Displaying items by tag: value

(New York)

There has been a lot of speculation over the last year that FedEx might be a buyout target. This time last year, everyone thought Amazon would buy the logistics company to beef up its own network. That did not happen. Now the speculation is that it might be on Warren Buffett’s list. Buffett has expressed that he is itching to make an “elephant-sized” acquisition, and FedEx fits the bill in more ways than one. Not only is it huge, but it has a more than $125 bn hoard of cash. Buffett likes simple businesses with good management and large moats, or barriers to entry which prevent competition. FedEx fits the bill perfectly.

FINSUM: This feels like a match made in heaven. Both parties refuse to comment. Hmmmm…

(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.

(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.

(New York)

So which stock will lead the way in 2020. Many are of two minds about this question. One the one hand, growth stocks look so pricey that value seems to have a good chance of taking the lead; but on the other, growth has been dominating for so long that it is hard to imagine such stocks not leading. Goldman Sachs say the middle road, or GARP (growth at a reasonable price) stocks, will be the big winners, as they have characteristics of both groups. “During periods of very strong or accelerating growth, investors embrace the risk of low valuation stocks because even lower quality stocks can successfully generate [earnings] growth in rapid GDP growth environments”, says David Kostin, chief US equity strategist at Goldman. Take Google for instance, which trades at 26x earnings, which is only in the 56th percentile for the communications sector, but has strong earnings growth characteristics. Other names to look at include Estee Lauder, MGM Resorts, and Lockheed Martin.

FINSUM: Interesting thesis and we like it in principal. Our issue is that investors just don’t seem to care about price right now.

(New York)

Value stocks have been in the doldrums forever. Growth stocks have been outcompeting for many years. One way to get some good performance is to stay away from value stocks as a whole, and instead focus on individual names. Here are some stocks that look cheap and have positive catalysts in the cards (from Bernstein Research): Hewlett Packard, Apple, Tyson Foods, UnitedHealth Group, Cigna, Anthem, Nielsen Holdings, Delta Airlines, and United Airlines.

FINSUM: Apple as a value stock seems rather questionable but we get the “mispriced because of how great its earnings are” logic. The airlines seem an interesting bet to us.