Blue-Light Special: Wal-Mart Stock
If you are looking for a good, safe stock in this volatile market, Wal-Mart is one of the best.
David Trainer, Founder & CEO
Long Ideas
David Trainer, Founder & CEO
RIMM’s Stock Offers A Free Option On a Comeback
Yes, RIMM is losing market share and fast. Yes, RIMM’s Blackberry Playbook tablet is a dud. Yes, the stock has been a stinker recently. And yes, none of what I wrote at the beginning of this article would matter if the stock were not super cheap.
David Trainer, Founder & CEO
More Downside Than Meets The Eye for Finisar
The worst is not over for Finisar Corporation (FNSR)’s stock. Despite dropping over 50% since March, the stock remains on our most dangerous stocks list, where it has been since October 2010.
David Trainer, Founder & CEO
Lorillard’s Profits Require No Smoke and Mirrors
I am not a smoker or tobacco user, and I do not like to be around smokers. However, that prejudice does not blind me from the fact that Lorillard, Inc. (LO) is a “very attractive” stock. I recommend investors buy it as well as the following ETFs because of their large allocations to LO and their attractive-or-better investment ratings...
David Trainer, Founder & CEO
Sell Citigroup Before The Earnings Bubble Pops
Citigroup is running out of accounting tricks and the stock will continue its slide as investors recognize the company is not as profitable as it wants investors to believe. Our analysis of the financial footnotes of more than 50,000 annual reports means we know more about which companies have the naughtiest and the nicest accounting. And Citigroup is definitely on the naughty list.
David Trainer, Founder & CEO
Sell Morgan Stanley Before It Sells You Down the River
When Morgan Stanley (MS) started in 1935, there were around fifteen employees. For 2010, the company reported 62,542 employees. Bigger is not always better. And for big, publicly-traded companies, big tends to be worse especially when it comes to financial reporting.
David Trainer, Founder & CEO
For Ask Matt readers:Caterpillar Inc. (CAT) — Dangerous Rating
Caterpillar Inc. (CAT) gets our Dangerous Rating. This means CAT’s quality-of-earnings are not attractive and the stock’s valuation is very expensive. For example, the valuation of the current stock price ($112.16) implies the company will grow its profits at 16% compounded annually for 20 years. The takeaway: there are better stocks to choose from. See details in our free report.
David Trainer, Founder & CEO
Buy Eli Lilly & Company (LLY) – Attractive and Safe Enough To Take Home To Mom
The risk/reward of this stock is quite compelling. Downside risk is low as the valuation already implies a permanent 54% decline in profits. How much worse can the valuation get? Upside reward potential is strong as the stock has to go over $77/share to trade at a value that implies the company’s profits will experience a 0% decline, still a no-growth scenario.
David Trainer, Founder & CEO
No Security In VirnetX Holding Corp’s (VHC) Stock
Is VHC the next Google? The market’s current valuation seems to suggest it is that and much more.
Very few times in the last 15 years have I found a stock as expensive as VHC. The only comparable situation that comes to mind is Google (GOOG) at its IPO.
David Trainer, Founder & CEO
Take Gains on Discover Financial (DFS) To the Bank
Since we made DFS the Stock Pick of the Week on Feb 15, 2011, the stock is up about 14% while the S&P500 is up about 0.3%. The stock was super-cheap when we made the call, and that is no longer the case. After making the February and March lists, DFS is no longer one of our Most Attractive Stocks in April.
David Trainer, Founder & CEO
Accounting Is Fishy at the Zumiez (ZUMZ) Surf Shop
2010 earnings for the retail apparel sector have been quite strong, especially compared to 2009. However, looking behind the window dressing of reported earnings, we find that not all earnings are made the same. Zumiez Inc. (ZUMZ), retailer of cool, new action apparel turned to an old accounting trick to boost its 2010 earnings by 13%
David Trainer, Founder & CEO
Dead Company Walking: Sell Eastman Kodak (EK)
What I bet very few people, outside the company itself, know is that EK’s pension liabilities could torpedo the company into bankruptcy and send the stock to significantly lower levels. In the company’s recently published 10K, we found that EK’s pension obligations are underfunded by $2.6 billion, about 3 times the company’s market value.
David Trainer, Founder & CEO
Back Up the Truck: Intel Is Too Cheap To Pass Up…Again
Recent weakness in Intel (INTC)'s stock presents an excellent buying opportunity for investors. As one of March’s most attractive, INTC offers the rare combination of strong cash flow growth with a remarkably cheap valuation.
David Trainer, Founder & CEO
For Ask Matt readers:Caterpillar Inc. (CAT) — Dangerous Rating
Caterpillar Inc. (CAT) gets our Dangerous Rating. This means CAT's quality-of-earnings are not attractive and the stock's valuation it very expensive.
David Trainer, Founder & CEO
Bleeding Reserves To Artificially Boost EPS: Sell Principal Financial Group, Inc. (PFG)
Principal Financial Group, Inc. (PFG) reported accounting earnings in 2010 that are misleading compared to the true economic earnings of the business. PFG’s 2010 reported earnings are artificially boosted by a reduced loan loss expense, which is funded by a draw down of the company’s loss reserves.
David Trainer, Founder & CEO
Score A Takedown and Buy World Wrestling Entertainment, Inc. (WWE) – Very Attractive Rating
Don’t be fooled by the histrionics and high-flying stunts. World Wrestling Entertainment is an excellent business. With a return on invested capital over 22%, it is one of the most profitable companies in the United States. Excess cash is $207mm, more than 20% of the company's market value.
David Trainer, Founder & CEO
For Ask Matt readers: Ford (F) — Dangerous Rating
Ford gets our Dangerous Rating. This means F has poor quality-of-earnings and an expensive valuation. For example, F's ROIC at 0.6% is in our Bottom Quintile. And the valuation of the current stock price ($15.07) implies the company will grow its profits at 10% compounded annually for over 40 years. The takeaway: avoid this stock.
David Trainer, Founder & CEO
The Ride Is Over: Sell Ariba Inc. (ARBA)
Over the past 10 years, ARBA appears as quite a success story and one of the few ‘internet bubble’ companies to survive and reach profitability, on a GAAP accounting basis at least. Looking beyond the reported accounting results, however, reveals that ARBA is not quite as profitable a company as it seems, and its valuation has out-grown its profits by a wide margin – the required combination of factors for making February’s list of most dangerous stocks.
David Trainer, Founder & CEO
Stock Pick of the Week: Buy Discover Financial Services (DFS)- Very Attractive Rating
HIDDEN GEMS:
1. Our discounted cash flow analysis shows that DFS’s current valuation (stock price of $21.80) implies that the company’s profits will decline by 40% and never grow again.
2. Economic earnings are growing faster that reported accounting earnings.
3. Free cash flow of $2.8bn or 24% of its enterprise value during the last fiscal year.
David Trainer, Founder & CEO
For Ask Matt readers: Abbot Laboratories (ABT) – Attractive Rating
HIDDEN GEM: ABT's current stock price (~$45 per share) implies the company’s profits will permanently decline by 20%. In other words, the market is not only giving no credit for future profit growth, it is predicting a significant (20%) decline in profits.
David Trainer, Founder & CEO