing a 100% pop.

Crystallex (KRY)

Jennison Natural Resources holds shares of this stock. The fund is up an annualized 32% per year over the past three years. Let it worry about the nationalization risk; you just want to win a contest.

We will update our contest stocks portfolio on a regular basis, most likely every day. To be notified when the portfolio is updated, just bookmark it by rating it with four stars. Again, the purpose of this portfolio is not to produce winners in every stock but to find stocks that have the most potential for an explosive move upward. Other portfolios worth looking at include stocks with unusual options activity and stocks at their 52-week lows.

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