Fave Five (5/12/2017)

Fave Five (5/12/2017)

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 9.1%.

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.

The Fave Five This Week

  • Air Lease (AL)
  • Akamai Technologies (AKAM)
  • FleetCor (FLT)
  • Skechers (SKX)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (May 12, 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 +2.0% since inception. 46.9% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (4/28/2017)

Fave Five (4/28/2017)

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 8.6%.

The Fave Five This Week

  • Air Lease (AL)
  • Fleet Cor (FLT)
  • Monster Beverages (MNST)
  • Royal Dutch Shell (RDS.A)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (April 28, 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 +2.3% since inception. (The absolute rate of return is 17.1%.) 47.7% of selections have outperformed the Wilshire 5000 since original selection.

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

Grinchy Dow 20,000

This Week at MANIFEST (12/23/2016)

Grinchy Bill Griffeth and Rogue destroyer Janet Yellen squelched our Dow 20,000 rally and party hats last week. But we’re resilient and pressing on. This week’s update batch includes Procter & Gamble (PG), Tractor Supply (TSCO), Fastenal (FAST) and those homebuilders and building supply retailers.

Burnt Popcorn!

We refer to market fraught with turbulence and emotions as “popcorn days.” In most cases, it’s a spectator sport as panic or exuberance is met with explanations and rationale that are back-fitted for the day. And these memes are among the most recyclable phenomenon on the planet. The same logic often works in both directions. People are selling today because _____ aligns pretty nicely on other days with People are buying today because ______.

This week, I demonstrated (again) why I could never be a day trader. I really thought we’d reach Dow 20,000 although I would never have taken out a second mortgage on the theory.

Grinchy Bill Griffeth had some fun with the Dow 20,000 enthusiasts with the accompanying tweet made during Friday’s Closing Bell segment on CNBC.

Other antagonists sent messages that 4 days of prolonged Dow 20,000 watching should probably be treated with a trip to the doctor.

But, we got close … coming within 34 points before Janet Yellen and her Rogue storm troopers at the Fed rained on the parade at 2:30 PM ET on Wednesday. The rest of the week had some moments — but it was pretty much like watching salmon flipping up the ladder. We learned on our Alaska cruise that despite a brief fling when the salmon reach their birthplace, it doesn’t end well. And the week didn’t end well for our box of Dow 20K party hats.

MANIFEST 40 Updates

  • 3. Fastenal (FAST)
  • 15. Procter & Gamble (PG)
  • 30. Home Depot (HD)
  • 34. Lowe’s (LOW)

Round Table Stocks

  • Chicago Bridge & Iron (CBI)
  • Fastenal (FAST)
  • Tractor Supply (TSCO)

Best Small Companies

(None)

Results, Remarks & References

Companies of Interest: Value Line (12/23/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 2.9% vs. 3.3% for the Value Line 1700 ($VLE).

Materially Stronger: Pulte Homes (PHM)

Materially Weaker: Sunpower (SPWR). First Solar (FSLR)

Discontinued:

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 3.3%, unchanged from 3.3% 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 (12/23/2016)

Normally we “cut off” the list at a MANIFEST Rank of 95 or 90 … and you’ll note that we had to go a little deeper in order to have a list this week. Study and shop well.

The Long & Short. (December 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. 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.

This Week at MANIFEST (6/24/2016)

This Week at MANIFEST (6/24/2016)

“… it took me about 11 years to get a record deal, and I just had to work around and come to terms with the fact that what I was doing was going to be different, and I just had to wait until somebody was ready to jump on the bandwagon.” — Lee Ann Womack

What we do is different.

The modern investment club movement was a big tent … and a considerable bandwagon. Unfortunately, people’s capitalism and the stewardship of common stock OWNERSHIP has hit a bit of a speed bump, or worse. It’s pretty clear that some WD-40 is needed. The results achieved by the persistent are compelling. But too quiet.

What we do is different. We have no problem with things like discounted cash flow analysis — we believe that we’re chasing fewer variables and that SIMPLER is usually better when it comes to the realm of investing.

“Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw therefrom. In forty-four years of Wall Street experience and study I have never seen dependable calculations made about common-stock values, or related investment policies, that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning signal that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment.” — Benjamin Graham, The Intelligent Investor

Amidst the chaos, turbulence and avalanche of information, we find it rewarding and seemingly more reliable to focus on growth, profitability and valuation in a different kind of model. As is often the case, an event like last week’s Morningstar Investment Conference serves to remind about the value of being simple … and different.

The audience gasped when Keith Lee of Brown Capital Management confessed that in 25 years of successful investing that he’s never owned a financial sector stock. In his own words, Brown is “sector benchmark agnostic.” Brown Small Company (BCSIX) has a 10-year relative return of +5.7%.

Keith Lee and Brown Capital Management are different.

MANIFEST 40 Updates

  • 4. Fastenal (FAST)
  • 15. Procter & Gamble (PG)
  • 29. Home Depot (HD)
  • 33. Lowe’s (LOW)

Round Table Stocks: Chicago Bridge & Iron (CBI), Fastenal (FAST)

Results, Remarks & References

Companies of Interest: Value Line (6/24/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 4.8% vs. 5.6% for the Value Line 1700 ($VLE).

Normally we exclude (filter out) those companies with quality rankings less than 60. We left them in to make a point. When a bull market has been running for a while — and is perceived to be in jeopardy — investors and traders will flock to defensive stocks. The companies with high EPS stability and high quality will see their return forecasts driven down as they’re overbought if seen as sanctuaries. This week’s list and update batch is evidence of that.

There are a number of companies in the update batch that would be most welcome as core holdings in many of our portfolios including the likes of Bemis (BMS), Kimberly Clark (KMB), Sonoco (SON) … but the average MANIFEST Ranking for the Issue 6 companies is 44. In other words, the average company in this update is outranked by 56% of the companies in our database. The reason behind this is related to the flight to quality in many cases.

In most cases, it makes sense to wait for a Better Bandwagon.

Materially Stronger: Lumber Liquidators (LL), Martin Marietta (MLM), Tempur Sealy (TPX), Tile Shop (TTS) [Reminder: These step change upgrades do not necessarily imply a “buy” condition … in some cases, it’s a switch from “sell” to “weak hold.”]

Materially Weaker: Beazer Homes (BZH), Restoration Hardware (RH), Aegion (AEGN)

Discontinued: Jarden (JAH), Sun Edison (SUNE)

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 5.6% 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 (6/24/2016)

  • Tractor Supply (TSCO) — Highest MANIFEST Rank
  • Sunpower (SPWR) — Highest Low Return Forecast (VL)
  • Restoration Hardware (RH) — Lowest P/FV (Morningstar)
  • Beazer Homes (BZH) —Lowest P/FV (S&P)
  • Sunpower (SPWR) — Best 1-Yr Outlook (ACE)
  • First Solar (FLSR) — Best 1-Yr Outlook (S&P)
  • Sunpower (SPWR) — Best 1-Yr Outlook (GS)

The Long & Short of This Week’s Update Batch

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.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.