Each and every year the AFL National Draft makes dreams come true. Young men sit in hope, waiting for their name to be called out and their lifelong dream of playing AFL to be realised. As I do every year, I have produced three of my favourite stock picks (defensive, speculative, value) for the year ahead, actually several years ahead. I want at least five year players in my portfolio.

Please keep in mind, I don’t know your risk tolerance, I’m not aware of your personal financial circumstances and as market dynamics change, so do these recommendations. Please consider these draft picks are general advice only.

My Favourite Defensive Recruit

Pact Group (ASX:PGH) – Boring but effective. That’s how I like my defenders. It’s a $1.2bn business that manufactures packaging and other products that services customers in the food, dairy, beverage and chemical sectors, amongst others. When you go to the supermarket and buy a pack of biscuits, more likely than not, the box they came in was manufactured by PGH. It operates 62 manufacturing plants in Australia, NZ and Asia. Its main shareholder is Raphael Geminder, who also happens to be the son-in-law of the late Dick Pratt. What that family doesn’t know about recycling and packaging is not worth knowing.

Sales have grown more than five times over the past 10 years through organic growth and acquisitions. The fundamentals are impressive, with the highlight being a return-on-equity of 28.1 per cent, forecast to rise to nearly 35 per cent next year. PGH trades on a PE of 13.2x, gross yield 6.1 per cent and it’s a quality business. It produces around $100m worth of free cash flow annually. The big risk is if management make a bad acquisition, however, a quality acquisition can also provide that additional kick in the share price.

My Favourite

Speculative Recruit

Late in the draft, when no-one is really paying attention, there is sometimes a diamond in the rough. Think back to the 2001 National Draft when Collingwood read out the name Dane Swan at pick 58.

Carnegie Wave Energy (ASX:CWE) is my favourite speculative investment. Although using the word speculative before the word investment in a sentence is a bit of an oxymoron, Mike Fitzpatrick (a majority shareholder in the company) introduced Carnegie to me three years ago. I initially researched the company, followed its developments and then later took a position in it, not only for my clients but also for myself. I joke that I don’t follow the smart money, I follow Rhode Scholar money.

CWE is an Australian wave energy company as well as owner and developer of the CETO Wave Energy Technology. In short, the technology converts ocean wave energy into zero-emission electricity and desalinated water. The CETO is different to other wave energy projects because it operates out of sight (under the water). The wave energy devices (buoys) are anchored to the ocean floor and tethered to seabed pump units. The buoys move in harmony with the motion of passing waves, driving the pumps which in turn pressurise water that is delivered onshore via pipeline. The technology is perfect for island countries or military bases that require electricity.

CWE has spent 10 years researching the technology. Funding is usually a problem for such a company, however management have been exceptional in extracting money from the federal government to pay for research and development. Over $20 million worth of funding in the past few years in fact. Their CETO 5 (Perth Wave Energy Project) is nearly installed and operational at their site near Garden Island in WA. The project will provide electricity and water for Australia’s largest naval base, HMAS Sterling. Their next project is developing CETO 6, which will be commercial.

If the company announces early next year that their CETO 5 project is installed, operational and producing electricity and water for HMAS, then it could well change the way our country (and many others) uses electricity.

My Favourite Value Pick

Woodside Petroleum (ASX:WPL) – the current collapse in oil prices (crude is down 20.8 per cent in the past year) is very much down to demand and supply. The United States of America becoming an exporter of the stuff (thanks to shale gas) has meant supply is considerably outstripping demand and as a result, prices fall. OPEC keeping production stable last week didn’t help the cause. In such an environment, only the fittest survive and WPL is the lowest cost producer with a net profit after tax break-even oil price of $US37/bbl for 2015 and 2016. The company is best placed to endure low oil prices, and maybe even acquire cheap assets. Value picks don’t come without risks. At an oil price of $US80/bbl (currently $US66bbl) earnings per share almost halve as does the future dividend, so a bounce is needed.

*Sam Fimis is a stockbroker with Patersons Securities and author of Premiership Portfolio: 6 Step Guide to Succeeding in the Stock Market – www.premiershipportfolio.com Twitter @premportfolio