Best stock to buy right now and hold two years?

As Jeremy Siegel has argued in his book "The Future for Investors," so-called "growth" stocks have historically disappointed investors. The problem is that expectations are already built into the stock's price, so growth stocks inevitably lose their luster while boring companies that "only" grow at 10-15% per year are the real winners-- if you reinvest your dividends back in the stock. This insight compelled me to sell most of my small position in Google (for a 45% profit, tyvm).

At some point, Google will achieve full growth. The search engine industry will mature, as have all once-hot industries, and Google will transition from a "growth" stock to a "value" stock, with the appropriate price decline.

Has this happened before? You bet, and we have a great example- my vote, Microsoft. MSFT is caught in limbo between growth and value. Growth investors believe correctly that its 20-30% annual growth days are behind it and are thus not interested. Value investors are not excited about its 1.3% dividend yield and still associate MSFT (whose stock is way down since 2000) with the tech bubble (while, ironically, they love Google).

Google's current price-to-earnings ratio? 60. Microsoft's PE? 24. IF PE is a measure of expectations, we see that investors have nearly 3X as high expectations for GOOG than MSFT. Two months ago it was more than 4X. So which stock has a tougher job, and the greater potential to disappoint?

I have made good money this year on both but MSFT is the only stock I still have a good chunk of change in. I prefer Mr. Softy's proven record of beating back rivals (see tombstones of Apple V1, Netscape), its stranglehold on home and business PCs, and its $50B in cash. Google is the most popular search engine by far, but search is 99% of its income. Not saying one-trick ponies can't win, but sooner or later this year's profits won't be double last year's, the mystique will wear off, and then the party's over for Google investors. It's as of all the irrational exuberance and high hopes from the late 90s were condensed into a single stock.

Yahoo!, on the other hand, is a yo-yo stock, Google's overlooked screw-up younger brother. But it has more inroads with traditional media, people visit its various pages for way more than just email and search, and it is valued at (its PE is) 32x earnings. If you believe search has a bright future beyond 1-2 years, YHOO is worthy of consideration. I don't have the extra cash or the stones to keep YHOO- I took a 15% loss with my money and made a 15% gain with my daughter's college fund this year. I own no more Yahoo!

Finally, if you want a company where black turtlenecks and tennis shoes are worn just like at Google, but with a proven record of innovation that makes gobs of money, Apple is a good bet. The chatter is the iPhone and iTV, possibly both out in 2007, will revolutionize their respective mediums. Its PE of 36 shows some built-in expectations, and its ongoing options scandal carries additional risk, but these guys made the iPod. As a WSJ columnist said today, "even my mother has an iPod." If they do the same with either phones or TVs, the stock will continue into the stratosphere.

Closing the loop on Siegel's research, it led him to conclude that investing in index funds and ETFs of high-yielding stocks is the best way to go. He even co-founded a company, WisdomTree Investments, that practices this belief in its couple dozen ETFs. The best stock since 1959? Phillip Morris (MO), now known as Altria. The reason? Steady and increasing dividends.

Honestly, though, with the Dow at an all-time high, and with two kids and an impending home purchase, most of my non-retirement savings is in a nice 5% APR savings account.

I know that I made almost $3000 off Apple's stock in about one year's time from less than 100 shares. I bought in at $48 and after a short increase it split. Then I watched the price go from $30 to $60. Unfortunately, with my new job, I was forced to sell my shares off due to laws regarding auditors and clients being financially independent of each other. :-( In the following months, it rose to above $90.

There is an IPO coming that I'm looking at...Zion Oil. If what they claim is true, Israel may well become a major player in the world oil market.

I'm just curious, why a two year timeframe for the stock holding?

I stated earlier that I did quite well on Apple stock. And as a business, Apple stands to do even greater things. However, with the news of restatements going back as far as 2002, now may not be the best time to buy. Apple will fall (as most do) after the holiday buying frenzy. It will fall because of the post-holiday iTunes site struggle. It will fall because of the restatements impact with executives causing investors (big players - not day traders) to beware. But come April ... the stock ought to be as low as it will get and should be worth buying into again in time for it to ramp up towards the fiscal year's closing.

Home Depot got my vote. It has expanded on the growth of home prices. That could change as the bloom comes off the housing market. However, there are a couple factors that make me think its still good times for this company:

• a slowing housing market will encourage home owners to do "things" to their homes to make them more attractive in an increasingly competitive market
• there will still be lots of new homes built as immigration from India and China with lots of billions of people continues

Just a guess though! And I'm not invested in it directly.

Anyone looking at Texas Instruments? Their DLP technology is in every DLP Television set bought/sold. Because of the expansion of HDTV with the new FCC regulations, these TV Sets are going to take off. Prices on Flat Screen TVs continue to drop and more folks will take the leap into the HDTV market, making TI mint.

Going one step ahead of TI and DLP (by the way, love the creepy little girl with the per elephant talking about the mirrors):

I recently got in the mail at work a sample of the ValueLine Investment survey, which contains a ton of info on sectors and companies. Their #1 sectos, out of 100 or so, is satellite/cable TV: dishnetwork, Comcast, DirectTV, etc. There wasn't much analysis in the info I got, but I can only assume they rate it so promising because of the HDTV thing.

On a personal level, I considered buying an HDTV but decided against it because $1000 for a TV was not the only cost: to justify the great screen/picture I would have had to commit another $50/month to cable or satellite, plus a new DVD player that can refine the picture (it's called "up-something-ing").

All these people getting HDTVs are going to want better cable and dish plans, so I am sure sales will go way up. If the providers can make good money (profits) on those sales, if their increased revenues exceed their increased costs of providing high-def content, then there will be good money in these companies/ that sector.

As for Texas Instruments, I am not so sure. With prices dropping on HDTVs, profit margins are dropping as well. Since Wal-Mart got into the game, Best Buy and Circuit City have had horrible earnings. They're making very little--if not losing money--on HDTVs. I am not sure what that means short-term up the supply chain to the TI guys providing the DLP technology, but long-term the retailers and TV makers are not going to sell or make anything on which they can't turn a profit.

Heh...in retrospect, this poll is pretty spot on, Google and Apple are still titans of IT...although at this point I probably would have made an investment (if I had the money) in Exxon