Stocks for the Buy-and-Hold Investor

MINNEAPOLIS (Stockpickr) -- Depending on your viewpoint, the market is either teetering on the brink of a potential collapse and correction or simply building a base for more gains. Knowing the outcome at this point in the game is a guess at best.

I can make a case for both. On one hand, a market that puts up a record gain for December is long due of a pause. On the other hand, stimulus, value vs. bonds, a strengthening job market, a more-optimistic consumer and impressive corporate earnings suggest that stocks are due for more gains.

These are very difficult circumstances for traders. In fact, the conditions are perfect for those patient investors who adhere to a buy-and-hold strategy. Ah yes, the same buy-and-hold strategy that has been so disastrous to investors over the last decade.

Hey, I'm open to giving any approach its due. The market is notorious for swinging from one extreme to another. Trading indeed has ruled the day for much of the past three years or more, but who is to say that trading makes the most sense at this very moment in time?

Related: 7 Big Brands, 7 Big Stocks

I'm not suggesting that trading is dead. Instead, investors might benefit from taking a break from the day-to-day or tick-by-tick action in the market. Give yourself a breather and let Mr. Market do whatever he is going to do in the short term.

If you have a portfolio, let current positions run. My guess is that you will end up wiser and richer for it down the road. In my opinion, letting your investments ripen now beats banging your head against the wall in search of clues on direction that cannot be found.

While we sit back and enjoy the show, here are some musings on 13 names that are on my radar due to recent news or active trading -- several of which strike me as strong buy-and-hold candidates.

Goldman Sachs ( GS): Signs of a market top: The king of deal-making is in the news with respect to its investment in Internet fad and social network king Facebook. It is interesting to note that one of the company's fund managers took a pass on the deal, citing that an investment in Facebook did not fit the investment strategy of the fund. Funny: Goldman will make a ton of money selling the deal to others, but the investment was not strong enough for its own proprietary product.

Major holders of Goldman include Bruce Berkowitz , whose portfolio at Fairholme Capital has 7.7% exposure to the stock as of the most recent reporting period, and Julian Robertson at Tiger Management, who increased his position by 34%. Roberto Pedone recently highlighted Goldman as one of his top bank stocks for 2011, and according to Dan Freed, it's one of 11 inflation-proof financial stocks.

Starbucks ( SBUX): The coffee shop purveyor is ditching its name in its logo. I don't know about you, but I know Starbucks the name, not Starbucks the logo. This move seems questionable at best but will have little impact on future value.

SAC Capital increased its position in Starbux by 919% in the most recent period, and Starbux comprises 4.7% of Mark Hillman's portfolio at Hillman Capital. Recently on "Mad Money," Jim Cramer flagged Starbux as one of several stocks with the most to gain from exposure to China, and it was one of Goldman Sachs' 10 best stock picks for 2011.

Gap ( GPS): Shares of the iconic retailer sank nearly 7% on Thursday after reporting a decline in same-store sales. I thought the holiday season was a plus for retailers, but apparently not all stores sell equally. Gap has struggled for years, and the brand may be tiring. If you needed an excuse to exit the name, this might have been it.

Richard Snow at Snow Capital owns Gap shares, and Jonas Elmerraji tapped it recently as a retail stock that could rally in 2011.

Citigroup ( C): The huge financial services firm weathered the financial crisis storm. Investors in this giant penny stock (according to the SEC, a penny stock is defined based on share price below $5 per share) have made a killing betting on the eventual recovery. Today banks are poised for profits with an upward sloping yield curve. Banks and big banks in particular make for great buy-and-hold investments.

Citi is a top holding of John Paulson, who has 7.2% exposure to the stock, and Bill Miller at Legg Mason, with 2% exposure. Cramer recently highlighted the stock as one of several big bank stocks with long legs, and it was on Sandler O'Neill's recent list of 5 popular financials that fit a rosy 2011.

Ford ( F): The recovery in the auto industry has been impressive. Ford's ability to avoid bankruptcy was due in part to a strategy of focusing on smaller cars. Perhaps it was just luck, but more likely it was strong management. Look for more of the same in 2011. Ford is another great buy-and-hold stock.

Major holders of Ford include Ken Heebner at Capital Growth Management and D.E. Shaw. Cramer recently encouraged "Mad Money" viewers to get bullish on stocks such as Ford, and Jonas Elmerraji examined its technicals in a recent Must-See Charts article.

Target ( TGT): The discount retailer lost $4 per share on Thursday after reporting same-store sales grew by less than 1%. That disappointing result was well below expectations. Shares now trade near its 200-moving day average of $54 per share. It would be easy to panic, but I would view the selling as a buying opportunity.

Pershing Square's Bill Ackman is one of Target's most well-known bulls, along with Ruane Cunniff. With a B buy rating, Target is one of TheStreet Ratings' top-rated multiline retail stocks, and Action Alerts PLUS' Stephanie Link named it one of her top three retail stocks for the year.

IBM ( IBM): An interesting article from Forbes examines IBM's efforts in the area of cloud computing. In my opinion, it is overstating the obvious. IBM missed the boat on cloud and is now looking to use its mainframe and storage power to ride the wave. Success in cloud could make IBM a worthwhile buy-and-hold possibility for investors.

Major holders of IBM include Karen Finerman at Metropolitan Capital Advisors, who increased her position by 19.4% in the most recent period. It's rated an A buy by TheStreet Ratings, earning it a spot on the top-rated IT services stocks list, and it's one of 10 Dow stocks with the best three-year dividend growth. ( CRM): Speaking of cloud computing, investors should note that shares of CRM are up some $10 so far in 2011. With a market still deciding which way to go, the momentum investors are riding this stock higher. Talk of its demise look to be premature. I would not trade this stock. Instead, this is a wave to ride.

Navellier & Associates has 2.6% exposure to Salesforce, and Renaissance Technologies boosted its position by 1,303% in the most recent period. RealMoney's Tim Melvin flagged Salesforce recently as a mighty stock whose run might be ending, and it's shown up on recent lists of stocks with large insider selling.

Netflix ( NFLX): Momentum investors can be fickle folks. Look no further than Netflix. Shares have been trading aggressively lower since peaking late last year. This is not a stock to buy and hold -- in fact, it might be a name worth dumping. If the momentum crowd gives up and moves on, things could turn ugly.

TheStreet Ratings has a B buy rating on Netflix, which earns it a spot on the top-rated Internet catalog and retail stocks list. According to Frank Byrt, it was one of the best-performing S&P 500 stocks of 2010.

SPDR Gold Trust ( GLD): Has gold lost its luster? At a minimum, it appears to have lost its can't-lose trading position. A weaker dollar creates inflation and thus higher gold prices. Lately we are seeing a stronger dollar thanks to a stronger economy. Previously, investors presumed a stronger economy implied higher inflation. Not so much today with gold down so far this year. I would view such a state to be temporary. We will not have a stronger economy without creating some sort of inflationary consequence. As such, buy and hold gold.

George Soros and John Paulson both have stakes in the SPDR Gold ETF, with 9% and 17.6% exposure, respectively.

Research In Motion ( RIMM): The big player in smart devices unveiled its tablet computer this week. Apparently everyone does have Apple ( AAPL) envy. My sense is that RIM's move is too little too late. Anyone remember the fate of Palm? It may take a bit more time, but Research In Motion's fate is likely to be similar.

RIMM bulls include Eminence Capital, which increased its position by 25.5% in the most recent period, and Prem Watsa at Fairfax Financial, with 4.5% exposure. Credit Suisse included the stock as one of its 18 top picks for 2011.

AT&T ( T): Verizon ( VZ) is coming, Verizon is coming. Perhaps in a move to pre-empt Apple's iPhone on Verizon, AT&T announced this week that it would be selling a cheap version of the Apple 3G. Again, investors looking for clues about such a strategy need only look at Palm's fate. Deep discounting of phone equipment was the kiss of death. Consumers are willing to pay for top-tier technology. Intense competition on the low end ensures that not enough volume exists to make the effort worthwhile. 2011 will be a tough year for AT&T.

George Soros owns shares of AT&T, having increased his position by 255.7% in the most recent period. It recently increased its dividend payout, and it's one of 2011's top-yielding Dow stocks.

BP ( BP): A new government report regarding the Gulf of Mexico oil spill further implicates BP and Transocean (RIG). The giant oil company response is to shrug. Not a smart move, in my opinion. The matter at hand is litigation, and the more evidence against British Petroleum, the more expensive the settlements or judgments. Will these companies ever learn?

BP bulls include T. Boone Pickens at BP Capital and Blue Ridge Capital. Both positions were initiated in the most recent reporting period.

To see these stocks in action, check out the Musings on 13 High-Profile Stocks portfolio.

-- Written by Jamie Dlugosch in Minneapolis.


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At the time of publication, author had no positions in stocks mentioned.

Jamie Dlugosch is a founder and contributor to
MainStreet Investor and MainStreet Accredited Investor . Formerly, he was president and CEO of Al Frank Asset Management. He has contributed editorially to The Rational Investor , The Prudent Speculator , Penny Stock Winners and InvestorPlace Media .

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