Fave Five (8/19/2016)

Fave Five (8/19/2016)

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. This week’s batch is a nod to Cy Lynch and Anne Manning who prefer considerable financial strength when return forecasts ebb lower. We also required top quintile EPS Stability — for dividend lovers, a bedrock of EPS is the source of dividends (along with the company check book.) Some of these are flying at lower altitudes — an acceptable condition for core positions but Morningstar believes all five have the potential to outperform the market over the long term.

The Fave Five This Week

  • Alphabet/Google (GOOG)
  • Cognizant Technology (CTSH)
  • Granger, W.W. (GWW)
  • Microsoft (MSFT)
  • Novartis (NVS)

Context: The average 1-year total return forecast (via ACE) for the Value Line 1700 is 14.2%. The average 5-year return forecast for $VLE is 6.6% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (August 19, 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 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.

Weekend Warriors

The return for the Weekend Warrior tracking portfolio is 11.6% since inception. 43.2% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Fave Five (8/5/2016)

We took a different tack this week, focusing on companies with HUGE financial strength and combining those leaders with the best 1-year “sentiment” known as target prices. This week’s companies are: Alphabet (GOOG), Cognizant Technology (CTSH), Disney (DIS), Novartis (NVS) and Starbucks (SBUX).

Fave Five (8/5/2016)

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 Fave Five This Week

  • Alphabet (GOOG)
  • Cognizant Technology (CTSH)
  • Disney, Walt (DIS)
  • Novartis (NVS)
  • Starbucks (SBUX)

Context: The average 1-year total return forecast (via ACE) for the Value Line 1700 is 15.7%. The average 5-year return forecast for $VLE is 5.9% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (August 5, 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 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.

Weekend Warriors

The relative return for the Weekend Warrior tracking portfolio is +4.3% since inception. 47.2% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Stocks to Study (5/13/2016)

This Week at MANIFEST (5/13/2016)

“Science and technology revolutionize our lives, but memory, tradition and myth frame our response.” – Arthur Schlesinger

“The real danger is not that computers will begin to think like men, but that men will begin to think like computers.” – Sydney Harris

This week’s update batch has a number of community favorites in the mix. The following companies are all members of the MANIFEST 40 — the most widely-followed companies by our subscribers:

  • Cognizant Technology (2)
  • Microsoft (3)
  • Oracle Corp. (16)
  • Alphabet/Google (19)
  • Wells Fargo (22)
  • Price T. Rowe (36)

Amazon (AMZN) has been an important contributor to Hugh McManus and his superior returns as a participant in the Round Table. AMZN ranks as the all-time leading selection despite that lonely selection in Chicago a few years ago. Other companies that have been featured in Round Table sessions include: Alphabet/Google (GOOG), Bank of America (BAC), Bank of New York Mellon (BK), Cognizant Technology (CTSH), eBay (EBAY), Global Payments (GPN), Infosys Tech (INFY), Microsoft (MSFT), Oracle (ORCL), PayPal (PYPL), Priceline (PCLN), SEI Investments (SEIC), T. Rowe Price (TROW) and Western Union (WU).

Results, Remarks & References

Companies of Interest: Value Line (5/13/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 6.9% vs. 5.4% for the Value Line 1700 ($VLE).

Materially Stronger: SLM (SLM), Priceline.com (PCLN), Western Union (WU), BlackRock (BLK), Earthlink (ELNK), Adobe Systems (ADBE), Facebook (FB), Overstock.com (OSTK), Amazon (AMZN)

Materially Weaker: Invesco (IVZ), EZCorp (EZPW)

Discontinued:

Coverage Initiated/Restored:

Market Barometers

Value Line Low Total Return (VLLTR) Forecast. The long-term low total return forecast for the 1700 companies featured in the Value Line Investment Survey is 5.4%, unchanged from 5.4% last week. For context, this indicator has ranged from low single digits (when stocks are generally overvalued) to approximately 20% when stocks are in the teeth of bear markets like 2008-2009.

Stocks to Study (5/13/2016)

  • RedHat (RHT) — Highest MANIFEST Rank
  • Citigroup ( C ) — Highest Low Return Forecast (VL)
  • Priceline (PCLN) — Lowest P/FV (Morningstar)
  • Priceline (PCLN) —Lowest P/FV (S&P)
  • H&R Block (HRB) — Best 1-Yr Outlook (ACE)
  • Symantec (SYMC) — Best 1-Yr Outlook (S&P)
  • Netflix (NFLX) — Best 1-Yr Outlook (GS)

The Long & Short of This Week’s Update Batch

The Long & Short. (May 13, 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 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” Outlook: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

May Round Table May 22, 2016 at 11 AM ET ONLINE

Stocks Featured: TBD

The Round Table tracking portfolio has beaten the market by 3-4 percentage points over the last five years. Consider joining Ken Kavula, Cy Lynch and Mark Robertson as they share their current favorite stock study ideas.

The May session will be simulcast from the NAIC Better Investing national convention near Washington D.C.

Registration: https://attendee.gotowebinar.com/register/8401811825391796481

Fave Five (4/29/2016)

Fave Five (4/29/2016)

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 Fave Five This Week

  • Air Methods (AIRM)
  • Aaron’s (AAN)
  • Alphabet/Google (GOOG)
  • Apple (AAPL)
  • Skyworks Solutions (SWKS)

Context: The median 1-year total return forecast (via ACE) for the Value Line 1700 is 9.3%. The median 5-year return forecast (MIPAR) is 6.4% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (April 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 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.

Weekend Warriors

The relative return for the Weekend Warrior tracking portfolio is +15.2% since inception. 59.5% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Booyah 38 For 2016

Fun With Dashboards

Booyah 38 for 2016

We take a look at the consensus outlooks (both short term, or 1-year, and the long term forecasts) for the best stocks for 2016 featured by Jim “Booyah” Cramer. We follow Jim for the educational slant that he often provides … and point out that his track record is better than most of his critics believe. Our community of investors may well remember the group book report that we shared via Get Rich Carefully (March 2015). Our favorites from the field would be Celgene (CELG), Biogen IDEC (BIIB), Under Armour (UA), Google (GOOG or GOOGL) and Starbucks (SBUX).

TheStreet’s Jim Cramer has a theory on what’s ailing the stock market these days.

The theory goes that there is a “scarcity” of investable stocks, with the exception of a handful of winners across sectors.

“I think we are stuck in an era where we are beginning to recognize that we have too many stocks, too many public companies, too many companies that don’t warrant our attention or our investment in,” Cramer said in prepared remarks for his keynote speech at The Deal Economy: Predictions and Perspectives for 2016 and featured at 38 Annointed Stocks To Add To Your 2016 Portfolio.

Booyah 38 For 2016 Dashboard

Cramer’s (38) stock selections are presented here, alphabetically and will be tracked on the dashboard at: Booyah 38. One of the first things we notice is that the overall average long-term forecast is a mere 5.2% when the average stock has a median long-term return forecast (MIPAR) of approximately 7.5%. This is some of what Cramer is getting at when he talks scarcity. Many of these stocks during a protracted recovery with persistent recessionary characteristics have already attracted a lot of attention from investors. Many of them can be considered defensive or protective measures against corrections or bears.

They’re largely from the S&P 500. In fact, only two hail (Palo Alto Networks & Ulta) from “outside the S&P 1500” with only one, Treehouse Foods (THS) from the S&P 400 Mid-Caps. But Cramer’s selections do manage to average a growth forecast of 10.3% due largely to what might be considered a first cousin of our Smoothie Investing portfolio. Recall that the Smoothie 20 was built from equal parts established blue chip companies and NASDAQ promising stars last summer. The Booyah 38 certainly displays some essence of this.

Quality (75.7) is also a little thin. If scarcity and low return forecasts are an issue — seeking high-quality companies is prudent protection and can be an effective oasis.

Booyah 38 For 2016: Dashboard.

Booyah 38: The Long Of It

Our “forensic review” of Cramer’s stock selections once again underscores some of the challenges and differences in the analyst community. As shown here, there’s a lot of red ink dripping in the Value Line and Morningstar columns. In fact the average long-term return forecast for the Booyah 38 is 0.1%. Fair value is another long-term measure — derived from a discounted cash flow analysis — as performed by Morningstar, S&P and others … The comparison of current price to fair value (P/FV) displays stocks that are attractive (<100%) versus those considered overvalued (P/FV > 100%).

The average P/FV (Morningstar) is 110% and S&P checks in a little more favorably at 104%.

Here’s the Booyah 38 ranked by MANIFEST Rank.

Booyah 38: The Short Of It

But this is really all about the next year, 2016. We gauge expectations using a number of resources including S&P, the analyst consensus estimates (ACE via finance.yahoo.com) and the most influential rhinos (Goldman Sachs, Merrill Lynch and any investment firm with Morgan embedded in the title). We do this with full awareness of the elusiveness, evolution and ebbing nature of forecasts. See: Ritholtz on Forecasting

The median 1-year total return forecast for the Value Line Standard Edition population ($VLE) for the three sources displayed here is:

  • Analyst Consensus Estimates (ACE) = 16.7%
  • Standard & Poor’s (S&P) = 13.4%
  • Goldman Sachs & Other Rhinos (‘GS’) = 14.6%

The average from the Booyah 38 checks in at 11-13% for the companies displayed here.

Closing Thoughts

As we mentioned, 35-of-the-38 stocks are in the S&P 500, so it’s worth wondering if this many stocks aren’t “designed” pretty much to track the S&P 500 (VFINX) for 2016 … and leaving out companies like Apple (AAPL) seems a little precarious.

Just for kicks the average 1-year total return outlook (ACE) for the S&P 500 is 15.6%.

Contrast this with Eddy Elfenbein’s Buy List efforts and our recent Gone Shopping With Eddy analysis of his 2016 selections (due out in a few days — we will let you know). We don’t know precisely how Crossing Wall Street hues their shopping list down to size but the evidence suggests some attention to quality … and the selections seem to have a dual short-term and long-term favorability that seems to have served Eddy well.

We hope everybody does well, shops carefully and experiences the best returns. Booyah!

A Few Of Our Favorite Screens

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These Are a Few of our Favorite Screens

For the January Round Table, we spent some time with a few screening resources in the quest for some good ideas for further study. We’ll collect them here and tabulate the overall results, using a version of the coach’s poll for collegiate sports (20-16-12-8-6-4-2-1 for votes) and see what percolates to the top of the charts.

Screens Featured

The Top 25

Knighthunt4

Ivory Soap Screen

This screen is based on a recognition that the two most important characteristics of any investment are (1) the return forecast and (2) the quality of the company. The MANIFEST Rank is an index that combines the two characteristics with essentially equal weighting. Here are the top eight results of a current screen based solely on MANIFEST Rank > 99.44

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Triple Play Screen

This is one of the more popular screens that we’ve covered over the years. It generally works best after a bear market has raged for a while.

It focuses on some of the primary drivers for higher long-term return forecasts. The three things we’re looking for are:

  • Elevated return forecast … generally because of a (hopefully) temporarily hammered stock price.
  • Potential for P/E Expansion … a higher P/E in the future than the current P/E.
  • Margin Enhancement … projected profitability in the long-term forecast that is higher than current levels.

Using one of the current leaders for this screen, we note that Qualcomm (QCOM) has a low return forecast of 9-10% according to Value. Keep in mind that the average low return forecast for the Value Line universe is 3-4%.

We also see a future P/E of 16.0x versus current levels of 13-14×.

Value Line expects “flat” net margins in the 33-34%. The reason this triggered in our database is that the analyst consensus is more optimistic than Value Line when it comes to future profitability for Qualcomm.

For more on this Triple Play screening approach, check out the archived presentation at: https://www.manifestinvesting.com/forums/14/topics/2778

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Gateway Champions

This screen is inspired by our repeat group champions, the Broad Assets investment club of St. Louis. Broad Assets repeated as champion last year and is running 2nd this year as Groundhog VIII comes to a close in a few days. We featured the concept behind this screen in our Victory By Escape Velocity? cover story from May 2014.

Nutshell: If you really believe that stock price follows earnings, it makes all the sense in the world to look for those conditions.

In this case, we focus on year-over-year (2015 over 2014) earnings estimates and focus on the companies with the strongest upside. We also limit the field to companies that have shown increasing earnings for each of the 4-5 years displayed. (All year-over-year figures > 0%)

Lannett (LCI) continues to have strong expectations, but it will be interesting to see what Broad Assets does with LCI in the future as 2016 EPS estimates are finally plateauing. We also note the presence of Balchem (BCPC), a long time favorite of another St. Louis club — Mutual of St. Louis and our friends Jay and Ray.

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Schloss Screen

The American Association of Individual Investors (AAII) features a number of screens based on famous investors and methods including one of our time-honored all-time favorites, Walter Schloss.

Screening Criteria

  • Companies that trade on the over-the-counter market are excluded
  • ADR stocks are excluded
  • Companies in the financial sector are excluded
  • Stock has been traded for at least seven years
  • Current share price is less than the latest quarterly book value per share
  • Current share price is within 10% of its 52-week low (Hugh McManus has to like that one)
  • Percentage of insiders owning shares is higher than the median insider ownership percentage for the entire database
  • Long-term debt from the most recent quarter and fiscal year equals zero

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Piotroski Screen

Joseph Piotroski, associate professor of accounting at Stanford University’s Graduate School of Business, undertook a study of low price-to-book value stocks to see if its possible to establish some basic financial criteria to help separate the winners from the losers.

The result, a favorite screening method among AAII members, is the top-performing screen since inception nearly 20 years ago.

Low Price-to-Book-Value

Piotroski’s work starts with low-price-to-book-value stocks. Price-to-book value was a favorite measure of Benjamin Graham and his disciples who sought companies with a share price below their book value per share. While the market does a good job of valuing securities in the long-run, in the short-run it can overreact to information and push prices away from their true value.

Measures such as price-to-book-value ratio help to identify which stocks may be truly undervalued and neglected.

Motley Fool CAPS

Most frequently chosen Outperform Ratings by the CAPS All-Stars (successful stock pickers) that have 5-Star ratings on 1/29/2015.

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Modified McManus

Hugh likes to shop for high-quality companies when they are trading near their 52-week lows. He keeps a fairly short list of qualified accumulation targets for his personal portfolio. We covered this screening concept here: Gone Fishing … Patiently

What makes this version of the list “modified” is that we’ve applied his shopping methods to the 6000+ companies in the Value Line database, limiting qualifiers to Financial Strength ratings of B+ (or better) and a return forecast (VL 3-5 Yr Proj Ann Tot Return or PAR) to double digits, in general, or better. (Data Source: Value Line Investing Analyzer)

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Great Buffalo

One of our favorite sources of ideas are successful/active fund managers. One of our favorite small company mutual funds is Buffalo Growth (BUFSX) shepherded by Kent Gasaway and his team.

The accompanying table (exported from Morningstar/Premium Version) provides a summary of buy/accumulate decisions made over the last quarter by the Buffalo team.

KYTHERA Biopharmaceuticals (KYTH) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel prescription products for the aesthetic medicine market.

Case Studies and Analysis Demonstrations

The stocks featured during the January Round Table:

  • Caterpillar (CAT)
  • Google (GOOG)
  • MSC Industrial (MSM)
  • QUALCOMM (QCOM)

The audience selected QUALCOMM (QCOM) from the candidates.

Sell Transaction

MWI Veterinary Supply (MWIV) was “sold” from the tracking portfolio during the session. MWIV is being acquired by Amerisource (ABC) for $190. Ken Kavula selected MWIV back on 11/29/2011 for $64.79, so $1000 became $2969 — an annualized return of 40.5% and a relative return of +22.9% versus the Wilshire 5000.

Archived Recording of January Round Table

The recording of this event is now available on the event page:

https://www.manifestinvesting.com/events/163-round-table-january-2015

It can also be found on YouTube at:

http://youtu.be/38J1L6uYT5c

If you enjoy this session, please leave us a comment or click Like on the YouTube page.  Thanks!

Round Table (January 2015)

The stocks featured during the January Round Table:

  • Caterpillar (CAT)
  • Google (GOOG)
  • MSC Industrial (MSM)
  • QUALCOMM (QCOM)

The audience selected QUALCOMM (QCOM) from the candidates.

Sell Transaction

MWI Veterinary Supply (MWIV) was “sold” from the tracking portfolio during the session. MWIV is being acquired by Amerisource (ABC) for $190. Ken Kavula selected MWIV back on 11/29/2011 for $64.79, so $1000 became $2969 — an annualized return of 40.5% and a relative return of +22.9% versus the Wilshire 5000.

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