Round Table (March 2016)

Round Table (March 2016)

Stocks Featured

The audience selected Neogen (NEOG).

The performance (since inception) of the Round Table tracking portfolio is 11.8% annualized.

This is a relative return of +2.7% versus the Wilshire 5000.

52.2% of all nominations have outperformed the Wilshire 5000 since selection.

Top Ranked Stocks by Return Forecast AND Quality

The Long & Short. (March 29, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target. 1-Yr Rhino Outlook: 1-year total return forecast based on most recent price target issued by Goldman Sachs, Merrill Lynch, JP Morgan Chase or Morgan Stanley.

Channeling Hugh: Companies Near 52-Week Lows

The following screening results intrigued us. We were simply seeking higher quality companies with decent return forecasts that are hovering near their 52-week lows, very much in the spirit of Hugh McManus and his bargain hunting mode.

When the results were displayed, I had to go back and make sure I hadn’t accidentally limited the sector to “healthcare” — because this is one of the features.  But I didn’t.

I guess this confirms that healthcare stocks have had a rough first quarter.

$100/bbl On The Wall, $100/Barrel

Take one down, pass it around …

Here’s a 20-year look at the price of crude oil ($WTIC).

$100/barrel will be back before most people expect — perhaps in the 2018-2020 range. Unless somebody propagates a successful and sustained fusion reaction in their garage.

It is interesting that the slope of the long-term trend following the Great Recession resembles what we’re seeing for top-line growth from all companies, collectively.

 wtic  100 2019 2020

This Week at MANIFEST (12/5/2014)

Wild Rides, Cyber Monday!

That dull thud we all heard over the Thanksgiving holiday was the energy sector turkey. As shown above, the energy sector took it on the chin to the tune of an 11% swoon as OPEC maintained production levels providing some hefty turbulence. As the following two charts illustrate, few companies in the group were immune from the carnage. Exxon Mobil (XOM) is actually one of the tamer examples from the sessions as these 5-day charts show the disruption.

But it appears that Monday is already bringing some relief … or at least a frozen turkey bounce for some of the higher quality companies in the group …

This week’s update batch (Issue 3 in the Value Line Investment Survey for those keeping score) includes a number of the affected companies. We note several things. First of all, the forecast fundamentals for a number of these companies were already being trimmed by the Value Line analysts. It will be interesting to watch over the next quarter to see if expectations continue to be reduced. We’ve often noted a bifurcation between Morningstar and S&P when it comes to the cyclical stocks — particularly in the energy industry. In this case, Friday’s swoon delivers a price-to-fair value ratio of 91% at Morningstar, essentially screaming something on the order of a Black Friday rush. S&P says “not so fast.” The S&P price-to-fair value ratio is actually greater than 100% (101%) and S&P has been steadily and materially reducing their fair value estimates for the energy stocks over the last few weeks and months. We tend to favor the S&P cyclical expertise in a tiebreaker … so we’d urge caution and an insistence on high-quality during opportunity shopping.

As Hugh has pointed out, BP (BP) was among the tumblers and probably rates fairly well as a long-term opportunity. Exxon Mobil (XOM) is among the study candidates also along with some of the other integrated blue chippers. Keep in mind that Hugh normalizes versus the 52-week low, seeking opportunities when stock prices are near their trailing 52-week lows. Hugh’s spreadsheets compare current prices to their 52-week lows. The accompanying charts for S&P and Morningstar do the same thing — but the comparison is between the current price and the fair value. Less than 100% is potentially attractive, unless it gets “too low.” Stocks in the sweet spot would likely fall into a P/FV ratio of 80-90% representing a discount to fair value of 10-20%.

Coming Events and Attractions

We will catch up on the final November columns and we’ll be out with the December issue of Expected Returns this week.

We’ll continue our expanded coverage of the update stocks this month as part of our quarter long test drive of this feature and the studies and shared ideas it delivers. Please tell us what you think and feel free to join in the Forum discussions for the deeper dives on some of the stocks.

Save the Date: The December Round Table will be held on December 30 at 8:30 PM ET. Register via:

Companies of Interest: Value Line

The average Value Line low total return forecast for the companies in this week’s update batch is 2.8%.

Materially Stronger: Zebra Technologies (ZBRA)

Materially Weaker: Rhino Resource Partners (RNO), Clean Energy Fuels (CLNE), Gulfmark Offshore (GLF), UGI (UGI), Kronos World (KRO), Marathon Oil (MRO)

Coverage Initiated: Methanex (MEOH), Concho Resources (CXO)

Discontinued: Walter Energy (WLT)

Companies of Interest: Morningstar

The average price-to-fair value (P/FV) ratio at Morningstar for the companies in this week’s update batch is 91%!

It will be interesting to see if the Morningstar analysts make any downward adjustments in fair value for the energy stocks during this turbulent ride.

Southwestern Energy (SWN) checks in at 55% — a stock that Morningstar apparently believes is significantly undervalued.

Companies of Interest: S&P

The average price-to-fair value for the companies in this week’s update batch is 101% — according to S&P.

There are always a couple of things to check during a swoon. One is whether the perceived opportunity is too good to be true. Companies with P/FV ratios less than 70% … or PAR values greater than 16% come to mind. The other is when companies are guilty by association when they don’t deserve it. Is it possible that Imperial Oil (IMO) should be less affected?

Ecolab (ECL) makes the S&P short list at a P/FV of 89% and a quality ranking of 86 — suggesting that it may be worthy of further study.

Market Barometers

The median Value Line Low Total Return (VLLTR) Forecast is at 3.7% — unchanged from 3.7% last week.

Stocks to Study

The following update stocks are ranked in the top 10th percentile of all companies we follow (MANIFEST Rank > 90) and this display provides a wide berth of dueling opinions, as usual.

Value Line Low Total Return Screen (6/7/2013)

Companies of Interest

All things considered (e.g. return forecast, quality, sentiment, momentum) Total (TOT) still ranks as a favorite among this group of study candidates. S&P agrees, checking in with a fair value of $51.40 and a “buy” rating. yields a “bullish” point-and-figure rating with +42.4% price pressure. There is modest potential for P/E expansion and neutral with respect to margin enhancement.

Materially Stronger: American Vanguard (AVD), Conoco Phillips (COP), Ferro (FOE)

Materially Weaker: Walter Energy (WLT), Suncor Energy (SU), Kronos Worldwide (KRO), SBA Communications (SBAC), Viasat (VSAT)

Market Barometers

The median Value Line low total return forecast (VLLTR) is now 6.4%, down from 6.5% last week.