Confident in the market’s recovery, many young investors have ventured into stocks with a buy low and hold strategy. You’ve read what they had to say about getting started, now, check out their favorite stocks picks. Charles Weems, 27, Erika Smith, 25, Andrew Simon, 23, and Kevin Njeru, 18, share their top funds as financial analysts weigh in on the long term prospects on the company’s growth. (See also: “The Young & the Restless” and” Behind ING-Girls Inc.’s $50,000 Youth Investment Challenge“)
Charles Weems, 27, Decatur, GA
Tip for Beginners: The best advice from my boss: “start early,†find a mentor who is investing and exchange ideas. Hang around and listen to those who are where you want to be in life.
My Favorite Holdings: Fannie Mae (FNM) and Freddie Mac (FRE)
Why I like these stocks: I still believe these two are going to be good holdings for the long term. The government is not going to let those two companies fold because of their important standing with the housing market, investors, and the economy as a whole. I believe with the new stimulus package beginning to take effect, we should start seeing the housing market turn around over the next five years.
The Professional Opinion
Analysts Consensus on Freddie Mac:
Hold: 1
Sell: 2
Analysts Consensus on Fannie Mae:
Hold: 1
Sell: 2
Matthew Warren of Morningstar:
“We recommend against speculating in Fannie shares. Fannie Mae posted another enormous loss in the fourth quarter ending in December. Severity of loss has increased as steady home price declines chew through homeowners’ equity and inadequate credit enhancement on Fannie Mae loans. Increased severity combined with an acceleration and broadening of credit problems suggests that things will get worse before they get better. With Fannie slowing foreclosures, stepping up modification efforts, refinancing (high-risk) high loan/value loans to lower rates, and reversing some recently implemented guarantee fees, it is clear that Fannie Mae is working toward policy goals rather than shareholders’ benefit. Freddie Mac posted a fourth-quarter loss of $25 billion, contributing to a $50 billion loss for the year ending in December, which wiped out decades’ worth of profitability. With net worth again in the red, Freddie’s conservator has submitted a request for another $30.8 billion in funding from the U.S. Treasury. With this new senior preferred investment from Uncle Sam, the total amount of these securities will rise to $45.6 billion. We would avoid speculating in this firm’s shares.â€
Ted Parrish of Henssler Financial Group:
“Fannie Mae and Freddie Mac have basically been taken over by the federal government. The government infused a lot of cash and that’s why most stock analysts don’t cover the companies anymore. Once a company gets below a certain price level per share, they loose coverage from a lot of the major research firms. That particular price can be anywhere between $5 and $10. The chances of those companies being major forces as independent organizations are not going to happen. Fannie and Freddie are not good for long-term growth. Their existence as a “going concern,†[or a business entity] is in question at this point. Shareholders will be the first in line to take a hit if there is any more trouble in their business.â€