Long Idea: Lear Corp (LEA)
Impressive profit growth and a valuation well below peers helped land Lear Corp on July’s Most Attractive Stocks list. Even better, aligning executive compensation with return on invested capital earns the stock a spot on July’s Linking Exec Comp to ROIC Model Portfolio.
3Q16 Sector Ratings For ETFs & Mutual Funds
At the beginning of the third quarter of 2016, no sectors earn an Attractive-or-better rating. Our sector ratings are based on the aggregation of our fund ratings for every ETF and mutual fund in each sector.
Long Idea: Nuveen Concentrated Core Fund (NCAFX)
This week’s Long Idea, Nuveen Concentrated Core Fund (NCAFX) justifies its fees through significantly better stock selection. In fact, NCAFX allocates heavily to stocks on June’s Most Attractive Stocks list.
Now Is The Time To Invest In This American Business
This week, we’ve found a company the market loves to hate in spite of its excellent operating results. With strong profit growth, prudent management decisions for future growth, and a greatly undervalued stock price, this week’s Long Idea is:
Add the Best Consumer Discretionary Stocks to Your Portfolio
The Consumer Discretionary sector ranks fourth out of the 10 sectors for the first quarter of 2015 and receives our Neutral rating. The Consumer Discretionary sector as a whole underperformed the S&P 500 in 2014, rising 9% to the S&P’s 12%.
Danger Zone: Make Sure You’re in These Two Stocks for 2015
Instead of our usual weekly sell/short call, we are going to open 2015 with two of our favorite stocks for the upcoming year. These stocks have strong growth potential in the coming year, and are attractively valued, trading below their economic book values.
10 New Stocks Added to Most Attractive List for December
Our Most Attractive Stocks (+1.1%) underperformed the S&P 500 (+2.2%) last month.
How to Avoid the Worst Sector Mutual Funds
Picking from the multitude of sector mutual funds is a daunting task.
Ford (F) is Hitting on All Cylinders
As long as Ford’s strong profit growth and market share gains continue, this stock has a lot of upside.
Consumer Discretionary Sector
The Consumer Discretionary sector ranks fourth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Dangerous rating, which is based on aggregation of ratings of 18 ETFs and 21 mutual funds in the Consumer Discretionary sector as of April 2, 2014.
NOPAT Adjustment: Foreign Exchange Loss
Converting GAAP data into economic earnings should be part of every investor’s diligence process. Performing detailed analysis of footnotes and the MD&A is part of fulfilling fiduciary responsibilities.
New Stocks Make Most Attractive/Dangerous Lists For March
Momentum chasing is never a good strategy. RCL significantly outperformed the market last year, while F lagged it slightly, but don’t expect those trends to continue in 2014 for either stock.
GM’s Long Range EV A Further Threat to Tesla
On Monday, GM announced their plan to develop an all-electric vehicle that could go 200 miles per charge, just like Tesla’s Model S. The catch? GM plans to sell their car for only $30,000, less than half of the $62,000 sticker price for the Model S.
Deferred Tax Assets and Liabilities – Invested Capital Adjustment
DTAs artificially raise reported assets and do not help generate operating profit while DTLs are like a source of interest-free financing. We remove the impact of DTAs and DTLs from our calculation of invested capital to ensure the more accurate measure of a firm’s return on invested capital (ROIC).
Asset Write-Downs – Invested Capital Adjustment
For debt investors, which GAAP was primarily designed for, write-downs are analytically helpful. They provide a more accurate assessment of the liquidation value of a company’s assets. For equity investors, on the other hand, write-downs are not helpful because they distort the return on invested capital (ROIC) of a company.
Accumulated Other Comprehensive Income Removed from Invested Capital – NOPAT Adjustment
Reported assets don’t tell the whole story of the capital invested in a business. Accounting rules provide numerous loopholes that companies can exploit to hide balance sheet issues and obscure the true amount of capital invested in a business.
Best & Worst ETFs and Mutual Funds: All-cap Value Style
The all-cap value style ranks seventh out of the twelve fund styles as detailed in my Style Rankings for ETFs and Mutual Funds report. It gets my Dangerous rating, which is based on aggregation of ratings of two ETFs and 270 mutual funds in the all-cap value style as of February 7th, 2013.
Show Discretion When Choosing Consumer Discretionary Sector ETFs
Retail HOLDRS (RTH) is our top pick for consumer discretionary sector ETFs. RTH is one of 51 ETFs that gets an attractive-or-better rating. We rate the investment merit of the top six consumer discretionary sector ETFs based on our coverage of 471 stocks in this sector. Per our first-quarter-2011 review of U.S. Equity Sector ETFs,…
Red Flag Report: Hidden Expenses/Income: What You Don’t Know Can Cost You
Most investors are not aware that companies hide one-time and unusual charges and income inside normal, operating line items (e.g. “Cost of sales”) on their income statement. These hidden items can mislead investors by artificially decreasing/increasing GAAP earnings. We found 13,000+ one-time items buried in normal line items like “Cost of Sales” by studying the Footnotes of 10-K filings from 1998 thru 2/15/2011. This research revealed that companies have concealed over $41 billion in one-time items.
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.