About a week ago, a press release announced that the University of Virginia Press would be making tens of thousands of writings and documents from the nation’s Founding Fathers available on the Internet. By 2012, instead of having to rely on what was written about George Washington or Thomas Jefferson, individuals will be able to read their original thoughts on many important subjects.
Consumer products giant Procter & Gamble (NYSE:PG) kicked off the first quarter of its fiscal year by announcing results on Wednesday morning that saw earnings come in ahead of analyst projections. PG’s size will likely keep it from growing rapidly going forward, especially compared to a much smaller rival, but its size and product and geographic diversity offer compelling downside protection for investors.
In the healthcare industry, when it comes to pharmaceutical drugs, the focus is usually on the major pharmaceutical companies (like Merck (NYSE: MRK ) and Johnson & Johnson (NYSE: JNJ )) that produce the drugs, and the retailers (like CVS (NYSE: CVS ) and Walgreen (NYSE: WAG )) that sell them on store shelves or in the pharmacy.
My colleague David Sterman recently wrote a piece about the challenges investors face when they spot a company they would love to own, but the stock is just too darn expensive. [Read Dave's article here ]
The basic takeaway is to keep a close eye on the stock in hopes that an opportunity arises to pick it up at a more appealing valuation.
VFCorp (NYSE:VFC) has sold branded apparel and related goods for more than a century. It has grown into a global firm with product and geographic location, and is currently seeing a nice recovery in its sales and profits following the global recession. Going forward, it would be nice to see more robust growth trends.
Posted: Oct 26, 2010 09:05 AM by Ryan C. Fuhrmann
Industrial conglomerate United Technologies (NYSE:UTX) reported third-quarter results last week that beat analyst projections as sales and profits continue to recover from the credit crisis. The stock has now nearly doubled since the height of the credit crisis in early 2009 and stands right at its 52-week high, both of which suggest the valuation is starting to look a bit rich given the still tepid outlook for the global economy.
Posted: October 25, 2010 2:22PM by Ryan C. Fuhrmann
The cellular phone space represents one of the most interesting and rapidly changing markets in the technology industry. It is interesting to investigate industry trends that are being increasingly driven by smartphone technology and currently altering global market share dynamics. Market share turmoil also suggests that competitive advantages do exist but can be extremely difficult to hang on to. (Evaluate the past performance before investing in these types of gadget funds. Read Technology Sector Funds.)
Property and casualty insurer Travelers (NYSE:TRV) reported strong third quarter results last week that saw respectable operating growth and solid profit expansion. Over the past couple of years, management has been able to return excess capital to shareholders while rivals have had to focus on repairing their balance sheets because of the credit crisis. This combined with several other investment merits make the stock worth a close look.
Healthcare bellwether Johnson & Johnson (NYSE:JNJ) reported third-quarter results earlier in the week that served as a further indication the firm is in a turnaround phase. Anemic growth in many operating segments remained and product recalls damaged sales in a consumer segment that used to be relied on for steady results. Conditions will improve at some point, but the current investment appeal is questionable.
I spend the vast majority of my time hunting down securities I believe are significantly undervalued and investigating those in great detail I believe have considerable upside potential. However, it’s also a valuable exercise to spend some time on the opposite end of the spectrum and analyze what I find to be unappealing or speculative investments that offer horrible risk/reward tradeoffs.
In comparison to what analysts were expecting, toy and game titan Hasbro (NYSE:HAS) reported solid third-quarter results. This outperformance pushed the stock to its all-time highs and a lofty earnings multiple, especially compared to an arch rival. At current levels, the investment appeal lies firmly in the rival’s shares.
After a relatively quiet period when the largest banks in the United States stayed out of the press and were allowed to refocus on running their operations, new allegations arose to suggest that many in the industry were negligent in handling the process for foreclosing on residential houses.
According to recent market statistics, Progressive Corp (NYSE:PGR) is the fourth largest auto insurer in the country. Sales and profit growth trends have picked up lately and suggest that the company should continue to pick up market share. Its business model is also somewhat unique and allows it to enjoy the best of both primary sales channels in the insurance industry.
Recent healthcare reforms will add an estimated 30 million new patients into the system within the next few years. That means more office visits, medical procedures — and lab tests.
Lab tests impact a very high proportion of healthcare decisions and will also become increasingly important as medical advancements will make the course of treatment even more important. Personalized medicine over one-size-fits-all drugs and treatments is another major secular trend working in favor of the lab testing business.
It may not seem remotely conceivable that the burning of garbage would be a viable or even appealing option for creating energy, but it is. There is an entire industry devoted to it, known as waste-to-energy, or WtE for short. The process involves the incineration of waste to create either electricity or heat energy — and it could be big business.
Posted: Oct 15, 2010 10:13 AM by Ryan C. Fuhrmann
The for-profit education industry was thrown into a further tizzy on Wednesday when the largest player in the space, Apollo Group’s (Nasdaq:APOL) University of Phoenix, reported a big drop in its expectations for student enrollments. This coupled with general industry concerns surrounding graduation rates, high student debt levels and an extremely uncertain regulatory environment means the stock has become too risky for most investors. For others, this uncertainty spells opportunity to make money on the stock over the next few years.
Money-center bank JPMorgan Chase (NYSE:JPM) reported third quarter profits on Wednesday that came in ahead of analyst expectations. Investing in the stock is a no-brainer for those that can stomach volatility in its non-traditional operating units, and the fact that the stock continues to trade below book value could imply that this risk is already baked into the valuation.
Cleaning products firm Zep, Inc (NYSE:ZEP) reported fourth quarter earnings on Tuesday that disappointed investors. A healthy acquisition program and cost-cutting moves following a spin off in late 2008 offer the potential for share price upside going forward.
Transaction processing firm Global Payments (NYSE:GPN) reported fiscal first quarter results on Monday after the market’s close. Earnings came in light of analyst expectations, but the firm’s long-term outlook remains strong, given that it operates in a growing market and has a solid track record of combining organic growth with a healthy acquisition program.
Last week, footwear brand firm Wolverine Worldwide (NYSE:WWW) reported third-quarter earnings that were better than analysts had forecast. Management also upped its full-year sales and profit expectations, all of which sent the stock towards its highs for the year. At current stock levels, the valuation may have gotten ahead of sustainable operating fundamentals.
After an extended period in the wilderness courtesy of one of the most severe economic downturns in decades, retail stocks are slowly making a comeback. Just a couple of years ago, consumers shunned clothing and many other goods for more basic necessities. Consumers traded down where they could and even the wealthiest of individuals held back on luxury purchases.
It’s little secret that China is one of the fastest-growing countries in the world. It already boasts the world’s largest population of nearly 1.4 billion citizens, and through the first half of this year, its economy  grew by +11.1%, which comes despite a global slowdown brought on by the credit crisis. In other words, China stands out for the vastness of its consumer base and track record for rapid growth. The country is a star compared to more developed markets that are struggling with housing bubbles and high unemployment coupled with crimped consumer spending.
Posted: Oct 08, 2010 09:11 AM by Ryan C. Fuhrmann
Food and beverage behemoth PepsiCo (NYSE:PEP) reported third quarter earnings that met analyst expectations, but the stock fell as management lowered the top of its earnings outlook range. This combined with uncertainty over the acquisition of certain bottling operations and a stock that is trading at its highs for the year means there is no hurry to become a shareholder.
An extremely valuable investment strategy is to keep tabs on what the major players on Wall Street are doing with their money. Warren Buffett, George Soros, Bill Gross, Mario Gabelli and Jeremy Grantham quickly come to mind — especially considering they are more than willing to put their own money on the line. So does Carl Icahn.
Warehouse retail leader Costco (Nasdaq:COST) just closed out its fourth quarter and fiscal year. It was business as usual as sales grew briskly and management was able to leverage the top-line improvement into higher earnings growth. To justify where the current share price is trading at, it must continue performing at this level for many more years.
Posted: Oct 06, 2010 13:33 PM by Ryan C. Fuhrmann
Yum! Brands (NYSE:YUM) released its Q3 earnings report on Tuesday and for the most part, it was good news: the company posted 7% growth in overall sales, mostly thanks to overseas sales, especially in China. YUM now operates 37,000 restaurants in 110 countries across the world, including Taco Bell, KFC and Pizza Hut, but recently singled out China as the driver of its fortunes going forward. The strategy is risky, but so far, it’s paying off. But can it keep working? Read on for a look at YUM’s recent earnings report, and where the stock could be headed.
Its operations aren’t growing like they used to, but Pitney Bowes (NYSE:PBI) is a leader in the postage metering industry and sports a hefty dividend yield. Combined with a low valuation, the stock is a very appealing income play - especially for investors chasing riskier high-yield options in the fixed income asset class.
Ryan C. Fuhrmann, CFA, began his investment career at Northern Trust Corporation in Chicago.
He is actively involved with the CFA Institute, an association of investment professionals, and has even co-authored a portion of their curriculum.
In addition to his CFA certification, he holds a degree in business from the University of Wisconsin and a MBA from the University of Texas at Austin.
Ryan adheres to a value-based investing viewpoint that successful companies generate sustainable cash flow for their owners and earn returns on invested capital far in excess of those costs of capital.
In his spare time, Ryan enjoys reading, traveling and catching as many live music shows and movies as possible.
More from Ryan:
Consulting and IT-outsourcing giant Accenture (NYSE:ACN) reported full-year results on Thursday that further proved it made it through the credit crisis with minimal disruption to its operations. This suggests that the company’s consulting and outsourcing businesses are less cyclical than originally thought. Additionally, ACN’s free cash flow generation remained impressive, though it is projected to slip slightly for the coming year.
American Greetings Corp. (NYSE:AM), along with privately-held Hallmark, sell greeting cards and related “social expression products.” The industry has been on a secular decline, which was further illustrated by American Greetings second quarter results. A couple of tuck-in acquisitions have so far failed to stem the sales decline, though profit growth has been decent over the past couple of years.
After more than a decade of above-average growth, spending trends in the defense industry have become much more challenging. Raytheon (NYSE:RTN) is highly dependent on the Pentagon for its sales, and its international business was just hit by the loss of contract in the United Kingdom. The longer-term outlook is still solid, given management’s track record and a leadership position in the industry.
The Telecommunications Act of 1996 mandated the need for disparate telecom networks to be able to communicate with each other. It also prescribed the need for number portability, which allowed consumers and businesses to keep their phone numbers even if they switched to another telecom provider or network.
The designers of the act could not have imagined how popular it has become for an individual to keep his or her phone number or that communications networks would transcend the wired and wireless spectrums to include the World Wide Web.
McCormick (NYSE:MKC) is the undisputed market leader in selling spices, seasonings and specialty flavors to consumers and food makers. Domestic growth has been steady and global expansion could really spice up growth prospects going forward. For now, the stock offers a comforting mix of modest operating growth, dividend yield and downside protection.
Xyratex (Nasdaq:XRTX) bills itself as a leading provider of data storage systems and storage process technology. The company description includes a number of tech-industry buzz words that have fueled takeover speculation because a number of industry bellwethers have recently acquired smaller players in the space.
Read the rest of this entry »