Goodfellow LLC’s “Stocks in the News”
American Tower in Deal to Acquire Another 15,000 Towers
(AMT, $72.13, up $3.38 midday)
Cell tower operator American Tower Corp. is in agreement to acquire MIP Tower Holdings, parent company of Global Tower Partners. “The deal will add about 15,700 towers in the United States and Costa Rica to American Tower’s existing portfolio of 56,000 towers worldwide,” reports Reuters. The deal will immediately add to annual profits.
American Tower is in a long-term trend of aggressive annual earnings and revenue growth. The PE is 39. The dividend increases every quarter, currently yielding 1.5%.
The stock has had a tremendous pullback since May, and will likely spend some time consolidating between $68 and $74, although it could fall further. With a high PE and a bearish chart, there’s no reason for investors to buy American Tower stock right now, although the company remains an attractive leader in its field.
Goodfellow LLC Rating: Aggressive Growth, Growth & Income, Public. (09/06/13)
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Home Depot CEO Discusses Continued Sales Strength
(HD, $73.33, up 34 cents midday)
Home renovation spending will continue to support a steady increase in sales at Home Depot Inc. throughout 2013, said CEO Frank Blake yesterday in a Bloomberg interview. Rising home prices are jump-starting a long-delayed trend in home repairs, as homeowners and investors prepare for home sales and investment activity.
Earnings growth projections have risen since our August report, now expected to grow 18-19% in each of the next two years. The PE is 20 and the dividend yield is 2.1%.
Home Depot’s share price has been weak this summer. Patient investors could accumulate shares between $72 and $76 while waiting for the next uptrend in the share price.
Goodfellow LLC Rating: Growth, Growth & Income, Accumulate. (09/06/13)
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MS Drug Launch Continues to Outperform Expectations
(BIIB $226.84, down 86 cents midday)
Biogen Idec Inc.’s new multiple sclerosis drug continues to experience robust sales above Street estimates since receiving FDA approval in March. Citi Research says, “we anticipate upside to [earnings] estimates driven by Biogen’s growing dominance of the MS market and operating margin expansion.”
Earnings per share growth estimates have increased repeatedly this year, now at 31, 28, and 19 percent over the next three years. The PE is 27.
Biogen stock is up $34 since we told Ransom Notes Radio listeners to “buy” in March, and up $14 since we said “buy” in early August. There was a very orderly price correction this summer, which appears to be over. Shareholders could see the price break past upside resistance at $242 in the near-term.
Goodfellow LLC Rating: Strong Buy, Aggressive Growth. (09/06/13)
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Louisiana-Pacific in Agreement to Acquire Ainsworth Lumber
(LPX, $17.03, up $1.77 midday)
Louisiana-Pacific Corp. shares are up about 10% today, after the company agreed to buy Canadian wood products company Ainsworth Lumber. The cash-and-stock deal is worth about $1.1 billion, including assumption of debt, and is expected to be accretive to earnings and cash flow in the first year. “Ainsworth has the best margins among peers & gives Louisiana Pacific access to growing Asian markets, especially Japan,” says Deutsche Bank.
After five years of net losses, the company earned a small profit last year. Current and future earnings are expected to reflect aggressive growth, giving the stock a low PE of 14.5.
The stock price suffered a big pullback this summer since running up to $22 in March, and appears ready to stabilize. Expect resistance around $17.50 before any meaningful retracement occurs on the upside.
Goodfellow LLC Rating: Hold, Aggressive Growth, Volatile, Public. (09/05/13)
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Victoria Secret and La Senza Carry L Brands’ August Sales Success
(LTD, $57.16, down 98 cents midday)
L Brands Inc., formerly known as Limited Brands, met Wall Street’s expectation today with August same-store-sales up 2%, led by strong increases at Victoria Secret and La Senza. Other company brands include Pink, and Bath & Body Works.
Earnings are expected to grow in the low-to-mid teens over the next three years. The PE is 18 and the dividend yield is 2.1%.
L Brands’ stock broke out of a medium-term trading range in July and rose swiftly. It’s consolidating now between $57 and $61. There’s no compelling reason to chase shares at this point.
Goodfellow LLC Rating: Growth & Income, Hold, Public. (09/05/13)
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Fastenal Company Reports Surge in August Sales
(FAST, $48.83, up $2.99)
Construction supplies retailer Fastenal Company reported a 7.2% surge in daily sales in August in a press release today, up dramatically from a 2.9% increase in July. The increase came from a larger base of manufacturing and construction customers, and was slightly adversely impacted by Canadian foreign exchange rates.
Earnings are expected to grow in the low-to-mid teens over the next three years. Fastenal Company is a growth and income value stock.
The shares have been trading sideways for 17 months after a huge run-up. The chart has been bearish all summer. Despite today’s big spike in the share price, Fastenal stock doesn’t appear ready to recover.
Goodfellow LLC Rating: Hold, Growth & Income, Value. (09/05/13)
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Ciena Corp. to Report Record Revenue Through Year-End
Network specialist Ciena Corporation (CIEN, $23.45) continues to surprise Wall Street with earnings that beat estimates, record quarterly revenue of $538 million, and expectations of record revenues again in the fourth quarter. Earnings came in at 23 cents per share vs. the 16-cent estimate.
Ciena has not earned a full-year profit since 2008, but is on track for solid profits this year, climbing another 88% next year to record numbers. Caution is warranted, as the PE is 44, and the company has a very high long-term debt ratio.
Ciena shares are up 21% since we called Ciena a trading buy on Ransom Notes Radio on June 6. The stock will likely trade between $21 – $23.50 in the short-term, then break out on the upside, with medium-term resistance at $28. Experienced traders and aggressive growth investors should try to buy on a bounce to $21.
Goodfellow LLC Rating: Aggressive Growth, Volatile, Public. (09/04/13)
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U.S. Auto Sales Are on a Roll
Ford Motor Company (F, $16.91) reported August retail sales up 20 percent to their highest levels since 2006, with total sales up 12.2%. Fourth-quarter production will be up 7 percent year-over-year.
Earnings are expected to grow 9% this year, rising to 14 and 25 percent growth in 2014 & ’15. The PE is 11.0, and the dividend yield is 2.37%.
Ford shares are up 26% since we told Ransom Notes Radio listeners to “buy” on May 2. We then cautioned investors after two big price run-ups since May; but now that the August price correction appears to be over, we are again bullish on Ford shares. There’s medium-term resistance just under $19.
Goodfellow LLC Rating: Growth, Growth & Income, Value, Public. (09/04/13)
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Wall Street Gets Bullish on Apple
Cantor Fitzgerald is bullish on shares of tech giant Apple Inc. (AAPL, $498.69), initiating coverage with a “Buy” rating and a $777 price target. “Apple is on the verge of an extended product cycle that we believe will include a refresh of existing products, increased penetration within existing device categories and entirely new market opportunities,” says Cantor analyst Brian White.
Apple will unveil new models of the iPhone in the U.S. and China on Sept. 10th and 11th. The Beijing event might also reveal a new, long-awaited partnership with China Mobile, after late-July meetings between the two companies.
Shares are up 19% since we called Apple a trading buy on Ransom Notes Radio on July 2. Full-year earnings are expected to fall 11% this year, followed by slow growth, but there are investors who love to own Apple. Apple bulls should accumulate shares under $490. Everyone else should look for stocks with strong earnings growth.
Goodfellow LLC Rating: Hold, Growth & Income, Value, Public. (09/04/13)
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Bank of America Sells Another Peripheral Business Venture for $1.5 Billion
Bank of America Corp. (BAC, $14.25) plans to sell its holdings in China Construction Bank Corp. for $1.5 billion, in a move to clean up its balance sheet and enhance its capital ratios.
Bank of America had several unprofitable years after the 2008 Financial Meltdown. Earnings per share are now growing aggressively, from 25 cents per share last year, to a projected $1.59 per share in 2015.
The stock is up 11% since we told Ransom Notes Radio listeners to buy BofA on July third, currently trading between $14 and $15. There’s price resistance at $15, and again at $19. There appears to be lots of room for continued growth in the share price.
Goodfellow LLC Rating: Accumulate, Aggressive Growth, Public, Volatile. (09/03/13)
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Citigroup Selling Assets to Rohatyn Group to Conform with New Banking Regulations
Citigroup (C, $49.37) sold more than $6 billion in private-equity and hedge-fund assets in order to “comply with new regulations that restrict banks’ holdings of alternative investments,” reports Reuters. “The so-called ‘Volcker rule’ is still being finalized, but is likely to be implemented within a few years. It prohibits banks from investing in any funds they do not manage.”
Earnings growth projections have increased significantly since we reported on Citigroup in July, now expected to rise 28% this year. The PE is 10. Share buybacks are expected to total $7.4 billion in 2014.
The stock has been trading sideways this summer, between $48 and $53, and should attract traders and growth stock investors. Shares can probably be acquired under $50 near-term.
Goodfellow LLC Rating: Accumulate, Growth, Value, Volatile. (09/03/13)
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Microsoft and Nokia in $7.2 Billion M&A Deal
“Microsoft Corp. agreed to buy Nokia’s mobile-phone business and license its patents for $7.2 billion, seeking to revive two smartphone businesses that have struggled for a half-decade to gain share against Apple and Google,” reports Bloomberg.
The deal will bring 32,000 Nokia employees to Microsoft (MSFT, $31.88), along with Nokia CEO Stephen Elop. There is speculation that Elop will be chosen to succeed CEO Steve Ballmer, who plans to retire next August.
Microsoft is expected to grow earnings by 4% this year. The PE is low at 11.4, and the dividend yield is high at 2.93%. The share price is testing support levels today at $31. While it’s tempting to buy the shares here for a short-term trade, investors should wait to see if support holds.
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