Fave Five (9/7/2018): Morningstar

Fave Five (9/7/2018)

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 10.0%.

This week we limit the field to companies with excellent quality (>80) with the lowest price-to-fair value ratios (P/FV) according to Morningstar.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (September 7, 2018) 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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.

McKesson (MCK) is on “wash sale probation” as it was sold on 8/31/2018 and is unavailable to the tracking portfolio until October.

Intel (INTC) is one of our favorite examples of stock prices that seem to move in “fits and starts.” The company is currently #26 among the most widely-followed stocks by Manifest Investing subscribers and has generally tracked the market (8% annualized total return) since charter membership in the MANIFEST 40 back on 9/30/2005. Intel (INTC) spent four years on the Round Table roster after selection by Hugh McManus and Mark Robertson back on 3/26/2013. The rate of return when sold on 12/19/2017 was 21.6% — beating the Wilshire 5000 by 9.5 percentage points.

Looking down the top (50) stocks that met this week’s criterion, we were struck by the number of Ken Kavula nominations for the Round Table in the field. Perhaps Morningstar gives extra credit for “up, straight and parallel,” too? A recent example is the laser purveyor, Coherent (COHR). The company was featured (by Ken) during the July 2018 Round Table.

Stericycle (SRCL) has been in the Fave Five tracking portfolio since 12/8/2017 and has stumbled to a relative return of -16.7%. Yes, Virginia, SRCL is on the Rule-of-5 hot seat but they may still stick the landing and commence recovery.

NutriSystem (NTRI) is #4 on our Best Small Companies list for 2018 and was added to the Fave Five tracking portfolio on 3/22/2018. NTRI has delivered a healthy return, 32.1% since then. Bring out your best small companies ideas as we build and share the Best Small Companies (2019 edition) around Halloween. Yes, we’re searching haystacks and counting down …

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +3.5% since inception.

The absolute annualized rate of return is 18.9%.

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

Fave Five (12/8/2017)

Fave Five (12/8/2017)

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 6.1%.

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.

Chugging Through 6000 Stocks in the Value Line “Universe”

Our playing field this week was limited to the stocks that qualified for our December Sweet 16 feature — discovered by applying the Triple Play criteria to the ~6000 stocks in the Value Line Investment Analyzer.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (December 8, 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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 relative/excess return for the Fave Five tracking portfolio is +5.7% since inception.

The absolute annualized rate of return is 22.6%.

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

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