Stocks in the News — week of March 31, 2014 (April 4th update)
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O’Reilly Automotive: Still Overvalued
(ORLY, $145.37, down $3.16 midday)
I last wrote about O’Reilly Automotive when the stock had a huge price run-up on February 7. At that time, I took the stock off my buy list because the earnings per share (EPS) growth rate was out of whack with the price-earnings ratio (PE).
The projected EPS growth rate has since risen to 16%, 14%, and 12.5% in 2014 through 2016 (December year-end). The 2014 PE has since fallen to 20.7. The numbers continue to indicate an overvalued stock.
The market is rewarding undervalued stocks this year, and punishing overvalued stocks. In that light, I don’t foresee ORLY shares doing any better than trading sideways for many months to come. My suggestion is to find a good exit point, and then reinvest capital into an undervalued stock with strong earnings growth and a bullish chart.
Goodfellow LLC rating: Hold/Sell, Public. (04-04-14)
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Is Visa’s Chart Falling Apart?
(V, $209.40, down $5.61 midday)
On January 28 I said “I’m discontinuing coverage of Visa Inc. for the time being. Even with the market pullback, Visa’s PE is much higher than its earnings growth rate. Current shareholders should use stop-loss orders to protect profits.”
The chart is beginning to look ugly. NOBODY should be bottom-fishing within credit card stocks.
(04-04-14)
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Hewlett-Packard Shares Continue Climbing
(HPQ, $33.37, up $0.12 midday)
Shares of Hewlett-Packard Co. are still rising, since bottoming in late 2012. There is no particular bullish news on the stock, other than CEO Meg Whitman remarking “that the company would enter the 3-D printing business by the end of the fiscal year,” reports TheStreet.com.
Rather, I believe the bullish chart is driving the stock price higher. There is absolutely nothing attractive enough about the company’s earnings growth expectations to justify any upward move in the stock price.
That being said, I can read a stock chart as well as the next guy, and I’ve been correctly predicting the upward move in the price for many months. I most recently reiterated that stance on March 26 when I said “I think the stock can rise to at least $35 in the near-term before having a pullback.”
Goodfellow LLC Rating: Hold, Value, Volatile, Public. (04-02-14)
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Priceline.com Changes Its Corporate Name
(PCLN, $1,240.01, up $48.12 midday)
“Today, priceline.com Incorporated announced that it has changed its name to ‘The Priceline Group Inc .,’ “reports MarketWatch.
Subscribe now to read my most recent comments on PCLN from March 24.
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Oracle Stock Breaks Out Again
(ORCL, $40.73, up $1.16 midday)
Shares of enterprise technology company Oracle Corp. have broken through upside resistance, reaching recent highs.
On December 19, in Oracle Shares are Poised to Break Out on the Upside I wrote, “The stock is poised to break through three-year upside resistance. Oracle shares could climb immediately…” The shares are up 11.5% since then, and actively climbing. Shareholders should hold their shares, and expect any bounce at $39/$40 to be normal, with stronger support at $37.50.
ORCL shares do not earn a buy recommendation at Goodfellow LLC due to slow earnings growth. Wall Street expects Oracle’s earnings per share (EPS) to grow 8-9% per year for the next three years (May year-end). The PE is 14.0.
Goodfellow LLC Rating: Hold, Public. (03-31-14)
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CBS Corp. (CBS, $62.03) completed the initial public offering (IPO) of its North American Outdoor advertising business on March 28, 2014. The IPO was priced at $28 per share. The new company is named CBS Outdoor Americas Inc. (CBSO, $29.50).
CBSO will subsequently be converted into a Real Estate Investment Trust (REIT).
CBS Corp. retains 83% ownership in the new company. (03-29-14)
Subscribe now to read a more extensive review of CBS & CBSO.
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Crista Huff
President
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