Build Your Own High Gain Stock Portfolio, One Sector At a Time

There are many ways to construct your own stock portfolio.

One way to create a diversified portfolio is to choose stocks from different sectors that follow these criteria:

1. The stock is in a good sector.
   
2. The stock is a good stock in a good sector.
   
3. The stock has Reasonable Valuation:
   a. PEG < 2.0 (Price-Earnings to Growth Ratio).
   b. Forward PE < 40
   
4. The stock shows Strength:
   a. Stock is within reach of a 52 week high.
   b. Stock is above the moving averages (200 day, and even 50 day moving average).
   

Here are a few suggestions that mostly fit the criteria above. One could create a portfolio by choosing a stock or a few stocks from each sector below.

A. Tech: Internet and Information

We are in the middle of a society changing Information Revolution, and the Internet plays a central role.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GOOG	Google	0.91	31	33.88%

B. Tech: Mobile Convergence and Mobile Devices

One of the major trends is the trend towards Mobile Convergence. Rather than have separate devices, such as a cell phone, a camera, and a music player, all these features are being integrated into a single mobile device. The Apple Iphone is a web browser, a music player, and a cell phone. Cell phones now come with cameras and music playing capabilities.

In addition, globalization is helping this sector out as international and emerging markets are adopting these mobile technologies in great numbers. One Indian person has even said that in India, even beggars have cell phones.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
AAPL	Apple	1.66	37.52	22.63%
RIMM	Research In Motion	1.04	35.06	33.61%
NOK	Nokia	1.40	17.06	12.22%

Aside from the Apple iphone, Apple (AAPL) has many other products as well such as the Apple iPod music player, and the Apple iMac computer.

Nokia (NOK), is also a play on Global Positioning as it is acquiring Digital Map Maker Navteq (NVT).

C. Tech: Networking/Digital TV/Telecom Equipment

Another trend is in the Network.

1. There is a trend having greater Bandwidth for advanced services (for example, High Definition Video on Demand).
   
2. There's the conversion of analog TV to digital TV. On February 2009, companies are supposed to stop broadcasting analog television, and are supposed to broadcast digitally.
   
3. There is the Battle for the Digital Living Room. From IP Television (IPTV), to Digital TV, to High Definition TV sets, to Digital Video Recorder Technology (DVRs), to digital set-top boxes, to streaming content from computers to the big screen, the battle for the Digital Living Room is just beginning.
   
4. The trend also includes wireless telecommunication systems that help bring advanced services (video on a cell phone) to mobile devices.
   

Symbol	Stock Name	PEG	Forward PE	5 yr growth
CSCO	Cisco	1.25	17.64	14.10%
GLW	Corning	0.95	15.80	16.57%
NNDS	NDS Group	0.69	16.39	23.75%
HRS	Harris	0.58	15.68	27.00%

Cisco (CSCO) is the big company in Networking. They also have Set-Top Box exposure (access to the Digital Living Room) with their acquisition of Set Top Box maker Scientific Atlanta.

Corning (GLW) makes glass and equipment for higher bandwidth optical networking. They are also a play on the Digital Living Room as their products are needed by those who make flat panel displays and High Definition TVs.

NDS Group (NNDS) is the United Kingdom's version of the overhyped Chinese company China Digital TV (STV). The company engages in the supply of open end-to-end digital technology and services to digital pay-television platform operators and content providers worldwide. They even supply middleware and Digital Video Recorder Technologies, and Set-Top Boxes, and they support high definition TV.

Harris (HRS) is a company which operates in four main segments from Government Communication Systems, RF Communications, Broadcast Communications and wireless networking through Harris Stratex (HPTX). Their Broadcast Communications Group is involved Digital TV. They also benefit from a good win rate on government contracts.

D. Tech: GPS and Global Positioning

A major growth area in tech is in Global Positioning Technlogies. This technology is more than just turn by turn directions on a navigation device. In the future, as part of Mobile Convergence, GPS will be integrated into almost any device which can move, such as a cell phone.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GRMN	Garmin	1.44	28.06	19.53%
TRMB	Trimble	1.86	28.94	15.60%
SIRF	Sirf Technologies	0.77	20.44	26.62%

Garmin (GRMN) mainly makes Global Positioning Devices. They are big in the car navigation and aeroplane navigation market. Recent concerns include the intended acquisition of their Digital Map Supplier Navteq (NVT) by Nokia (NOK).

Trimble Navigation (TRMB) makes GPS products. They are also a unique play on the good Agriculture market, as they even have GPS equipment for farm equipment and tractors.

Sirf Technologies (SIRF) makes GPS semiconductors. Their chips are finding their way into devices such as cell phones.

E. Tech/Consumer Discretionary: Computer, Video and Online Gaming

The strong Gaming cycle is continuing as three major console makers (Nintendo, Microsoft and Sony) have released major consoles.

There are also up and coming new trends such as online gaming, especially in East Asia (China).

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GME	Gamestop	1.36	28.92	21.22%
SNDA	Shanda Interactive	0.64	21.26	33.26%

Gamestop (GME) is the premiere gaming retailer. Why choose the winner of the console or software maker war when you can buy the retailer who sells all these products.

Shanda Interactive (SNDA) together with The9 Limited (NCTY) are dominant Chinese Online Gaming companies poised for great growth.


F. Energy: Oil and Oil Services.

Energy and Oil remain strong sectors. There's great demand as countries all over the world, especially the emerging market countries, need oil. Supply is limited as well, and harder to come by.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
COP	Conoco Philips	0.93	9.19	9.92%
NOV	National Oilwell Varco	0.60	17.89	29.67%

Conoco Philips (COP) is an integrated oil company, while National Oilwell Varco (NOV) is an Oil Services and Equipment Company, and operates three segments: Rig Technology, Petroleum Services and Distribution Services.

G. Energy: Coal

Energy sources such as oil are in great demand. Coal, a very inexpensive fossil fuel, benefits from the great demand in energy.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
BTU	Peabody Energy	0.93	9.19	9.92%

H. Materials

Freeport McMoran (FCX) is a gold and copper company, and both are needed by rapidly growing emerging market countries such as China.

Precision Castparts (PCP) manufactures metal components used in the aerospace, power generation, general industrial, and automotive markets. There's a bull market in aerospace and infrastructure, and Precision Castparts benefits.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
FCX	Freeport McMoran	0.98	10.82	11.00%
PCP	Precision Castparts	0.85	18.13	21.23%

I. Agriculture

There's a Bull market in agriculture, thanks to an influential US Farm Bill in 2002.

Monsanto (MON) makes seeds, including very specialized and drought resistant seeds. Deere (DE) makes agricultural equipment. Trimble Navigation (TRMB) is also an unusual play on agriculture as they provide GPS products to many places, including tractors and the agriculture industry.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
MON	Monsanto	0.95	29.53	30.93%
DE	Deere	1.75	16.21	9.25%

J. Aerospace and Defense

There's a Bull market in Aerospace and Defense thanks to the aeroplane replacement cycle. Many of the older planes have to be replaced.

Boeing (BA) makes airplanes and is a better play than competitor Airbus. Transdigm Group (TDG) is a $2B company that supplies parts to the Aerospace industry. Lockheed Martin (LMT) is a defense contractor that makes many defense products, including military aircraft.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
BA	Boeing	1.08	15.86	14.70%
TDG	Transdigm Group	0.64	18.24	28.50%
LMT	Lockheed Martin	1.33	15.31	11.52%

K. Infrastructure

With great global growth comes a great need for Infrastructure.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
ABB	ABB Limited	0.83	20.63	25.00%
MDR	McDermott	1.38	22.01	16.00%

L. Telecom: Emerging Market Wireless Telecom

Emerging Markets are using wireless products in large numbers. Many emerging countries have low wireless penetration so there is even more room to grow.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
AMX	America Movil	0.49	15.89	32.65%
VIP	Vimpel Communications	0.75	17.49	23.37%
CHL	China Mobile	0.98	24.66	25.14%

M. Financials

Goldman Sachs (GS) is the premier brokerage company, the gold standard.

Hudson City Bank (HCBK) is a fast growing regional bank that has very little exposure to the subprime problems, and some have speculated that along with other Northeastern banks, could be taken over by Canadian banks and other companies.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GS	Goldman Sachs	0.76	9.91	13.12%
HCBK	Hudson City Bank	1.09	18.73	17.15%

N. Asset Management Companies

Everyone is looking for the next Berkshire Hathaway (BRK.A), Warren Buffett's company.

One very good company in the mold of Berkshire Hathaway is the cash rich Leucadia (LUK), run for many years by super investors Ian Cumming and Joseph Steinberg.

Carl Icahn, another superinvestor, gives us Carl Icahn Enterprises (IEP), (Formerly American Real Estate partners (ACP)) and offers investors a way to invest with this great activist investor. Watch out for guru investors with a lot of cash to use.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
LUK	Leucadia	N/A	N/A	N/A
IEP	Carl Icahn Enterprise	N/A	N/A	N/A

O. Consumer Staples

Symbol	Stock Name	PEG	Forward PE	5 yr growth
PG	Procter and Gamble	1.60	18.07	11.31%
UL	Unilever	0.96	15.34	16.00%

P. Consumer Staples: Drinks and Beverages

Hansen (HANS) is a fast growing beverage company specializing in Energy Drinks.

Central European Distribution (CEDC) is a Polish drink and Vodka producer.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
PEP	Pepsi	1.74	19.22	11.03%
HANS	Hansen Natural	0.76	30.06	39.63%
CEDC	Central European Distribution	1.29	22.52	17.50%

Q. Consumer Discretionary: Gambling Equipment

Scientific Games (SGMS) makes equipment for Lotteries, Printed Products, and Diversified Gaming. Some say this is a recession proof stock.

International Game Technology (IGT) makes Gaming Equipment for Casinos.

Symbol	Stock Name	PEG	Forward PE	5 yr growth
SGMS	Scientific Games	1.06	23.94	22.66%
IGT	International Game Technology	1.69	25.36	17.20%

R. Industrials

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GE	General Electric	1.47	16.31	11.09%
UTX	United Technologies	1.40	16.39	11.72%

S. Healthcare

Symbol	Stock Name	PEG	Forward PE	5 yr growth
GILD	Gilead	1.35	23.30	17.20%

Invest in South Korean Stocks from the USA

The economy of South Korea is the "fourth largest in Asia and the twelfth largest in the world in terms of market exchange nominal GDP as of 2006." Korea over the last few years, is averaging a growth rate of 6.5% The country is part of the "Four Asian Tigers" which include Taiwan, South Korea, Hong Kong, and Singapore. The country has even decided to invest in advanced IT infrastructure, having high broadband penetration, and having internet speeds greater than the AT&T's DSL "elite" package.

South Korean stocks make up over 15% of iShares Emerging Market (EEM) Exchange Traded Fund, the largest country position in the fund. You can invest directly in Korea by investing in iShares EWY Exchange Traded Fund.

If you want to invest in individual Korean stocks from the US, you can choose from among a range of solid investment grade companies, to small capitalization, speculative stocks.

Banks and Financial Services

1. Kookmin Bank (KB) is a 30.7 Billion Dollar company, the largest lender in South Korea. There are rumors of HSBC Bank and Kookmin Bank competing over the Korea Exchange Bank.

2. Shinhan Financial (SHG) is another large South Korean Financial Services company with a market cap of 26.75 Billion dollars. Citigroup, on May 14, 2007, Upgraded the stock to a Buy. Its 5 year expected growth rate according to Yahoo Finance is 15.95%.

3. Woori Finance (WF) is a financial services company with a 21.44 Billion Dollar market cap and expected 5 year estimated growth of 10.2%. In 2001, the government put together four smaller banks and an investment banks to create Woori Finance.

Telecom

4. Korea Telecom (KTC) is a 10.3 Billion Dollar company that provides telecom services in Korea. According to Motley Fool, Korea Telecom, as of March 2007, has a yield of 7% and a 3 year dividend growth of 52%.

5. SK Telecom (SKM) is a 19.85 Billion dollar telecom company with an expected 5 year growth rate of 12.55%. According to Motley Fool, the stock has a 3.2% yield, and "the stock will give you a hedge against the dollar and the potential for some growth in the company's Internet business. Of course, this is also an extremely competitive industry experiencing rapid changes in technology."

Online Gaming

Because of South Korea's great internet infrastructure, Computer Online Gaming has become a national passion.

6. Gravity (GRVY) is a small 179 Million dollar online gaming company. The company offers massively multiplayer online role playing games and offer various mobile games and license of merchandizing of character related products based on its online games such as Ragnarok Online. (Yahoo Finance).

7. Webzen (WZEN) is another small 64 Million dollar online gaming company.

Internet

8. Gmarket (GMKT) is a 1 Billion dollar company that operates a retail-ecommerce marketplace in Korea. As of March 31, 2007, "the company had approximately 11.7 million registered users."

Utilities

9. Korea Electric Power (KEP) is a 32 Billion Dollar company that is expected to grow by 9.8%. It is the third largest South Korean company by market cap.

Steel

10. Posco (PKX) is a 45.17 Billion Dollar Company that is expected to grow by 6.28%. It is the 2nd largest South Korean company by market cap, and has a PE of 13. Warren Buffett, as of Dec. 31, 2006, owns 4 percent of Posco. Apparently, Warren Buffett, and other analysts think Korea is now cheap.

Electronics

11. LG Philips LCD (LPL) is a 16.24 Billion Dollar company, with a forward PE of 11, a 5 year estimated growth rate of 25%, for a PEG of 0.73. The company develops, manufactures Thin Film Transistor (TFT) based Liquid Crystal Display (LCD) panels.

12. Mirae (MRAE) is a speculative, under $2 146 Million Dollar company. The company designs, manufactures and sells semiconductor related equipment.

13. Pixelplus (PXPL) is another speculative under $2 13.7 Million Dollar company. The company is in the semiconductor industry.

Hana Telecom and Wider Than are two other companies that currently trade on the .PK "pink sheets."

The Warren Buffett Challenge (and Index Funds)

Warren Buffett, in the 2007 Annual Berkshire Hathaway Conference, has some interesting comments.

Warren Buffett even offered a challenge:

Name at least ten hedge funds that will beat a low-cost index funds.

His point? For "a know-nothing investor, a low-cost index fund will beat professionally managed money." But you might ask why didn't Mr. Buffett take his own advice on index funds? Warren Buffett said that he thought could beat the S&P by a couple of percentage points, "just not a whole lot better."

Other gems selectively taken directly from a Leslie McFadden Article from BankRate.com:

1. Read and think before you invest. When a 17-year-old who was attending his 10th consecutive Berkshire annual meeting asked how to become a better investor, Buffett offered some simple but golden advice. Read everything on investing you can get your hands on and fill up your mind with various competing thoughts. After doing that, it's time to get started, as investing on paper and dealing with real money is like "reading a romance novel and doing something else."

He added that when you think about buying shares in a company, think about why you might buy the whole business. If you couldn't write an essay about it, then you shouldn't buy any shares.

2. Risk is tied to the type of business and ignorance of the investor. One investor from Los Angeles asked about using volatility as a measurement of an investment's risk. "Volatility does not determine the risk of investing," Buffett said, adding that risk comes with certain kinds of businesses and not knowing what you're doing. A better approach would be to understand the economics of the business you're investing in, he said.

3. What can be done about shorting stocks? "I have no problem with shorts," says Buffett. He added that he didn't think shorting stocks poses any threat to the world. He would be fine with it if someone wanted to short Berkshire stock.

4. Better to invest in businesses tough for competitors to enter. Asked about his interest in investing in Taiwanese high-tech companies, Buffett remarked that "change is wonderful, but not necessarily for investments." In terms of predicting how a business will perform, he said it's much easier to look at consumer behavior and businesses that have big barriers to entry, citing Gillette as an example of a company with a 70 percent market share for men's razors.

5. Value investing -- what else is there? One person asked about whether Buffett's value investing strategy would apply in South Korea. Buffett said investing is all about value. "What other kind of investing is there?" he asked. "Are we going to have nonvalue investing? Are we going to have tipster investing … dream investing? I've never understood what the alternative is."

Investing Book Recommendations

There are so many investing books out there, so how does someone new to the market start investing?

Books are a good way to learn. If you want a broad overview, you should start with the infamous Dummies series, and get Investing For Dummies, 4th Edition (Eric Tyson). Investors have to start somewhere, and the Investing For Dummies is a good start. (Alternatively, you can also buy and read "Personal Finance For Dummies" by Eric Tyson).

Okay, if you now know the basics, and know about 401ks/IRAs, stocks, ETFs, mutual funds, and have a general idea about the market, what should you read next?

Right now, there are many investing styles ranging from Growth to Value to everything in between. Some of these styles are very different from each other, and each philosophy may have very different rules. So where do we start?

I believe to get a good overview of the different styles, you should read these four books and decide for yourself what kind of investor you can become:

1. GROWTH: How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition (William O'Neil)
   
2. ?: Jim Cramer's Real Money: Sane Investing in an Insane World (Jim Cramer)
   
3. ?: One Up On Wall Street : How To Use What You Already Know To Make Money In The Market (Peter Lynch)
   
4. VALUE: The Essays of Warren Buffett : Lessons for Corporate America (Warren Buffett)
   

To start out, I would recommend reading both Jim Cramer's "Real Money: Sane Investing in an Insane World" and Peter Lynch's "One Up On WallStreet", Millenium edition.

Jim Cramer's book is a more contemporary look at investing, and goes into detail about the basics of stock investing, rules, cycles, stock sectors, creating a discretionary portfolio, spotting bottoms, and spotting tops, just to give a small sample.

Peter Lynch is the Legendary investor who managed Fidelity's Magellan to outstanding performance. Invest in what you know. He groups stocks into six categories such as "Slow Growers", "Stalwarts", "The Fast Growers", "The Cyclicals", "Turnarounds", and "Asset Plays". He helps investors in the process of choosing great stocks, and even multibaggers (make many times your original investment). Even if the book was written in 1989, this book is still a timeless classic. The Millenium edition has an interesting introduction by Peter Lynch himself in 2000, during the height of the dot-com bubble.

To get two very different takes on investing, you should read both William O'Neil's book (founder of Investors Business Daily , and a die hard growth investor who likes strong earnings growth and great charts), and Warren Buffett's book (Value Investor extraordinaire who made people rich through Berkshire Hathaway (BRK.B)). You'll see how two legendary investors look at investing in two different ways. But both succeed!

There are other recommendations to the right as well, but you may want to first try the books above first.