Top 5 Stocks To Watch November 2013

Ten stocks that combine high growth potential, healthy profit margins and low price-to-earnings multiples

The change in sentiment is palpable on Dalal Street. Just two months ago, stock market pundits were vying with each other to assign aggressive hair value?targets to BSE Sensex and NSE Nifty. The projected earnings of Sensex stocks in 2013-12, in the range of Rs. 1,250-1,275 were quickly discounted into the price and people started talking about profitability expectations for the following year, 2013-13.

But the warning signs were all there. Companies had failed to sizzle the markets with their second quarter (July-September 2013) results and the interest rate cycle had turned upwards. Not a day passed without the news of yet another scam breaking out. For a while, the market seemed to ignore these details. Everybody seemed to take comfort from the fact that Indian markets had proved to be one of the year's best performing in the world, attracting half of all portfolio fund flows to Asia.

The rude awakening came in the form of the housing scam. We got into the mood for a bloodbath almost immediately,?recalls the research head of a Mumbai brokerage. Suddenly, corruption and political troubles came to the fore. The market hasn't been the same since.  Investors and brokers have turned very cautious and have become ready to penalise any stock they think is low-quality. This anger was seen even in some IPOs that failed to garner enough money even while the issues of public sector companies couldn't handle the subscriptions they received.

In this unforgiving environment in which both fundamentals and sentiment are wounded, what kind of companies should an investor choose?

First of all, at 23 times trailing earnings and 16 times the earnings of 2013-12, the market is fully valued. There is absolutely no margin for error. The investor has to be obsessed with buying cheap and compare individual P/E ratios with industry averages before taking a decision to buy. At the sight of any more danger or earnings disappointment, the market will flee to safety, abandoning highly priced midcaps and multi-bagger?stocks. This is not the time for adventure.

Indian companies will have to contend with high interest rates in 2013. This means any company exposed to high debt or planning to borrow more will be penalised. Also, firms depending on borrowing-led consumption, like home builders and car makers, will hurt. Companies with strong cash flows will benefit.

There are several companies that smartly invested in capacity expansion when cost of funds were low and are ready to start production from the new capacity just as demand picks up. These firms will be able to benefit from the economic growth without having to incur a heavy cost.

Our recommendations comprise a set of 10 companies that will not only thrive in a high interest rate regime, but also find themselves the beneficiary of the strongest growth impulses in the economy. These are the themes that will drive the economy forward despite the turbulence in macro indicators.

Top 5 Stocks To Watch November 2013:Newcastle Investment Corporation (NCT)

 Newcastle Investment Corp. operates as a real estate investment and finance company that invests in and manages a portfolio consisting primarily of real estate securities. The company?s portfolio of real estate securities includes commercial mortgage backed securities, senior unsecured debt issued by property REITs, real estate related asset backed securities, and agency residential mortgage backed securities. Newcastle also owns interest in loans and pools of loans, including real estate related loans, commercial mortgage loans, residential mortgage loans, and manufactured housing loans. In addition, it owns interests in operating real estate. The company is organized to qualify as a real estate investment trust for U.S. federal income tax purposes. Newcastle was founded in 1998 and is based in New York City.

Top 5 Stocks To Watch November 2013:El Paso Pipeline Partners LP (EPB)

 El Paso Pipeline Partners, L.P. engages in the ownership and operation of natural gas transportation pipelines and storage assets in the United States. The company holds a 100% interest in Wyoming Interstate Company, Ltd. (WIC), an interstate pipeline transportation company located in Wyoming, Utah, and Colorado. It operates approximately 800-mile WIC interstate natural gas pipeline system with a design capacity of approximately 3.5 billion cubic feet per day. The company also owns a 58% general partner interest in Colorado Interstate Gas Company, which operates an interstate natural gas pipeline system with approximately 4,300 miles of pipeline with a design capacity of approximately 4.6 billion cubic feet per day; and associated storage facilities with 37 billion cubic feet of underground working natural gas storage capacity. In addition, it owns a 60% general partner interest in Southern Natural Gas Company that operates an interstate natural gas pipeline system with approximately 7,600 miles of pipeline with a design capacity of approximately 3.7 billion cubic feet per day; and associated storage facilities with a total of approximately 60 billion cubic feet of underground working natural gas storage capacity. Further, the company owns interests in Elba Express Company, L.L.C., which operates an approximately 200-mile pipeline with a design capacity of 945 million cubic feet per day; and Southern LNG Company, L.L.C. that owns a liquefied natural gas receiving terminal with a storage capacity of 11.5 equivalent billion cubic feet. It serves natural gas distribution and industrial companies, electric generation companies, natural gas producers, other natural gas pipeline companies, and natural gas marketing and trading companies. El Paso Pipeline GP Company, L.L.C. serves as the general partner of the company. The company was founded in 2007 and is based in Houston, Texas. El Paso Pipeline Partners, L.P. is a subsidiary of El Paso Pipeline LP Holdings, L.L.C.

Top 5 Stocks To Watch November 2013:CareFusion Corporation (CFN)

 CareFusion Corporation, a medical technology company, provides various healthcare products and services in the United States and internationally. It operates in two segments, Critical Care Technologies, and Medical Technologies and Services. The Critical Care Technologies segment develops, manufactures, and markets equipment and related supplies for infusion, medication and supply dispensing, and respiratory care. Its products include intravenous medication safety and infusion therapy delivery systems comprising disposables, software applications, and related patient monitoring equipments; automated dispensing machines and related applications for distributing and managing medication and medical supplies; and equipment and supplies for ventilation, and respiratory and sleep diagnostics. The Medical Technologies and Services segment develops, manufactures, and markets disposable infection prevention products, software-based infection detection services, surgical and diagnostic instrumentation, and neurological monitoring equipments. It offers skin disinfectant and other patient-preparation products; hair-removal and skin-care products; infection detection software; custom surgical procedure kits; surgical instruments and related products and services; and interventional specialty products, such as diagnostic trays and biopsy needles, drainage catheters and vertebral augmentation products; and neurological monitoring and diagnostic products. The company serves hospitals and other healthcare facilities comprising oncology clinics, ambulatory surgical centers, clinics, long-term care facilities, and physician offices. CareFusion Corporation sells its products and services through a combination of direct sales representatives, wholesalers, and third-party distributors. CareFusion Corporation was incorporated in 2009 and is based in San Diego, California.

Top 5 Stocks To Watch November 2013:Voyager Oil & Gas Inc. (VOG)

 Voyager Oil & Gas, Inc. engages in the exploration and production of oil and gas in the United States. It primarily focuses on oil shale resource prospects in Montana, North Dakota, Colorado, and Wyoming. As of May 17, 2011, the company controlled approximately 141,500 net acres in the five primary prospect areas comprising 28,000 net acres targeting the Bakken/Three Forks in North Dakota and Montana; 14,200 net acres targeting the Niobrara formation in Colorado and Wyoming; 800 net acres targeting a Red River prospect in Montana; 33,500 net acres in a joint venture targeting the Heath Shale formation in Musselshell, Petroleum, Garfield, and Fergus counties of Montana; and 65,000 net acres in a joint venture in the Tiger Ridge gas field in Blaine, Hill, and Chouteau counties of Montana. It supplies energy and fuel for industrial, commercial, and individual consumers. The company is based in Billings, Montana.

Advisors' Opinion:

• By SmallCap Investor At 2011-8-30

  Shares of this explorer, which has operations in the Western U.S., crossed back above $3 and have risen 40 percent in the past month, amid increasing investor interest in companies drilling in the Bakken region.

Top 5 Stocks To Watch November 2013:Rubicon Minerals Corp (RBY)

 Rubicon Minerals Corporation, a mineral exploration company, engages in the acquisition, exploration, and development of mineral properties in Canada and the United States. It primarily explores for gold and base metal deposits. The company?s key asset is the Phoenix Gold Project located in the Red Lake gold camp, in the Province of Ontario. As of March 31, 2010, it controlled approximately 65,000 acres of prime exploration ground in the prolific Red Lake gold district of Ontario, Canada, as well as approximately 380,000 acres surrounding the Pogo Mine in Alaska and approximately 225,000 acres in northeast Nevada. The company was founded in 1996 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By Barker At 2011-10-30

  This is the sole pre-production company to make my list, and with good reason. Rubicon lays claim to the most exciting discoveries of bonanza-grade gold deposits that this Fool has observed in the industry, and the project's prime location in Ontario near existing major gold mines makes this one stand out as a particularly low-risk play.