Fave Five: Triple Play (3/3/2017)

Fave Five (3/3/2017)

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 6.9%.

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

  • Abbvie (ABBV)
  • CVS Health (CVS)
  • Infosys Tech (INFY)
  • Polaris (PII)
  • Proto Labs (PRLB)

The Long and Short of This Week’s Fave Five

The Long & Short. (March 3, 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 +0.3% since inception. 53.1% of selections have outperformed the Wilshire 5000 since original selection.

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

Best Small Companies (2016)

Best Small Companies (2016)

We lamented the decision by Forbes to discontinue their annual Best Small Companies list last year. 36 years in the running, the list provided a number of actionable opportunities over the last couple of decades for many of us. That said, while sticking to their core criteria, we may have actually improved the discovery and screening process. The returns posted by the lists, orphaned for two years now, have been 19.0% and 21.6%, respectively. For context, the Wilshire 5000 checked in at approximately 4% for both periods. With this experience under our belts, we head for the haystack in search of promising smaller companies to bolster our all-of-the-above investing discipline and hoping for a solid January Effect.

The Russell 2000 (RUT) gained 2.5% from 10/31/2015 through Halloween 2016.

The Wilshire 5000 (VTSMX) did a little better, checking in at 4.1% during that same period.

Every Halloween, we remind our fellow investors to be extra vigilant for opportunities among smaller, faster-growing companies, during the 4th quarter of the year. History suggests that some opportunities are created by tax-related selling. The smaller companies are impacted the most and those with solid expectations often get a stock price boost during January when investors return after wash sale periods expire.

Small Cap Does Not Mean Small Company

It’s also a time when we are reminded that small cap does not mean small company. As a case in point, the average sales growth forecast for the Russell 2000 (EQWS) is approximately 6.0% — the type of growth more closely associated with stalwarts and larger blue chip contributors. If you’re really looking for small companies, we suggest an emphasis on higher growth rates. This month’s fund feature is Conestoga Small Cap (CCASX) featuring an average sales growth rate of 13%. Go ahead. Check out the companies held by Conestoga. (See page 4.) In a word, they obviously shop for leadership small companies in much the same way that we do and can/should be considered a qualified source of ideas. Conestoga features a +2.4% (annualized) excess return versus the S&P 500 over the last ten years.

The criteria used to build the list is largely faithful to the Forbes traditions. Specifically, annual revenues were limited to less than $1 billion, but required to be greater than $50 million. We also required a minimum stock price of $5. Because we feel the sales growth forecast is the strongest characteristic to define “small” — we required a minimum growth forecast of 10%. No asset-based companies from the financial sector were included. And finally, when we think about “Best” we think the combination of quality and return forecast is a great place to start.

This Year’s Haystack

The companies that qualify for our 2016 Best Small Company Manifest are shown in the accompanying table.

Newcomer Meridian Bioscience (VIVO) checks in at #1. VIVO is covered in the Value Line Standard Edition and had a 16% low total return forecast (11/18/2016). Meridian Bioscience provides diagnostic test kits, purified reagents and related products, as well as biopharmaceutical enabling technologies. Products are marketed to hospitals, laboratories, veterinary centers, physician offices, diagnostic manufacturers and biotech companies worldwide. The company is headquartered in Cincinnati, Ohio and investors are encouraged to explore the investor relations materials at:
www.meridianbioscience.com

Diagnostics as a “theme” are fairly prevalent among the best small companies. Solomon Select feature Mesa Labs (MLAB) is one example and Mid-Michigan local favorite, Neogen (NEOG) is another. Both of these companies were “discovered” via the Forbes list and continue to qualify. Another company that qualifies as biopharma-enabling might well be Simulations Plus (SLP) but the company falls a little short of the annual revenues minimum.

We expected to lose last year’s #1, Forward Air (FWRD) to “graduation” but the recessionary conditions in transporting “stuff” kept FWRD below the $1 billion maximum. Forward Air had been a resident of the Forbes listing for seven years … so this makes it nine years for this logistics leader.

The top performer from last year’s best small companies was Ubiquiti Networks (UBNT) with a total return of 79.7%. Ubiquiti develops high performance networking technology for service providers and enterprises. UBNT is closing the digital divide by building network communication platforms and has 38 million devices worldwide. Ubiquiti just missed qualifying for this year’s list — ranking #41 as the UBNT return forecast is down to 7.9% following the robust performance over the last year.

 

Diagnosis: Ubiquitous

We think a ubiquitous haystack is a path to opportunity and success. We’re reminded that we can’t achieve proper balance unless we’re continuously searching for the next promising well-managed small company. We’re reassured by the presence of several long time favorites on this study list and look forward to discovering and diagnosing at will.

Fave Five (6/24/2016)

  British flag

We’re going Brexit shopping.  In the wake of the polling results, some European disruptions are inevitable but a 500-point drop in U.S. stock market indices is likely unwarranted.  Our weekly shopping list was restricted to the best long-term prospects this weekend — hoping for some outsized opportunities thanks to Mr. Market and pundit/media hand wringing.

Fave Five (6/24/2016)

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

  • Aaron’s (AAN)
  • Celgene (CELG)
  • Polaris (PII)
  • Proto Labs (PRLB)
  • Synaptics (SYNA)

Context: The median 1-year total return forecast (via ACE) for the Value Line 1700 is 10.8%. The median 5-year return forecast for $VLE is 5.6% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short.(June 24, 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.comS&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 +2.7% since inception. 55.6% of selections have outperformed the Wilshire 5000 since original selection.

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

2 Guys Talk Stock (BINC)

We’re not sure which one is Jake and which one is Elwood, but the 2 Guys (Ken & Mark) completed the third leg (insert pirate joke here) of their mission as they rolled into Washington D.C. for the 2016 BI National Convention.

Observing that “Sweet 16” stocks in a stock search based on MANIFEST Rank > 99.44, our Ivory Soap screen … a study list of candidate companies is generated that easily dominated a good part of the hourly discussion.

Here’s the StockSearch results:

For more demonstration and discussion, investors can review the YouTube recording from the Chicago 2 Guys session via: https://www.youtube.com/watch?v=ysi7T_FTgx0

20 Consensus Stock Selections

Here are the consensus selections from the participants in our annual stock picking contest — Groundhog X (2016) … twenty pretty good stock studies that could be worthy of a closer look.

The tracking dashboard can be accessed here: https://www.manifestinvesting.com/dashboards/public/heavy-hogs-2016

Heavy hogs dash 20160205

Growth: Top line growth forecast.  Projected P/E: Long term P/E ratio.  Projected Yield: Long term “average” dividend yield.  Financial Strength: Consensus ranking based on Value Line, Morningstar, S&P and debt quality considerations.  EPS Stability: Relative variability of EPS trend (2009-2019).  Quality: Percentile ranking based on financial strength, EPS stability and relative growth & profitability.  PAR: Projected Annual Return for long term return forecast.

Round Table (November 2015)

Round Table (November 2015)

What: Round Table Discussion of Favorite Stock Study Ideas

When: Monday, November 30 at 8:30 PM ET

Where: Online. Register via https://attendee.gotowebinar.com/register/5522647165700089346

Who: Kim Butcher, Ken Kavula, Hugh McManus and Mark Robertson

Why: Because we like to share ideas for successful investing. The selections made by Round Table participants have beaten the market over the last five years with a relative return of approximately +3.0%

Stocks Likely To Be Featured

  • Maximus (MMS)
  • Novo Nordisk (NVO)
  • PayPal (PYPL)
  • Proto Labs (PRLB)
  • TBD

The session (webcast) is FREE. Please invite your friends and family to attend.

If you’d like to be added to an email reminder list for this and all future (monthly) Round Tables, send a request to nkavula1@comcast.net

Here’s an Ivory Soap Screen snapshot (MANIFEST Rank > 99.44) for some Round Table candidates.

Ivory screen 20151127

I don’t know if Ken Kavula will be using the Mid-Michigan Market Beaters for some shopping ideas — but he should.

Here’s the tracking dashboard of their consensus selections for 2016.

Mid mich market beaters dash 20151130

Our Best One-Hit Wonders

It’s interesting that 29-of-50 One-Hit Wonders have positive relative returns. These companies represent single selections made over the course of the last 5 1/2 years. The choice could have been made by one of the Round Table knights, a guest damsel or guest knight. What is also true about these selections is they did not receive a “seconding” audience vote at the time of presentation.

Rt one hit wonders best 20151130

Our Worst One-Hit Wonders

All I can say for most of these (attributed to Robertson) is that “it’s early.” Only a couple of them are closed (sold) positions — so there’s plenty of work-in-progress here.

Rt one hit wonders worst 20151130a

 

50 Best Small Companies (2015)

This Week at MANIFEST

It’s a busy week — starting with closing out our selections for the Manifest Investing Best Small Company list … to the rescheduled Round Table on Tuesday night … to spending some quality time with friends in Seattle at their annual conference for long-term investors.

A couple of weeks ago, we were advised by Forbes that there would be no 37th Annual List of Best Small Companies. So, after 36 years and the reality that this list has provided a number of actionable and rewarding situations over the last 20 years or so, we’re left to hope that it’s a one year hiatus. The Forbes list has always been a favorite and we’ve reminded investors to “trick or treat” around Halloween every year. “It was a sad day in the Kavula household.” — Ken Kavula.

So — while remaining relatively faithful to the Forbes methodology — we decided to generate our own. We’ll do a full narrative and feature this as our cover story for November, but for now, here are the highlights and the 50 Best Small Companies by Manifest Investing.

Methodology

Criteria:

  • SMALL Annual Revenues less than ONE BILLION
  • Sales growth >= 10%
  • Annual Revenues > $50 million
  • Stock Price > $5
  • BEST Ranked by Highest Quality (Percentile ranked composite of Financial Strength, EPS Stability and relative Sales Growth Forecast and Profitability)
  • No Asset-Based Business from Financial Sector

Published Dashboard for 50 Companies: https://www.manifestinvesting.com/dashboards/public/best-small-companies-2015

Manifest Investing 50 Best Small Companies (As Inspired by Forbes)