Stericycle (SRCL)

Is Stericycle a Sell?

Stericycle (SRCL) was added to the Round Table tracking portfolio back in February 2014 at a stock price of $114.00. It has since lagged the market by some -21.5% (annualized) leaving some to wonder if it isn’t a sell candidate despite trading near 52-week lows.

Srcl analysis 20170920

The Value Line perspective — in a nutshell:

Our near-term investment outlook has grown more pessimistic over the past three months. Specifically, Stericycle is now ranked to under perform the broader market averages over the coming six to 12 months. The issue does hold wide recovery potential, assuming our long-term projections aren’t far off the mark. (Matthew E. Spencer, CFA August 25, 2017)

Perhaps, but trading near the 52-week low delivers a 1-year zoning position of 3.7% with a 1-year target price of $107. The “average stock” has a 1-year zoning position of approximately 80%.

As shown in the accompanying chart, SRCL is now “oversold” (RSI<30).

Srcl chart 20170920

Goldman Sachs has not changed their outlook from March — at least not in a public release or not yet.

This overview does display a spectrum of expectations for the 1-year target range.

Srcl analysts 20170920

Morningstar continues to maintain a fair value of $110.

This delivers a price-to-fair value of 70/110 = 63.6%

Growth: “These assumptions allow Stericycle to approach $4.5 billion in revenues by 2021, reflecting a five-year organic revenue CAGR of 3.7%.”

We expect the near term may yet be volatile as Stericycle continues to manage headwinds in its core business, integrate Shred-It, design and implement an enterprise wide information technology system, and ultimately restore confidence in a business that we continue to believe has the building blocks in place to produce reliable recurring revenue streams over the long run. (Barbara Noverini, August 10, 2017)

This Round Table perspective on Stericycle makes me question whether we should extend the -20% relative return selling criteria beyond one year.

Srcl rt relative return 20170920

Did we miss a “trough” in PAR — a potential selling opportunity when the stock price hit $151.6 during 2015?

How about quality degradation?

As the accompanying chronicle shows, the PAR did not reach “auto-sell” levels during 2015 — but this image does rekindle those questions about the notion of “support and resistance levels” on PAR charts also. For some stocks, should we be setting low-PAR and high-PAR triggers much like Bollinger bands in technical analysis? I don’t know. But it’s worth some considerations and a pile of case studies, I’d think.

Srcl chronicle 20170920

Bottom Line?
For current stakeholders, with the recent nudge upward in quality and the potential that the blending is going a little better, we think it prudent to hold through another earnings cycle and see if the “new company” can stabilize and move forward as suggested by the Value Line long-term outlook.

Fave Five (11/18/2016)

Fave Five (11/18/2016)

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, we seek the companies with the best return forecasts, highest quality and in a tribute to www.morningstar.com — the companies with the lowest price-to-fair value ratios as being potentially “on sale.” Context: A P/FV = 100% would indicate that a stock is priced at its fair value according to Morningstar.

The Fave Five This Week

  • Cognizant Technology (CTSH)
  • CVS Health (CVS)
  • Novo Nordisk (NVO)
  • Stericycle (SRCL)
  • Synaptics (SYNA)

The Long and Short of This Week’s Fave Five

The Long & Short. (November 18, 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/excess return for the Weekend Warrior tracking portfolio is +5.0% since inception. 50.7% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (10/28/2016)

Fave Five (10/28/2016)

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.

So you’re looking at the stocks in the top 1% of all companies according to MANIFEST Rank (Return Forecast and Quality combination) that have the lowest price-to-fair value ratios (P/FV) according to S&P. The P/FV profile for the S&P Platinum Portfolio is shown here:

The Fave Five This Week

  • Abbvie (ABBV)
  • Celgene (CELG)
  • Deckers (DECK)
  • LKQ Corp (LKQ)
  • Stericycle (SRCL)

Context: The median S&P price to fair value ratio is 102%.

The Long and Short of This Week’s Fave Five

The Long & Short. (October 28, 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/excess return for the Weekend Warrior tracking portfolio is +8.7% since inception. 42.6% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (9/23/2016)

Fave Five (9/23/2016)

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.

So you’re looking at the stocks in the top 1% of all companies according to MANIFEST Rank (Return Forecast and Quality combination) that have the highest 1-year total return forecasts according to the analyst consensus estimates. (ACE)

The Fave Five This Week

  • Celgene (CELG)
  • Extra Space Storage (EXR)
  • Honda (HMC)
  • Stericycle (SRCL)
  • Ulta Salons (ULTA)

Context: The average 1-year total return forecast for the Value Line 1700 is 14.7%. The average 5-year return forecast for $VLE is 5.0% (annualized).

This Week’s Fave Five In The Sweet Spot

Sweet Spot Five. (September 23, 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.

Weekend Warriors

The relative/excess return for the Weekend Warrior tracking portfolio is +6.3% since inception. 54.1% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (8/26/2016)

Fave Five (8/26/2016)

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.

Among the stocks covered by Goldman Sachs, the average stock has a one year total return of approximately 10%. We centered our attention this week on the top two percent (return forecast & quality) of our coverage combined with the near term expectations of Goldman. The Muppets are fairly well in consensus with Morningstar and S&P for this batch.

The Fave Five This Week

  • Apple (AAPL)
  • CVS Health (CVS)
  • Jones Lang LaSalle (JLL)
  • Starbucks (SBUX)
  • Stericycle (SRCL)

Context: The average 1-year total return forecast (via Goldman Sachs) for the Value Line 1700 is 9.2%. The average 5-year return forecast for $VLE is 5.7% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (August 26, 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 12.1% since inception. 48.2% of selections have outperformed the Wilshire 5000 since original selection.

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

Decidedly Older Stocks to Study

This Week at MANIFEST (5/27/2016)

“Decidedly older.” (Women)

The scene was the Better Investing national convention last weekend in Chantilly, Virginia. It was the last session of the conference. The words rang out during Ken Kavula’s presentation of Ulta Salons (ULTA) as his shared stock idea for the May Round Table. He was — of course — talking about the differential between his teenage granddaughters and some of the “more experienced” clientele that may linger longer in the salon portion of the establishment. Sitting directly on Ken’s right (and within elbowing distance) frequent guest damsel Kim Butcher reacted immediately. “Decidedly older??? I’m fairly certain, Ken, that NONE of us ever want to be referred to as ‘decidedly older’ [Ken was probably grateful that his spouse, Natalie, was not in the room, too.]” The audience roared a second.

“Women, traditionally, become the subjects and objects of other people’s lives.” — Jane Fonda

And for that, we’re infinitely thankful.

Those words are from a TedX speech by Jane Fonda, delivered back in 2011 on the subject of “Life’s Third Act.” It features a perspective on longevity, aging and the shift to living longer and contributing more substantially during our last 30 years on the planet. If you liked Jane in her role on The Newsroom, you’ll probably like these 10-12 minutes via TedX.

The audience at the BI national convention is still not getting younger from a demographics perspective. That said, I’d argue that the shift described by Fonda has been a work in progress for some time and that investment clubs and individual investors have indeed been transforming for a few years. We’re witnessing the transformation of rote methods into deeper understanding and in so many cases, pervasive market beating performance over decades. The Super Investor session that I delivered in Chantilly (Beltway Super Investors) featuring Eddy Elfenbein, David Gardner and a slipstream sample of investment club leaders was very well received and we’ll do more.

Ken and I (and many of you) make “coaching club visits” to a fairly large number of clubs. We’ve witnessed an evolutionary shift. Few clubs make some of the traditional mistakes and the portfolios we see are better designed, better positioned and better maintained. So many clubs embrace our efforts at interpretation, innovation and implementation of the delightfully few things that really matter and we’re grateful for this evolving simplicity … and the results we observe.

During a few moments with some decidedly experienced investors in Chantilly, we were encouraged to keep seeking the foundations of Nicholson’s vision. Some observed that the Nicholson moments we reinforced back at the national convention in Chicago a few years were landmark. And most welcome. We were encouraged to do more. A dear friend who knew Nicholson well urged us to continue to re-discover and reinforce … Press on.

The modern investment club movement is less obvious at a time when it’s probably needed the most. Diebold is back to 98% institutional ownership from the 54% it achieved less than ten years ago. It’s enormously challenging to engage the interest of most people, most young people, and even most decidedly older people in ownership of individual common stocks. (By the way, RPM presented at the conference and appears to be stronger than ever)

I think Jane Fonda is right, an opportunity lies ahead. In her words (with a dash of paraphrasing) …

“Circle back to where we started — and know it for the first time. We could be a necessary cultural shift in the world.”

Inspire younger generations to optimize and maximize their investing experience.

Be decidedly older. Do it well.

MANIFEST 40 Updates

  • 11. FactSet Research (FDS)
  • 30. Starbucks (SBUX)
  • 32. Buffalo Wild Wings (BWLD)

Round Table Stocks: Buffalo Wild Wings (BWLD), C.H. Robinson (CHRW), Copa Holdings (CPA), Forward Air (FWRD), Knight Transportation (KNX), Maximus (MMS), McDonald’s (MCD), Panera Bread (PNRA), S&P Global (SPGI), Stericycle (SRCL), Waste Connections (WCN)

Results, Remarks & References

Companies of Interest: Value Line (5/27/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 6.3% vs. 5.6% for the Value Line 1700 ($VLE).

Materially Stronger: Iron Mountain (IRM), Texas Roadhouse (TXRH), Sonic (SONC), Forrester Research (FORR), Equifax (EFX), Darden Restaurants (DRI), Domino’s Pizza (DPZ)

Materially Weaker: Teekay (TK), Frontline (FRO), Calgon Carbon (CCC), American Railcar (ARII)

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 5.6%, unchanged from 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 (5/27/2016)

  • Maximus (MMS) — Highest MANIFEST Rank
  • Ruby Tuesday (RT) — Highest Low Return Forecast (VL)
  • Stericycle (SRCL) — Lowest P/FV (Morningstar)
  • Delta Airlines (DAL) —Lowest P/FV (S&P)
  • Golar LNG (GLNG) — Best 1-Yr Outlook (ACE)
  • Delta Airlines (DAL) — Best 1-Yr Outlook (S&P)
  • Buffalo Wild Wings (BWLD) — Best 1-Yr Outlook (GS)

The Long & Short of This Week’s Update Batch

The Long & Short. (May 27, 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.

16 Stocks On The Launch Pad?

Screening Results (February 2016)

In Search of “First Stage” Potential

by Mark Robertson

As we’ve watched the Broad Assets investment club win three of the last four years in the Groundhog group competition, we’ve searched for a common theme … a genesis of their statistically significant success.

Escape Velocity?

Our May 2014 cover story captured the essence pretty well. We’re looking for companies that are not only well-positioned for the long term with the insurance component of high quality, but companies poised to deliver large year-over-year increases in earnings. If we believe that stock prices follow earnings — and we do — it seems natural to seek these launch pad situations.

This month’s screening results are an attempt to do just that. The list that follows is a collection of excellent quality companies. But they also have relatively large expectations for 2016 earnings vs. 2015. The average forecast increase is 12.4%. All of these top that threshold. We include the relative strength index (RSI) for a glance at oversold potential. (RSI near 30) We’ll check back in a year to see if the EPS step changes take shape and if prices follow. If they do, it won’t hurt my Groundhog 2016 entry a bit.