Fave Five (9/29/2017)

Fave Five (9/29/2017)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings. The median 1-year ACE total return forecast is 11.1%.

This week we return to the triple play screening method for our five favorites. The triple play possibility occurs when you find a stock that is very depressed in price and also appears to be on the verge of substantially boosting its profit margins. The triple play effect is possible in that:

(1) The depressed price of the stock can return to normal levels;

(2) increased profit margins can produce increased EPS and a higher price;

(3) may also cause higher P/E ratios, or P/E expansion.

The Fave Five This Week

  • Alliance Data Systems (ADS)
  • Coach (COH)
  • CVS Health (CVS)
  • General Electric (GE)
  • Ulta Beauty (ULTA)

The Long and Short of This Week’s Fave Five

The Long & Short. (September 29, 2017) 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 www.morningstar.com 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.

Fave Five Legacy (Tracking Portfolio)

The rate of return for the tracking portfolio is 21.6% since inception.

The relative/excess return for the Fave Five tracking portfolio is +6.1% since inception.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Goldman Sachs: Buy and Avoid

This was a tangential subject of discussion during the March Round Table. We’ve added Goldman Sachs price targets and will be monitoring them versus ACE and S&P.

Nutshell: Might this be a way to gauge sentiment? In this case, these differentials could deliver influence or impact, providing a potentially meaningful sentiment indicator.


Gs buy avoid list 20150331

As a quick reminder to be careful out there, this is what this morning held for Garmin (GRMN).

That’s a reduction from $63 to $54.

Source: Benzinga.com

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More Fun With Goldman Sachs

When they’re not doing “God’s work” or referring to retail investors as Muppets, Goldman Sachs (GS) makes some calls — long and short — that can be influential in the market. In some Wall Street circles, the legions of Goldman Sachs are playfully known as Masters of the Universe.

In addition to the two lists shared above, here’s a list of nineteen stocks that Goldman Sachs believes are headed for price swoons — a list of stocks to sell short.

Goldman Sachs offers three criteria on how to pick stocks to short:

  • Look for individual stocks with high valuations that have a tendency to underperform;
  • take hints from mutual funds as they do a good job of selecting shorts;
  • and look for stocks that are likely to move on company-specific factors and are less prone to moving with general market and sector trends.

Among the overvalued stocks Goldman thinks could drop are Celgene (CELG), OReilly Automotive (ORLY) and Red Hat (RHT). Stocks underweight by mutual funds that could fall are HST, CTL and EQR; and likely to deviate from the broad market and their sectors are KLAC, JEC and COH.

Rounding out Goldman’s 19 stock recommendations that could reward short sellers: ARG, DO, DISCA, FLS, KSS, MOS, NDAQ, NVDA, TDC, WU.

Tracking Dashboard: http://www.manifestinvesting.com/dashboards/public/goldman-shorts-20140414

Here are the tracking dashboards for the Goldman MOST UPSIDE and MOST DOWNSIDE stocks as of 3/31/2015:

Value Line Low Total Return Screen (11/1/2013)

The subtle deterioration of fundamentals continues unabated and the number of companies considered “materially weaker” outnumber the “materially stronger” entries again this week. This means that the long-term forecasts continue to show more downside pressure.

This week includes the shopping (retail) stocks and the sale opportunities continue to be fairly thin and far between.

Companies of Interest

Materially Stronger: Zale (ZLC), GameStop (GME)

Materially Weaker: Body Central (BODY), Coach (COH) 1, Ascena (ASNA), Bed Bath & Beyond (BBBY), Wal-Mart (WMT) 2, American Eagle (AEO), Nordstrom (JWN), Penney J.C. (JCP), Aeropostale (ARO)

1 Coach (COH) 3-5 year low price forecast reduced from $75 to $65.
2 Wal-Mart reduced from $100 to $95. (FYI)

Market Barometers

The median Value Line low total return forecast (VLLTR) is 4.0%, up slightly from last week’s 3.9%.

Sweet 16 Screen (May 2013)

In Search of High-Quality Stocks On Sale

The screening results shown here represent the survivors of a screen based on a projected annual return in the Sweet Spot, an excellent Quality Ranking, leadership financial strength and EPS stability and a dash of Motley Fool CAPS positive sentiment.

Overall Market Expectations

Mipar 20130430

The median projected annual return (MIPAR) for all 2400+ stocks followed by MANIFEST (Solomon database) is 6.6% (4/30/2013). The multi-decade range for this indicator is 0-20% and an average reading since 1999 is 8.5%.

Companies of Interest

With the median return forecast hovering at 6.6%, less than the historical average and nearing historical lows, it still makes sense to shop amongst the highest quality companies.

This month’s Sweet 16 provides a smorgasbord of companies that keep making appearance on a variety of our screening efforts, model portfolios and/or educational webcasts.

Techne (TECH) may be among the fundamental analysis leaders but the technical indicators (including sluggish momentum) are weak. The stock was recently dumped (sold) by the Motley Fool’s flagship newsletter, Stock Advisor. Study carefully.

The French integrated energy company Total (TOT) has hovered near the top of our screens for a few months. The price-to-fair value ratio at Morningstar is 89% and the PnF sentiment is “bullish” with price pressure of +71%. The PAR is 15-16% and the Value Line low total return forecast checks in at 16% also. With a top decile quality ranking and an overall fusion rank of 100, the stock is worth a closer look.

I think Varian Medical (VAR) and Masimo (MASI) are probably impacted by the medical device tax debate. They’re both leaders in key areas, targeted radiation therapy (Varian) and non-invasive monitoring (Masimo). The debate is a little like watching a dog chase it’s tail. Call it a tax or surcharge or whatever, it incrementally elevates the cost of health care (bizarre since it’s embedded in an affordable care law) — and patients either pay more or these companies atrophy margins.

Coach (COH) continues to fire on all cylinders and the cash register queues refuse to abate.

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Weekender Screen: FOSL COH RUE

Tomorrow’s Value Line edition update is basically the “Shopping Edition.” It includes a bunch of retailers, apparel and specialty retail companies with a few others. But it’s clearly deluged with those consumer discretionary companies that torment us.

To kick things off, for those in rainy day refuge or looking for some stocks to study in advance of the update, here’s some of the stocks we’ll most likely be chewing on over the next few days.

All of these stocks have relatively high return forecasts, either good or excellent quality rankings, relative price strength and momentum and in most cases, symptoms of positive (upward) price pressure.

Fossil (FOSL) and Nick Stratigos’ Round Table Selection of Rue 21 (RUE) head this list and qualify on all counts. Our 8th most widely-followed stock, Coach (COH) qualifies with the exception that COH still seems to languishing in bearish sentiment — although last week’s positive news probably places that weaker characteristic in jeopardy.

Weekender screen 20130428

Triple Play Screen (3/19/2013)

Photo Credit: Alan Cleaver via Compfight cc

A couple of people have requested a quick triple play screen in the last few days, so we’ll take a closer look.

Companies of Interest: Recent Round Table selection Vera Bradley (VRA) just toggled back to “Bullish” and with fundamentals intact, the price drop could be a sale vs. distressed merchandise. Kohl’s (KSS) was downgraded by JP Morgan this morning — so study carefully and monitor for impact on long-term trends. Coach (COH) continues to be challenged in a challenging retail environment but the news/expectations out of China have been quite good of late. United Health (UNH) has some of the stronger P/E expansion and margin enhancement potential on the list.

Keep in mind that the Triple Play screening criteria is generally most useful in the later stages of a bear market but the concepts are always valid.

Here are the three major Triple Play criteria:

  • Damaged stock price (Elevated return forecast)
  • Potential for profitability improvement (margin expansion)
  • Potential for P/E expansion

Using our stock database:

We begin by limiting the field to companies with Fusion Rankings (a combination of return forecast, quality ranking and technical factors) greater than 80.

We then limit the field to companies with (1) projected P/E ratios greater than current P/E ratios and (2) profitability forecasts greater than current profitability levels. P/E expansion and margin enhancement are both annualized in the results table.

The qualifying companies are sorted (descending) by MANIFEST Rank.

View From The Top Shelf

Sweet 16: Screening Results (March 2013)

This month features the top percentile of all stocks covered at MANIFEST on the basis of quality (our combination rating of financial strength, earnings stability and relative growth and profitability forecasts). It’s not the customary sixteen stocks or so … but these twelve quality champions are formidable and worthy of a closer look and automatic/perpetual pounce pile status.

Overall Market Expectations

The median projected annual return (MIPAR) for all 2400+ stocks followed by MANIFEST (Solomon database) is 7.2% (2/28/2013). The multi-decade range for this indicator is 0-20% and an average reading since 1999 is 8.5%.

Companies of Interest

With the median return forecast hovering at 7.2%, less than the historical average and nearing historical lows, it makes sense to shop on the top shelf. If prices continue to surge absent any strengthening of fundamentals, the return forecast could get significantly lower. The subtle whittling of expectations (no slashing) continues as we begin the first quarter updates for 2013. Invest in the best (highest quality) but only when they’re suitably on sale.

The top shelf company with the highest fusion rating (combination of fundamental and technical analysis scoring) is Cognizant Technology (CTSH). Cognizant is well-positioned within its industry with a strong track record and stands to benefit as the global recession turns to recovery.

Mesa Labs (MLAB) continues to score well and is one of our favorite companies from this year’s batch of promising small companies from Forbes.

The recent price swoon in Coach (COH) leaves the company with the lowest price-to-fair value ratio (76%) from Morningstar and Standard & Poor’s (83%) among the companies on the top shelf. The price reduction also generates an annualized low total return forecast of 16.4% at Value Line. There’s a rumor floating that somebody thinks all of the purses are a bit pricey … but those crowds of trampling shoppers and a legacy of results suggests that the whole company might be worth buying. I don’t think the price tag hanging on the company is $40-something.

Those return forecasts across the board look pretty good on the top shelf … not a bad idea to start there.

What’s Your Wallet? (COH)

Photo Credit: dicharry (Creative Commons)

Coach (COH) certainly qualifies as a community favorite. Ranked #10 in the MANIFEST 40 collection of our most widely-followed stocks, a number of us are owners of this high-quality company.

In this week’s update for Value Line, the 3-5 year low price forecast has been adjusted from $85 (11/2/2012 company report) to $70 (2/1/2013). At a stock price of $51.21, this change alone drops the low total return forecast from 15-16% all the way to 10%. Now … 10% is nothing to sneeze at when the overall average low total return forecast is 7.7% — but that five percentage point punch to the midsection is well, a little breathtaking.

Sales Growth Forecast

Profitability Trend and Analysis

Projected Average P/E Ratio

Equity Analysis

Using a current (trailing 12-month) revenues of approximately $5 billion, a growth rate of 11%, net margin of 20% and a projected average P/E of 18x (payout ratio = 33% and projected yield = 1.9%) generates a long-term return forecast of approximately 18%.

The expectations of the analyst consensus, Morningstar and Standard & Poor’s are considerably more optimistic than Value Line — raising the overall average return forecast to a much higher level than 10%. It’s entirely possible that Value Line is one of the early arrivals and that we could see some weakness in the other forecasts, and we’ll stay vigilant — tuned for any material changes.

Value Line Low Total Return Screen (2/1/2013)

Based on a combination of fundamental and technical analysis, Rue21 (RUE) appears to be among the more attractive candidates for further study this week.

We’ll be taking a closer look at Aeropostale (ARO), Coach (COH), Deckers Outdoor (DECK) and Kohl’s (KSS) as they’re all current tracking portfolio selections or ranked fairly highly among our most widely-followed stocks by our subscribers.

Materially Stronger: Iconix (ICON), Foot Locker (FL), Christopher & Banks (CBK)

Materially Weaker: Aeropostale (ARO), Coach (COH), Bebe Stores (BEBE), Kohl’s (KSS), J.C. Penney (JCP), Big Lots (BIG), Crox (CROX), Deckers Outdoor (DECK)

Challenge Club (January 2013 Meeting)

January Meeting Highlights

The 2012 Annual Report was presented. Relative return for 2012 was +1.4%.

Unit value at the time of the meeting is $24.21 — 6.9% since inception vs. 3.3% for Wilshire 5000.

Blog link (for sharing): https://expectingalpha.com/2013/01/17/challenge-club-january-2013/

Motions, Decisions

1. A motion to buy 100 shares of Green Mountain Coffee (GMCR) failed to pass.

2. The motion to accumulate 100 additional shares of AFLAC (AFL) passed (82%).

3. The motion to accumulate 125 shares of FactSet Research (FDS) passed (94%).

4. A motion to accumulate 100 shares of Coach (COH) failed to pass. (~50%)

The dashboard at meeting end (but before January contributions):

Challenge dash 20130118