Fave Five (7/7/2017)

Fave Five (7/7/2017)

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 average 1-year ACE total return forecast is 9.8%.

The Fave Five This Week

  • Bank of the Internet (BOFI)
  • General Electric (GE)
  • IMAX (IMAX)
  • Monro Muffler (MNRO)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 23, 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. 1-Yr GS: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +0.2% since inception. 44.8% of selections have outperformed the Wilshire 5000 since original selection. The absolute annualized rate of return is 13.9%.

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

MANIFEST 40 (3/31/2016)

Your Most Widely-Followed Stocks: An Update

Our MANIFEST 40 is a celebration of collective excellence in stock selection, strategy and disciplined patience.

The 40 stocks are something of a barometer because we know that these community favorites are not simply followed … most of them are also widely owned, with considerable diligence and vigilance.

MANIFEST 40 (March 2016). Performance Results. These are the most widely followed stocks by Manifest Investing subscribers. Current leader Apple (AAPL) was added on 9/24/2009 and steadily climbed the ranks while generating a relative return of +20.3% (annualized) since then. Figures in parentheses are the ranking back in December 2015.

The rate of return is 9.0% since inception (9/30/2005). Bottom line? On an annualized basis, your community favorites have beaten the Wilshire 5000 by +3.6 percentage points — a relative, or excess, return that probably portends outsized success with our actual portfolios.

Quality (90) is solid and the overall return forecast (8.9%) is positioned to outperform the Wilshire 5000. At an average sales growth forecast of 6.8%, we’d to see some faster-growing companies adopted by our community.

Capturing Attention: Chargers

Gilead Sciences (GILD) moved from #25 to #22 as most of the list remained rather steady. Visa (V) is a new addition at #40. The results of $100 positions investing in any of the Top 40 companies can be viewed at any time via the public dashboard on the home page.

“We have always believed that the collective decisions made by our community of long-term investors are worth huddling over … a place where ideas are born.”

Shopping in the Dow 30 Aisle

Diamond (DIA) Expectations

The last few years have been pretty good to the Dow 30 stocks — after spending the first ten years of this century in the dog house. The trailing 5-year annualized return is 15.0% versus the Wilshire 5000 at 16.8%. So the other 4970 stocks have actually continued to outshine the Dow 30.

One of the things we’ve noticed is that the renaissance of many of these stocks has persisted — with continuing improvement in profitability, etc. — while many companies are under more margin pressure and “deceleration.”

Here’s a quick look at our 5-year forecasts for the Dow 30 as well as the Value Line low total return 3-5 year forecast. We’ve also included a quick look at Morningstar and S&P price-to-fair value (P/FV) metrics. (100% = fairly valued … <100% is potentially attractive)

In keeping with some of the Groundhog shopping, we also display the 1-year outlooks based on analyst consensus and S&P target prices.

Nutshell: Microsoft (MSFT) and General Electric (GE) are consensus favorites. S&P thinks JP Morgan (JPM) is a steal. There’s an IBM (IBM) bandwagon at Morningstar. Value Line is skeptical about the long-term forecast for Disney (DIS), Cisco Systems (CSCO) and Home Depot (HD). S&P doesn’t want Coca-Cola (KO) … not even with a 10-foot pole. Morningstar thinks United Health (UNH) is overvalued, too. S&P is scratching their heads over Exxon Mobil (XOM) and Chevron (CVX) … and we’ll stay tuned to see what conclusions are reached by Team Stovall.

Djia consensus 20150206

General Electric (GE)

It has been a while since we took a closer look at General Electric (GE), the 7th most widely-followed stock by Manifest Investing subscribers. The company is anything but a stranger to this community of investors.

It’s also safe to say that it’s been a source of considerable angst and frustration for many of us.

Company Description

General Electric Company is one of the largest & most diversified technology and financial services companies in the world. With products ranging from aircraft engines, power generation, oil and gas production equip., and household appliances to medical imaging, business and consumer financing, and industrial products, it serves customers in more than 100 countries.

Business Model Analysis

Even successful giants are vulnerable to the impact of a deep recession and GE turned out to be no exception. During the 2007-2009 financial crises, GE Capital served as a catalyst that deepened the damage. Because GE Capital was essentially a venture banking enterprise nested within the industrial giant — and accounted for over 50% of revenues — when the financial markets imploded, the impact was fairly severe and maybe even life threatening. That’s the only way to account for a price drop from $42.20 to $5.70 (-86.5%) for this blue chip leader.

Outlook

The Value Line low total return forecast for General Electric is now 13% — as the long-term low price forecast was bumped from $30 to $35 in the current update.

Analysts appear to be optimistic about the Alstom acquisition and fairly certain that the global condition will ultimately improve. Infrastructure matters. This urgently includes the United States as the electrical system condition is well on its way to resembling those bumpy pothole-ridden atrocities we used to call roads. The only difference is that when the electricity system fails — it takes a lot of critical stuff with it. General Electric is crucial to restoring the necessary reliability of our electrical supply.

We like this blue chip from a number of perspectives. The year ahead will probably only bring returns in line with the overall market; however, out to 2017-2019 we think this equity has room to run. Too, with the dividend north of 3%, income investors have a strong play here.” — Value Line (1/16/2015)

The growth forecast is based on emphasizing the last 2-3 years of actual data in combination with the Value Line forecasts. This industrial giant is retooling, exiting a few businesses while bolstering others. The Alstom addition is an example. For this reason, we focus on the right hand side of the business model trends — and find 4-5% top line growth feasible.

Value Line has a 3-5 year projected net margin of 15.3% and this is a big part of the 14.7% total return forecast for the analyst section of the study. While achievable, we’d be more comfortable with a profitability forecast in the 12-13% range based on the historical profile.

A projected average P/E ratio of 15.0x for a blue chip leader is solid.

General Electric’s exposure to capital-intensive industries makes for a rough road during corrections and recessions. Bringing home an EPS stability of 76 is quite an achievement. The “dent” made in the company the 2008-2009 recession manifests in the Financial Strength rating. (It used to be higher) Overall, General Electric still ranks in the top 10th percentile of all companies when it comes to quality — and we’d be unsurprised to see the overall quality rating increase in years ahead.

It’s been a bumpy road. (Understatement alert) But business results have been steadily improving. 2015 may be yet another flat spot in the stock price trend if oil prices continue to fall — and global recessionary conditions persist.

Ge chart 20150115

Value Line Low Total Return Screen (4/19/2013)

Companies of Interest

In keeping with last week’s Phoenix theme, many companies were bolstered in this release of updated company reports … leading to one of the stronger “Materially Stronger” collections we’ve seen in quite some time. (The definition of materially stronger is that the long-term low price forecast issued by Value Line has ‘step changed’ 20-25% over the last three months.)

General Electric (GE) is #18 in the MANIFEST 40 and has steadily been making portfolio and business/capital structural changes while continuing to position the company in high opportunity potential areas for future. Pentair (PNR) is making some of the same types of strategic moves recently. Checkpoint Software (CHKP) has some of the strongest fundamental and technical characteristics in this update field — and sports a fusion ranking of 99.

Materially Stronger: General Electric (GE), Pentair (PNR), Hillenbrand (HI), GATX (GMT), Roper Industries (ROP), Whirlpool (WHR), Gencorp (GY), Lindsay Corp (LNN), Tecumseh Products (TECUA), Morgan Stanley (MS)

Materially Weaker: E*Trade (ETFC)

Market Barometers

The median Value Line low total return forecast is 6.8%, compared to 6.7% last week.  (The long term average for this forecast is 8.5%)