Goodfellow LLC Growth Stock Portfolio for 2016

originally published Dec. 31, 2015

 

Dear Investors,

Herein please find a diversified portfolio of growth stocks for 2016 from which you can fine-tune your investment portfolios. These are all growing, profitable companies.

My stock selection style combines both fundamental and technical analysis, in an effort to minimize the risk associated with stock investing. I screen stocks for strong future earnings per share growth, low price/earnings ratios (PEs), and low debt levels. I then examine the technical charts, seeking to buy when the stocks are poised to rise in the near-term, to accommodate both short-term and long-term investors.

I always use the most recent Wall Street consensus earnings per share (EPS) estimates when referring to EPS growth projections.

Some of my recommended stocks are at all-time highs, and climbing. With others, we are buying low after the stock price fell in 2015.

I don’t recommend stocks with losses, ongoing bad news, poor balance sheets, scandals, bearish charts, or significant M&A activity. If the stock’s on this list, it’s got great earnings growth prospects, a comparatively low PE, and a technical chart indicating that investors are likely to achieve good capital gains in 2016.

Eleven of the thirteen Goodfellow LLC model equity portfolios, from 2011 through 2015, outperformed the Dow Jones Industrial Average and/or the S&P 500.

There are ten stocks in this year’s growth portfolio. Four of the stocks have fiscal year-ends other than December 31st: D.R. Horton (Sept.), FedEx (May), Harman International Industries (June), and Intuit (July).

Please review How to Structure a Stock Portfolio before proceeding with purchasing more stocks.

Best wishes for a profitable 2016!

 

Crista Huff

President

Goodfellow LLC

 

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BorgWarner Inc. (BWA) is a maker of engineered automotive systems for power train applications. BWA is an undervalued growth stock with a strong balance sheet.

• 2016 EPS are projected to grow 14.8%.

• The 2016 PE is low in comparison to the EPS growth rate, at 12.6.

• The PE ranged from 11-24 in the years 2010-2014, reaching a P/E of 19 or higher in each year.

• The dividend yield is 1.2%.

• BorgWarner authorized a $1 billion share repurchase in February 2015.

• The company’s long-term debt-to-capitalization ratio is very low, at 16%.

Based on chart patterns, I believe BWA will begin rising immediately in the New Year, barring any unforeseen bad news. There’s upside resistance at $55.

 

Delta Air Lines, Inc. (DAL) is a global passenger & cargo air transportation company. DAL is a very undervalued aggressive growth stock.

• Wall Street analysts raised their 2016 EPS growth expectation for Delta in December, from 27.5% to 38%.

• The 2016 PE is 8.0 P/E.

• DAL has a 1.0% dividend yield.

• Delta intends to purchase a 49% stake in Grupo Aeromexico.

DAL shares traded at new highs in December. The stock is a table-pounding buy.

 

D.R. Horton Inc. (DHI) is a U.S. homebuilder. DHI is an undervalued growth stock.

• Analysts expect EPS to rise 17.0% in 2016 (September year-end).

• The 2016 PE is 13.7, within a recent annual range of 11-17.

• D.R. Horton increased its quarterly dividend by 28% in November 2015. The current yield is 1.0%.

The stock broke past annual highs in late November, and is now trading between $30.50-$33.00. I expect DHI to climb past $33 this winter.

 

E*Trade (ETFC) offers financial brokerage and banking products and services. ETFC is an undervalued aggressive growth stock with a strong balance sheet.

• I’ve seen Wall Street raise E*Trade’s 2016 consensus EPS estimate five times since Halloween, now expected to grow 37.1%.

• The 2016 PE is 18.6.

• E*Trade announced an $800 million share repurchase in 2015; its first such announcement in eight years.

ETFC’s price rebounded nicely from the August market correction, and is now trading between $28.50-$31.00. I expect the stock to rise above $31 as soon as the broader market shows some strength.

 

FedEx Corp. (FDX) is a global package delivery company. FDX is an undervalued growth stock.

• EPS are expected to grow 18.1% in 2016 (May year-end).

• The 2016 PE is 14.1, in the lower portion of FedEx’s annual PE range.

• FDX has a 0.7% dividend yield.

• The company repurchased 10.2% of its stock in fiscal ’14 & ’15.

FDX reached new all-time highs in June 2015,  corrected with the broader market in August, and has since traded between $140-$165. I expect FDX to continue trading within that range, gathering strength, then to climb toward $180 in the latter half of 2016.

 

Harman International Industries, Inc. (HAR) is a manufacturer of in-car technology and entertainment systems. HAR is an undervalued growth stock. The stock price revisited its August-September lows in December, and is likely to rebound to 103 in January.

• Harman’s 2016 & ’17 EPS are expected to grow 13.7% and 17.7% (June year-end).

• The 2016 PE is 14.5.

• HAR has a 1.5% dividend yield.

• HAR traded at a P/E of 26 or higher in four of the last five years.

• In October 2014, the company announced a new $500 million three-year share repurchase program.

After falling quite a bit in 2015, through August, the stock price bottomed and stabilized. The recent trading range is very wide, between $90-$110, giving both traders and longer-term investors capital gain opportunities.

 

Intercontinental Exchange Inc. (ICE) owns a worldwide network of electronic financial exchanges and clearing houses — including the New York Stock Exchange — serving stock and commodity markets. ICE is a growth stock with a strong balance sheet.

• Analysts expect 2016 EPS to increase 19.3%.

• The 2016 PE is 18.1, well within its normal annual PE range.

• ICE has a 1.2% dividend yield.

ICE reached an all-time high in November 2015, had a pullback, and is now climbing again. I expect a neutral-to-bullish stock market to push ICE past short-term upside price resistance, around $263.

 

Intuit Inc. (INTU) is an industry leader in financial management software solutions. INTU is an undervalued aggressive growth stock

• EPS are expected to grow 34.4% and 25.0% in 2016 & ’17 (July year-end).

• The 2016 PE is 27.7.

• INTU has a 1.2% dividend yield.

• The company completed $1.25 billion in share repurchases in fiscal 2015, with $1.35 billion remaining in the repurchase authorization.

• The 2015 long-term debt-to-capitalization ratio was very low, at 18%.

INTU’s price improved steadily since the August market correction; most recently trading between $95-$103, with additional upside resistance at $108.

 

Universal Electronics Inc. (UEIC) is a manufacturer of wireless remote control products, software, and accessories for home entertainment systems. UEIC is a volatile small-cap growth stock with a strong balance sheet.

• Wall Street expects 2016 EPS to grow 21.5%.

• The 2016 PE is 15.4.

• Universal Electronics carries no long-term debt.

UEIC shares reached an all-time high in February 2015, then fell to their September lows. The rebound began in November. The stock has most recently been trading between $48-$53.50. Barring unforeseen bad news, I expect UEIC to finish trading in that range in the coming weeks, then move higher, to a range of $54-$59; then rise to the low $60’s, where it traded a year ago.

 

Zions Bancorporation (ZION) is a holding company that owns eight commercial banks, with 460 branches, in 11 states in the western U.S. Zions will see its net interest income increase, as the Federal Reserve increases short-term rates. (The Fed has outlined a plan for three more rate hikes in 2016.)

• After a slow earnings year in 2015, Zions is slated for its most profitable year since 2007, with 58% EPS growth.

• The stock’s PE is quite low at 13.9.

• The PE has reached 19 or higher, every year from 2010 through 2015.

• The dividend yield is 0.9%.

ZION has been trading between $26.50-$31 since the August market correction, with additional upside resistance at $33. Once the stock surpasses $33, there’s no recent ceiling on the stock price.

 

Crista Huff

President

Goodfellow LLC

 

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