example portfolio 11, Barron's Top 10 Stocks For 2014

Barron's Top 10 Stocks For 2014Each year for the last few years Barron's has published their list of Top 10 Stocks for the upcoming year.

Last year's picks did well, returning 35.2% thru Dec 10 this year, a full 9% higher than the S&P 500's 27% for 2013 (so far).

In 2012 their top 10 returned 17% compared to the S&P's 12.6%, and in 2011 their picks fell 7% compared to the S&P decline of 2%.

Barron's Likes Low P/E Stocks

The success of Barron's picks (2 out of 3 years) is mostly because they choose low P/E stocks. Five of their 10 picks for 2013 had single-digit P/Es ratios, and only one had a P/E above 13.

Keeping with their winning forumla, 6 of 10 picks for 2014 have an estimated 2014 P/E of 10 or less:

Company Symbol 2104E P/E
Barrick Gold ABX 7.7
Canadian Natural Resources CNQ 11.9
Citigroup C 9.4
Deere DE 10.2
General Motors GM 8.4
Intel INTC 12.8
MetLife MET 8.9
Nestle NSRGY 17.4
Simon Property Group SPG 15.9
US Airways Group LCC 9.1

Lowering Risk By Increasing Yield

We ran those 10 stocks through Born To Sell's covered call screener and came up with a list of in-the-money covered call candidates that had an annualized return of 10% or more for the January 18, 2014, expiration (38 day trade). Note that two of these (C and INTC) have an earnings release before Jan 18, and one of them (DE) has an ex-dividend date before Jan 18:

Barron's Top 10 Covered Calls For January 2014

If you'd like to go further out than January, here are the same stocks with in-the-money covered calls for the March expiration (101 day trade):

Barron's Top 10 Covered Calls For March 2014

Obviously, there is no capital appreciation in these covered calls because they are all in the money. However, with the market having gained 27% this year and with upcoming debt ceiling negotiations imminent, the next month or two might be a good time to get more conservative with some in-the-money plays.

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