Eq: Growth

Eq: Growth (11)

Monday, 06 January 2020 11:24

Time to Get Aboard the Amazon Rocket Ship

Written by

(Seattle)

Yes, Amazon looks expensive and has seen massive gains in recent years. This makes many fearful of the stock. But the reality is that the stock is a free cash flow rocket ship that is going to keep surging higher, according to 47 of the 49 Wall Street analysts who cover it. Amazon trades for 69x 2020 earnings, but it still looks pretty inexpensive on a free cash flow basis. The company’s past growth initiatives are now paying off, which means Amazon is throwing off free cash flow in a big way.


FINSUM: Amazon has averaged a 35% gain per year since it went public. We don’t see any big reasons why it cannot continue this year.

Monday, 23 December 2019 09:38

Two Blockbuster Stocks for 2020

Written by

(New York)

Standard Life analyst Andrew Milligan made two great calls this time last year. He picked Microsoft and Equinix as two breakthrough stocks for 2019. They rose 55% and 64% respectively so far this year. Now he has his 2020 picks ready. Milligan says to take a look at Visa, Mastercard, and 5G companies like Marvell technology. He also still likes Microsoft, for what that is worth.


FINSUM: We like the call on 5G. The new tech has sort of been in the background of mainstream investing consciousness, but next year could be when it explodes to the forefront.

Friday, 06 December 2019 07:56

Growth Stocks Look Ready to Run

Written by

(New York)

If it seems like value investing is dead, it is because it almost is. Even major adherents have moved away from the practice as growth stocks have greatly outperformed value stocks for so long. The growth sector has been led by large tech companies for the last several years, and many are wondering whether the gains can keep going. The answer, according to Credit Suisse, is “yes”. The bank has put out a piece reminding investors that in late stage bull markets growth stocks can often hit P/E multiples of 45-60x. The sector is currently only trading at 28x earnings. Credit Suisse singled out Microsoft and Raytheon as good cheap picks.


FINSUM: The optimism has been building in markets, so it would not be far-fetched to think a big late cycle run could be in the cards for growth stocks.

Thursday, 17 October 2019 11:08

Two Stocks to Ride Out a Recession

Written by

(New York)

Whether we like it or not, a recession is likely headed our way. Industrial numbers are waning, and even consumer data is getting weaker. So assuming we have a recession, where is the best place to hide? A couple suggestions today. How about materials stocks, whicg have been on a tear this year, up 50% or more. Check out Vulcan Materials and Martin Marietta Materials, which specialize in gravel, sand, and crushed stone. Materials stocks, like garbage-disposal companies, are quite recession resistant.


FINSUM: These stocks are pricey right now, but the demand for them seems likely to stay high if the economy keeps trending downward.

Friday, 04 October 2019 09:13

Goldman’s Best Stocks for a Recession

Written by

(New York)

The likelihood of a recession is growing. Weak manufacturing data this week accompanied by poor jobs data this morning is once again driving fears that the economy may be headed for a downturn. Accordingly, Goldman has put out a recommendation for the best stocks to hold for the forthcoming recession. According to the bank, stable growth stocks fare best in an environment of slowing growth and rising uncertainty. As a reminder, stable growth stocks are those on the less risky end of the growth curve, a group which has been underperforming fast-growing stocks by a considerable margin. Some names to look at include Fiserv, Autozone, Amdocs, Omnicom, Johnson & Johnson, and Walmart.


FINSUM: We quite like Autozone and Walmart for their consumer-staple characteristics and unique abilities to hold up well in a recession.

Monday, 12 August 2019 12:25

Why Low Volatility Stocks are a Good Bet

Written by

(New York)

Low volatility stocks have been the hero of the volatility over the last year. In the past 12 months, the S&P 500 has returned 3.2%. That compares to a whopping 14% plus for low volatility stocks, such as in the S&P 500 low-vol index. By definition, low volatility stocks are boring (think utilities, insurance, and REITs) and have stable earnings. That works well for defending against market swings, but the protection means that valuations are WAY above their long-term average (three standard deviations above). That said, falling rates are very helpful to this class of stocks, so there is wind at their backs.


FINSUM: Despite quite high valuations, we think low vol stocks will continue to do well so long as the trade war continues to plague markets.

Friday, 02 August 2019 10:38

The Rate Cut Will Help These Stocks

Written by

(New York)

The rate cut is not like investors hoped. While the key rate was cut 25 basis point, it did not come with a wealth of dovish future guidance. Still, the cut is going to make a big impact in certain areas, not the least of which is in growth stocks. Growth stocks are likely to pull further ahead of value stocks as “In an environment where rates indeed go lower, growth stocks are just mathematically worth more”, according to MFS strategist Rob Almeida, continuing “So the terminal value for a growth company is higher, because of the discount rate, than it is for a cyclical company”.


FINSUM: The truth is that growth stocks have been doing so well because their growth is real and not just financial (just look at P/E ratios versus the Dotcom bubble). The rate cut will help keep the engine going.

Monday, 08 July 2019 09:22

Buy Stocks When There is Wall Street Consensus

Written by

(New York)

A lot of of investors don’t really know what to do with Wall Street equity research. While certain analysts are very insightful, the misaligned interests and intentional underestimation sometimes make it hard to separate what to listen to from what to ignore. However, there is a clear way to make purchases based on Wall Street forecasts—when there is a heavy consensus on a stock, buy it. The key signals to look for are when price targets are similar across all analysts, and when all are saying “overweight” or buy. Such occurrences are not as common as many might think, but they are very potent when they do appear.


FINSUM: This makes some sense as equity research analysts are a reflection of the general sentiment amongst institutional investors. If all seem to be positive, then the underlying feeling on that stock is bullish.

Tuesday, 14 May 2019 06:30

Beware the Bubble in Alcohol Stocks

Written by

(New York)

Many investors may not be aware of it, but those with assets in the sector could be sorry. Alcohol stocks, and specifically bourbon shares, are in a bubble. Tech has stolen all the limelight, but whiskey stocks—one of America’s oldest industries—have had a great decade. Millennials have revived American whiskey makers, such as Brown-Forman and MGP Ingredients, the latter of which’s shares have jumped from $6 in 2014 to $98 in 2018! P/E ratios are at about 30x and the stocks have recently started to fall sharply. It looks like the bubble is bursting.


FINSUM: The performance of this sector is pretty amazing—doubled revenues in the last decade. That is outstanding for such an old industry. However, valuations seemed to have significantly outpaced realistic value.

Friday, 05 April 2019 13:31

The Best Sector to Play Global Warming

Written by

(New York)

Anyone paying attention will have noticed there has been a change in linguistics surrounding the global climate situation in recent years. What was once called “global warming” is now referred to as “climate change”. However, we think that fact has helped to obscure perhaps the best way to play the changing environment. The world has been getting warmer (whether you think it is human created or not), so what better way to invest in the transformation than in air conditioning companies. HVAC companies, such as Ingersoll-Rand and United Technologies, are also good recession hedges. The companies earn the bulk of their revenue from servicing and repairs, businesses which hold up well even in recession because nobody wants to live without air conditioning.


FINSUM: We see this as a good long-term play with nice short-term downside protection. Asymmetric risk on this idea, heavily skewed to the upside.

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…