My Three Best Long Ideas for 2016

Most of my best investment ideas for 2016 have been short calls. Although the scenario has played out perfectly over the last few days as the market has gone down considerably, having a “short-only” portfolio is not something that I would recommend. Despite the fact that I am currently bearish on the stock market, I think investors should only have about 60% of their portfolios short. Hence, in this article I will be putting forward three of my best long ideas for 2016. Investors can use the recent crash to add these stocks to their portfolios as they are trading at a cheap valuation. Let’s take a look at these stocks one by one.

Macy’s (M)

Macy’s stock has been hammered over the last few months as it is down almost 50% from its 52-week highs of $73.
For a company that has been running for almost a century, losing almost 50% of its value because of two bad quarters doesn’t make sense. However, everyone was expecting Macy’s to struggle and the worst-case scenario is baked in the company’s current share price, which is why I think the stock has nowhere to go but up.

The company is cutting costs at a rapid pace and will be closing many of its unprofitable stores. Macy’s is streamlining its business and its annual expense will decline by $400 million. In addition, the stock is currently very cheap, trading at a P/E ratio of under 10. Hence, I think investors should add Macy’s to their portfolios going forward.

Oaktree Capital (OAK)

Oaktree Capital is another underperformer that I think investors should add to their portfolios. After touching the52-week highs of $57.07, Oaktree has lost considerable value and is now trading at $40. For those of you who don’t know, Oaktree Capital is an investment management company focused on alternative markets. The Company invests in distressed debt, corporate debt, control investing, convertible securities, real estate and listed equities.

The stock has underperformed due to a bad earnings report, however Oaktree’s long-term prospects look bright.  Oaktree Capital usually raises a large capital during declines in its target market and reduces fund size when opportunities fade away.

Over the last few quarters, Oaktree has raised capital of $22.6 billion, outdoing the $15 billion mark it reached in 2014. The company was preparing for an economic downturn a few months ago and it seems like its wager has paid off with the market losing almost 10% of its value in just a few days. Hence, I think Oaktree’s upcoming earnings report should be better and investors should consider adding the stock to their portfolios.

Ladder Capital (LADR)

Ladder Capital Corp is an internally-managed real estate investment trust. The company invests in loans, securities and other interests in U.S. commercial real estate, with a focus on senior secured assets. Like the other two stocks discussed in this articles, Ladder Capital has depreciated considerably over the last few months. The stock is down almost 40% from its 52-week highs and is currently undervalued.

The company’s business model allows it to benefit from securitization along with first mortgage balance sheet loans and property rentals. In addition, the company’s growing market share in the commercial mortgage loan origination market is also another tailwind for the stock. Given its unique and diversified business model, I think investors should add this stock to their portfolio amid the recent weakness in the U.S. market. The stock also has a high dividend yield of 46.25 and investors can use the recent weakness as an entry point.

Conclusion

These are three of my best long ideas for 2016. All the three mentioned stocks have lost considerable value over the last few months and are trading at a discount valuation. In addition, they also have a good dividend yield that makes the investment opportunity even more lucrative. Hence, I think investors should add these three stocks to their portfolios.
Published on Jan 13, 2016
By Ayush Singh

Copyrighted 2016. Content published with author's permission.

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