Stocks in the News — week of September 9, 2013 (Sept. 13th update)

 

 

Goodfellow LLC’s “Stocks in the News”

seen on Townhall Finance, heard on Ransom Notes Radio

 

Note to subscribers:  I’m making two changes to the Stocks in the News feature.  First, I’m limiting access to subscribers-only.  The general public can continue to access the info via Ransom Notes Radio and Townhall Finance.  Second, I will be giving more specific buy/sell advice.

Please keep in mind that these stocks are not stocks which would merit Goodfellow LLC buy ratings.  These are simply companies in today’s news.  News on our buy-rated stocks can be found in our weekly article, Featured Stocks in Action. — Crista Huff

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New Pandora CEO on Board

(P, $23.90, up $2.52 midday)

Pandora Media Inc. has selected digital-advertising veteran Brian McAndrews as its new CEO, Chairman and President.  Morgan Stanley says “we think Mr. McAndrews is well-suited to lead Pandora in its efforts to evangelize the digital radio advertising model to broadcast radio buyers.”  S&P says “sell Pandora”, citing “disproportionately high content costs”.

The company took a small loss last year, will make a small profit this year, and then earnings are projected to grow rapidly.

The stock price is up 26% since we urged Ransom Notes Radio investors to “buy low” during the August market correction, and it broke through upside resistance today.  Expect Pandora stock to climb for a while now.  The next stock price catalyst will be a report on the September listener metrics in early October.

Goodfellow LLC Rating:  Aggressive Growth, Public.  (09-12-13)

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Bristol-Myers Searches for the Sweet Spot in Prostate Cancer Treatment

(BMY, $43.55, up 29 cents midday)

Bristol-Myers Squibb Co. reported lackluster results in drug trials to treat advanced prostate cancer, prolonging patients’ lives by about five weeks.  Phase III studies are underway for patients with less-advanced cancer, who responded better to treatment.  The drug is currently successful in treating melanoma, and the company is seeking to use it to treat additional cancers.  Prostate cancer is the second leading cause of cancer death in the U.S.

Bristol-Myers is a profitable company, but lacks earnings growth.  The PE is 25 and the dividend yield is 3.22%.

After a huge run-up this year, the stock corrected in August, and will likely trade between $41 and $48 for the rest of the year.  We think the stock is grossly overvalued.

Goodfellow LLC Rating:  Public. (09-12-13)

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Lululemon Tweaks Forecast, Price Plummets

(LULU, $65.87, down $3.15 midday)

Lululemon Athletica Inc.’s stock is down about six percent this morning after the company fine-tuned its annual profit forecast.  A yoga pants recall in March has seriously disrupted the company’s ability to get product into its retail stores.  Earnings growth projections then fell dramatically to 7% growth this year.

The company is expanding internationally, adding men’s stores, and adding golf & tennis apparel to its product lines.  However, sales are being affected by lack of inventory, the poor economy, and much lower price points offered by competitors such as Nike and Under Armour.

Aggressive earnings growth is expected to resume in 2014.  The PE is 33.

Lululemon’s stock price is on the low end of a medium-term trading range between $62 and $82.  Traders and aggressive growth investors should jump in here.  Everyone else should be cautious with this volatile stock.

Goodfellow LLC Rating:  Aggressive Growth, Volatile, Public.  (09-12-13)

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Chinese Property Developer Sets Eyes on American Hotels

(MAR, $43.16, up $1.55 midday)

Property developer Wang Jianlin is now China’s richest man, with a net worth of $22 billion.  In addition, Bloomberg is reporting that Jianlin “has hired two investment banks to buy hotel-management companies in the U.S.”  Shares in Marriott International Inc. are up about 3% today based on takeover speculation.

Marriott’s earnings are expected to grow 16-18% per year for the next three years.  However, their long-term debt ratio is extremely high at 153% and their cash position is weak at $88 million as of December.  It makes sense that a cash-rich investor could appeal to Marriott’s board of directors.
The share price is still recovering from the 2008 Financial Meltdown.  There’s serious price resistance at $47.  Traders and takeover speculators could accumulate shares at $41, but we wouldn’t otherwise recommend the stock due to the company’s cash and debt positions.

Goodfellow LLC Rating:  Growth, Growth & Income, Public.  (09/11/13)

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Time Inc. Buys AmEx Publishing, Owner of Food & Wine, Travel & Leisure 

(AXP, $74.84, up 24 cents midday)

Time Inc. has agreed to purchase American Express Publishing for approximately $100 million, for which parent company Time Warner Inc. can easily write a check.  American Express Co. “is selling the magazines because banking regulations restrict the company from non-financial activities,” reports Bloomberg.

Earnings per share at AmEx are expected to grow 10% per year for the next three years.  The company gets over half its revenues from card spending, while maintaining strong credit quality and an extremely low delinquency ratio.

AmEx shares broke past long-term resistance in May, and have traded between $71 and $79 since that time.  The company is doing well financially, but there’s no compelling reason to purchase shares.

Goodfellow LLC Rating:  Growth & Income, Public.  (09/11/13)

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Obamacare Causes Another Big Name to Reconfigure Healthcare Benefits
( TWX, $63.18, up 24 cents midday)

“Time Warner Inc. says it plans to move its retired workers off its health plan and provide money to them to purchase coverage on private exchanges at the beginning of next year,” reports Fox News.  The benefit change mirrors an identical decision made by IBM last week, and is attributed to rising healthcare costs.

Earnings at Time Warner are projected to grow 14-15% per year for the next three years.  Time Inc. will spin off from Time Warner in first quarter 2014.  Now that we’ve seen competitor News Corp. spin off 21st Century Fox, which brought immediate profit to shareholders, we think Time Warner shareholders will be equally well-rewarded.

Shares are up 18% since we began recommending the stock to Ransom Notes Radio listeners in February.  The share price experienced an orderly correction within an uptrend during August, and could easily begin reaching new highs again near-term.

Goodfellow LLC Rating: Strong Buy, Growth, Growth & Income  (09/11/13)

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Celgene Receives Another FDA Approval

(CELG, $148.07, down 40 cents midday)

Biopharmaceutical company Celgene Corp. received FDA approval to treat late-stage pancreatic cancer, giving the company another potential $1 billion in annual sales, and diversifying the company’s product base.  “The National Cancer Institute estimates about 45,000 patients will be diagnosed and about 38,000 will die from the disease this year.”  We reported this summer that Celgene is also applying for global regulatory approval this year for a myeloma cancer drug.

Earnings estimates have increased again, expected to grow between 21 and 27 percent over each of the next three years.

The stock is up 38% since our first buy recommendation to Ransom Notes Radio listeners in March.  It’s been trading between $132 and $150 for two months, and could pretty easily break out on the upside in the near-term.  S&P just raised the target price to $172.

Goodfellow LLC Rating:  Strong Buy, Aggressive Growth.  (09/10/13)

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McDonald’s U.S. Performance Weakens

(MCD, $96.81, up 36 cents midday)

McDonald’s Corp.’s August same-store sales increased 1.9 percent, much better than analysts expected, with Europe and Russia leading the international pack.  U.S. sales remain disappointing due to a poor economy; and menu competition and price promotions among many fast-food rivals.  McDonalds is introducing new food items, including steak for breakfast, and chicken wings, in a fight to maintain market share.

Earnings growth estimates have been ratcheting downward all year, currently expected to be up 4% this year.  The dividend yield is 3.18%.

The stock price broke through support in August, currently trading between $94 and $99.  We encouraged Ransom Notes Radio listeners to stay on the sidelines all year.  The large dividend yield should provide some price support for shareholders.

Goodfellow LLC Rating:   Public.  (09/10/13)

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Visa to Join the Dow

(V, $183.79, up $5.24 midday)

Visa Inc. will be added to the Dow Jones Industrial Average as of the market close on Sept 20.^.  Watch for the stock to trade up, as approximately 6.5 million shares need to be purchased by Dow index funds.

Wall Street expects Visa’s earnings to increase by 17-22% in each of the next three years.  The company announced another $1.5 billion dollar stock repurchase plan in August.

The share price rose 15% after our March buy recommendation to Ransom Notes Radio listeners, reached new highs in July, then had a pullback with the August market correction.  Watch for it to trade between $180 and $192 in the near-term.  Visa shares should appeal to growth stock investors.

Goodfellow LLC Rating:  Buy, Aggressive Growth.  (09/10/13)

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Biogen and Isis in $100 Million Dollar Drug Deal

(ISIS, $31.16, up $3.24 midday)

(BIIB, $226.24, up $1.06 midday))

Isis Pharmaceuticals Inc. will receive $100 million from Biogen Idec Inc. in a six-year agreement to develop treatments for neurological disorders, and up to $220 million thereafter for each new drug compound.  This marks the fourth recent collaboration between the companies, which is expected to bring new drugs to market annually beginning next year.

Isis is a small-cap aggressive growth company which typically takes a net loss every year.

The share price shot up to the low $30’s this summer, then corrected.  The stock could appeal to traders while it ranges between $28 and $34 in the near-term.

Goodfellow LLC Rating:   Aggressive Growth, Public.  (09/09/13)

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Crown Castle to Convert to REIT 

(CCI, $71.60, up $1.05 midday)

Crown Castle International Corp., operator of wireless towers and infrastructure, has begun the process of reorganizing as a Real Estate Investment Trust (REIT).  REIT’s typically pay substantial dividends to shareholders.  The company has not yet commented on future payouts, but S&P recently said, “We view the shares as highly attractive, given our expectations for strong free cash flow growth.”

The company became profitable in 2011, and generally expects rapid annual earnings growth.

The stock has been trading between $67 and $81 all year.  Crown Castle shares could appeal to growth & income investors and traders for the future dividend and the wide trading range.

Goodfellow LLC Rating:  Trading Buy, Growth & Income, Public. (09/09/13)

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S&P 500 to Add Delta Air Lines

(DAL, $21.30, up $1.41 midday)

Delta Air Lines Inc. will join the S&P 500 index after the close of business on September 10, replacing BMC Software.  BMC is being acquired by Bain Capital.

Delta’s earnings projections have increased since our July report, now expected to grow 48% in 2013.  The PE is 7.6.  The company is focusing on debt reduction; and return of capital via increased dividends and a $500 million share repurchase program.

The stock price is up 52% since we told Ransom Notes Radio listeners to buy at $14 earlier this year.  The stock is on an uptrend, most recently trading between $19 and $22 since mid-July.

Goodfellow LLC Rating:   Growth, Value, Public.  (09/09/13)

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Questions?  Contact Crista Huff at research@goodfellowllc.com.

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