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*
- 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:
Callaway Golf Company will continue to capitalize on taking market share across the club and ball segments, the growing golf industry, and successful M&A that the company has demonstrated in the recent future. Callaway will continue its reduction of cost and increase margins across the board. Callaway will do this while maintaining and expanding their exposure on tour with some of the best and brightest young stars in golf. This will drive up the stock price in both the short and long term.
Generac Holdings is a company who has maintained stable, to increasing revenue and sales over the previous years. The probability of better future performance outweighs the probability of negative performance based on numerous catalysts. When considering an aging and underinvested national electric grid, it is valid to expect an increased reliance on backup power generation in the long term. Weather related incidents are a strong factor as well. Seasonal changes and the aftermath from weather related incidents are a long-term catalyst of demand for a product from a company that provides a market-leading product in emergency response and power generation. A 5%-6% organic growth is expected with a conservative 1% addition from seasonal factors and storms. An industry specific shift in power generation from the traditional diesel powered generation, to natural gas generation systems can be expected to benefit Generac as they are the current leader in natural gas generation. Generac’s technology will establish them to become the leader within the evolving industry. Generac is expected to expand its’ commercial market share through numerous strategies which improve operations and Generac’s global footprint. Increasing revenue and lower costs of operation will contribute to long term growth for Generac.
Pilgrim’s Pride Corporation, an industry leader with regard to quality, safety and minimizing SG&A costs, filed Chapter 11 bankruptcy in 2011 after 4 quarters of consecutive losses attributed to: rising grain costs, a poultry surplus, high SG&A costs and operating inefficiencies and a large debt burden ($1.9 Billion) as a result of an acquisition. In the years since the bankruptcy, the company has been purchased by JBS holdings, a meat producer and distributer who holds 78.5% of the company currently, which has helped the company to learn from its past mistakes, pay off a majority of the debt and propel itself on a path to becoming the industry leader for chicken products.
Axcelis Technologies is a leader in the semiconductor materials market. Based upon their increased revenues, gross margin improvement program, and aggressive strategy to grow market share, Axcelis’ stock is poised for significant growth in the coming months.
TopBuild will capitalize on favorable macro ecnomic conditions forecasted for the next few years, along with a plan in place to reduce its cost and maintain the growth pattern it undertook in recent years. The company has seen its revenue grow at a rate of 7.81% over the past 3 years and it is expected to increase such growth to at least 9%. In addition, Top Build’s aim to diversify its product mix and invest in the commercial segment will allow the company to reduce its risk associated with the housing market volatility and to increase operations on a more profitable segment. The company has also taken initiatives aiming for cost reduction such as increasing its buying power through the acquisition of competitors, investments in smart technology to improve processes’ efficiency and branch rationalization. TopBuild is highly dependent on macroeconomic factors, such as new housing starts, age of housing stocks and household formation. This dependency, for instance, will result in a significant driver for the success of the company, as forecasts are in favor to allow growth and expansion for TopBuild. The combinations of the catalysts mentioned above makes of this stock a great investment opportunity, as I believe that a substantial growth can be expected out of this promising company on a short term basis
Sturm, Ruger & Company Inc., America’s largest firearm manufacturer, is a small cap company established in 1949 with high potential upside. Donald Trump plans on raising the country’s defense budget from $590 billion to $637 billion in 2018, which will call for an increase in firearm production throughout the United States. It just so happens that Sturm, Ruger & Company’s total revenue consists of 94% firearms. Exports sales only represent about 3% of these sales, mostly all product content being domestic. Firearm sales to the general public will continue to grow as tension increases in the country with Trump as president. After the LA shooting this past week, the company’s stock price rose by 3.6%. As much as it hurts to say, tragedies like this will continue to happen and people will continue to buy firearms for self-defense purposes. Product development is important in this industry; just below 30% of Ruger’s firearm sales coming from new products. Spending on research and development has stayed consistent at approximately 10 million per year for the company as they try to cultivate the market with the latest and highest quality firearms.
Grubhub Inc. is the leading force in the United States online takeout/delivery market and will continue to drive growth within the $80bn+ online takeout industry. In addition to holding a portfolio of strong subsidiaries, Grubhub has recently partnered with both Yelp and Groupon, expanding their customer base and potential for increasing revenues. Grubhub consistently beats earnings estimates and continues to grow organically as Active Diners and Daily Average Grubs (DAGs) have increased 25% and 16% respectively year-over-year. Grubhub’s continued success and ability to attract restaurants and diners through marketing, expansion, and innovation will create internal value and appreciate the company’s stock price.
As the current leader in the internet-based mailing and shipping services industry, Stamps.com will continue to see strong revenue and earnings growth over time. With over 20 million potential subscribers in the market, Stamps.com will keep growing as the e-commerce business is growing at the rate of 15% annually.
Hexcel is a company that has many factors causing them to grow. Their ability to try and find a way to continue to increase their growth s is a strong indicator that they will continue to make money in the long run. Hexcel is coming off of one of their best years in the sense of earning over two billion dollars, and still have room to grow with the ten million dollar research center they just opened up in the United Kingdom. There a ton of projects coming on in 2018 that will cause the value of Hexcel to increase, supporting the fact that they are a strong buy.
Ligand Pharmaceuticals is a differentiator within the healthcare market keeping their costs low and their royalties high. By licensing their technologies and drug development expertise they reap the benefits of their partners while they stick to their specialties. While they recently reported recorded revenue performance for their three staple drugs, they also have had a large number of drugs pass through the FDA process.