OUTLINE:
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
- Our Weekly Stock Picks*
- Macro Environment
- The Bond Report, What's next, & Key Earnings
*Each target price is (1) computed using CGFS' proprietary valuation and simulation approach and (2) adjusted within 3 standard errors of the estimate. Assumption and computation details are inserted at the end of each write-up.
This Week's Picks:
Air Lease Corporation is a leading provider of commercial aircraft all over the world. We can expect continual double digit revenue growth with consistent margins through 2020 at the very least. The value creation for this stock is based around earnings estimates being beat, as well as consistent investor sentiment in the airline production industry. To meet target goals past 2018, Air Lease needs to ensure they can supply booked out demand, which is on Airbus and Boeing.
Cirrus Logic is a company with a history of performance. The company is posting good margins and operating performance as compared to most of its competitors. The company also has a lower P/E ratio than its peers which may indicate that the company is currently unfairly priced. In addition, I believe that the business model as well as the strategy pursued by the management of the firm will yield in the future.
Hasbro is the industry leader in the strength of its rich innovative brand portfolio. Also, with its strategic and licensing partnerships with premiere entertainment brands that attract fans and have key motion picture releases upcoming. Hasbro's 1st quarter earnings significant gains in its numerous brand portfolios and generating $411.9M in operating cash flow positions the company well for the future. The leisure product industry continues to see significant global growth. Hasbro is shifting to consumer changing trends with the premier of its first animated film, "My Little Pony: The Movie," and increased presence in digital gaming with 43% growth from year-to-year due to its Backflip Studios. Also, with the demographic focus on girls and customers over the age of 14 have seen significant consumption growth. Hasbro uses a small amount of leverage and is much more profitable than its competitors which makes Hasbro the best in class of the Leisure Products industry. Hasbro with its Brand Blueprint strategy will continue to re-invest into its brands, create innovative new content, and connect with consumers.
ICON is well positioned to benefit from drug makers continued increase in outsourcing their R&D to CROs. This is a long-term trend that ICON can only benefit from. ICON also has plans to continue its acquisitions strategy that has helped them grow tremendously. Icon has also achieved further operational improvements and has been successful in the reduction of its customer revenue concentration.
Southwest continues to be one of the most successful airline company based out of the United States. Their low cost strategy was the first of its kind and has provided the company with value unlike their competitors. In the last 52 weeks the stock has surged from 35.42 to a high of 59.68. A weak Q1 earning call could set up a cheap price to buy LUV. Southwest is expected to return to its old self in future quarters, which would increase the stock price once again. In regards to the industry, Southwest has positioned itself in an industry that is growing and is expected to continue growing. Southwest is also able to block itself from the possible travel legislation that will be implemented because the company mostly operates in the United States. Southwest has also been able to meet its competitors or beat them in sales and margin growth.
Because of a year of sluggish growth, the market has made QVCA stock fall significantly from its recent high (-25% in the last 12 months). However, global consumer and technology trends, as well a strong business model based on pricing power, exclusivity, and customer retention, are likely to send the stock back up in the next 2 years. In addition to that, the company can still improve when it comes to creating value and generating profits. Therefore, this stock is a safe investment that, in my opinion, has recently hit a bottom and can only increase in value in the next 24 months.
Triton International is the largest container leasing company in the world as of July 2016 through the merger of Triton Container and TAL International. According to Triton, key stakeholders including customers, lenders, and suppliers are reacting favorably to the merger and express strong interest in working with them being the market leader. The merger has increased Triton’s competiveness from other leasing companies through new scale and cost advantages, superior supply capability, and access to large amounts of capital. They have a preferred supplier status with many customers and strong reputation for reliability making it very hard for a competitor to cut their market share. Triton operates globally, with facilities in South Korea, China, Japan, Australia, India, South Africa, and Brazil. They also have facilities in Seattle, San Francisco, Houston, NY, NJ, Miami, London, Hamburg, and Bermuda. Triton is able to offer the lowest unit cost, and provides unrivaled operating and marketing capabilities compared to their peers. The past few years were tough on the container leasing market, but due to a rebound in container prices and a better supply/demand balance for containers, Triton is poised to have a much improved 2017and beyond. The fourth quarter limited the pace of financial recovery due to lost revenues from a bankrupted customer; Hanjin, and increased repair expense to meet demand. Over 2017, Triton will experience lower pressure from lease re-pricing and sales of used containers to increase, making them a valuable growth stock.
Terraform Global is in an industry that is experiencing a secular shift which they are well positioned to take advantage of. Terraform has been able to grow rapidly through building new power plants and acquisitions of existing ones but these projects have been financed mostly by debt which has quickly deteriorated their financial health and ability to continue to grow. Once TerraForm is acquired by Brookfield Asset Management, the partnership should provide enough liquidity for TerraForm to continue growing its operations while repaying principal on its debt which will reduce the overall financial risk of the company and will be reflected in the share price.
Market appreciations have become a stranger to most companies specializing in brick-and-mortar retailers because of the growing popularity of e-commerce. Companies, like Amazon, have been able to capitalize on the convenience of shopping from the couch and waiting for the product to show up on the doorstep. However, even Amazon is beginning to shift towards a strategy that Simon Property Group has already been utilizing: omnichannel retail. This method of shopping gives the consumer more of a choice between the internet and brick-and-mortar, thus allowing companies to tailor to the wide spectrum of consumer preferences. SPG’s main leg on Amazon is that their utilization of omnichannel retail is much more developed, and their financials prove this. Beyond steady FFO and NOI growth, SPG’s $7B in liquidity has allowed them to tailor their own business to capitalize on contrarian strategies, acquire industry stragglers, and become the largest brick-and-mortar firm in an evolving industry.