Sunday, July 17, 2016

The Buy Now List - Updated for Summer 2016

Just a few weeks ago I wrote a post about the no-movement stock market, the forces holding it back, what I thought would happen next and what not to do (don't sell and buy a boat). You can find that article here

Since then, the market has finally begun to move upwards. Brexit's immediate negative impact on US stocks was reversed and forgotten within about a week. The S&P 500 reached a new high a few days ago, topping its best from mid-2015. If you're not fully invested in stocks right now, you're missing out.


But also since then there have been some news items worth considering when it comes to choosing specific stocks to get into today. So for those of you who can truly buy and hold— aiming for a 3-5 year window— here is my revised Buy list:


Apple (AAPL): No longer the astonishing growth story it's been for the last 15 years, Apple is still one of the most powerful money machines in the world, yet the stock is clearly on sale. Even if Apple is selling fewer iPhones than it was, the company is massively profitable and will continue to be so. In the next few months they will release the iPhone 7, which holds promise as many buyers of the iPhones 5 and 6 still have not upgraded, potentially waiting for the 7 to arrive. In addition, Apple Music will be revamped and easier to use, for release in October; Apple Watch II will be faster and more useful; AppleTV is expanding its reach into the smart home, and on the horizon lies the Apple car, sure to make a dent on an old and stagnating industry.


Disney (DIS): Disney is on a roll. Its theme parks bring in more visitors spending more dollars every year, and the new Shanghai Disneyland will only increase the company's growing brand strength in China. The movie studio's animated, superhero, and Star Wars films continue to dominate at the box office, making huge gains year over year: in 2016 Disney films have vacuumed up 32% of all US box office revenue to date, double the company's market share of just three years ago. And then there are the billions in licensing deals related to hundreds of characters and stories, its Marvel comics and Star Wars universes, and its Frozen juggernaut. Plus they've got ESPN, their children's television networks, their subscription web services, games and so on... Disney is what I like to call a "forever" stock: buy it, tuck it away, forget it, will it to your children. It's an astonishing business.

Facebook (FB): Hard to believe there's anyplace to go with Facebook, now at 1.6 billion members, but here it is: Facebook is massively profitable, yet it's stock price has yet to catch up to it's rocketing revenue growth. While it was once a worry that Facebook would lose its cache once Grandma signed up, it now looks like the very future of digital social connection. 

Under Armour (UA): Under Armour's stock has been beaten down severely from its highs last fall, largely on the departure of two senior executives and a rare earnings miss in Q4. Neither of these will impact the business in the long term. UA has been doing an excellent job growing its core business with exploding sales particularly of basketball shoes and other athletic clothing (partly thanks largely to prescient contracts with basketball phenom Steph Curry and world #3 golfer Jordan Speith— and now newly crowned Wimbledon prince Andy Murray), as well as a fast-growing women's apparel business. Meanwhile the company has invested $1 billion in connected-fitness technology and "wearables", competing with FitBit and the AppleWatch, among others. UA is is still the only company with a chance to actually challenge Nike's worldwide sports and fitness dominance. In fact, nearly all of their success has been in the stateside: UA's penetration of the global market has just begun.


PayPal (PYPL): Recently spun off from eBay, PayPal is rising fast in a newly wild-West payment environment. Scores of companies are now competing to process your spending, from Square to ApplePay to plain old handwritten checks. But trusted stalwart PayPal recently rolled up Venmo (the millennial's favorite cash-exchange system) and is now a major payment processor, putting real fear into the banks and the credit card companies. Digital payments are here to stay and PayPal is one of the frontrunners.

Chipotle (CMG): This fast-casual restaurant chain was one of the fastest-rising stocks of the 2010s until a short but brutal e-coli outbreak hit a number of locations last fall and winter. Stores emptied while management scrambled to contain the damage to Chipotle's locally-sourced healthy image. New nationwide safety processes are now in place to prevent another outbreak and free burrito promotions have put business on the upswing again. Loyalty programs and a renewed focus on quality will propel continued company expansion and stock price increases for the future. Pick it up while it's still underpriced.


I also offer a few higher-risk picks for you adrenaline junkies looking for bigger returns:


Twitter (TWTR): The financial press is all about how user growth is flat at Twitter. True enough, for now. But hundreds of millions of loyal Twitter users around the world continue to count on the service for news, sports updates, and celebrity worship. Twitter has been helpfully evolving its user interface and has recently reinvented its platform for advertisers: it's revenues have never been higher. The company has been rapidly adding live sports-streaming deals to its content coffers. And whether the business continues to go it alone or gets rolled up by Google/Verizon/Amazon, it's not going anywhere and is improving steadily.

Netlix (NFLX): Netflix continues to grow both inside the US market and, more notably, overseas. With services now available in 15 languages across 190 countries, the company is picking up speed with customers around the globe. Netflix defies critics again and again with the breadth and depth of its offerings and its stubbornly-low customer attrition rates, yet prices and revenues are up year after year. The long-held worry that profits will be squeezed as the company pays more for content over time has begun to give way as Netflix increasingly relies on its own in-house production of both TV shows and movies, easing margins and increasing content control. The legacy TV networks look stale and unimaginative in comparison; it may be that Netflix is just hitting its stride. (Day of this post, NFLX missed its expected subscriber growth numbers for Q2; the stock immediately fell off 15%, verifying my expectation of volatility. Plus now it's a bargain!!)

Tesla (TSLA):  On the forefront of the electrical transport revolution, Tesla, as well as its real-life Tony Stark founder Elon Musk, is always in the news. The current fervor surrounds the company's singular vehicular "autopilot" software, implicated in the highway death of a Florida driver who was apparently watching a movie while barreling down the freeway in his Model S sedan. It's a momentary headline. Last month the story was Tesla's offer to buy out its cousin business, Solar City, with the idea to vertically integrate solar panels with batteries and electric vehicles. As a stock Tesla will be a seriously volatile ride, but this company is routinely compared to Apple for its market-making vision, brilliantly conceived (if expensive) products, and its determination to change the world.

Finally, Sell: General Motors (GM): While GM has recently grown both leaner and meaner, making and selling better automobiles than they have in 50 years, and likely will see a small earnings pop this week, nonetheless the company suddenly faces a new and substantial risk. On Tuesday last week a federal appeals court opened the door for billions of dollars in wrongful-death lawsuits stemming from GM's faulty ignition switches, a profit-scorcher from which GM's 2009 bankruptcy would otherwise have shielded it. In light of the potential for those lawsuits now to proceed (124 people died in ignition-related accidents), I am recommending a sell for GM. Details on that story can be found here.


Drifting to Fifty | Random unrelated nugget of the week
Your relationship is a box. It is separate from you and your partner, it's a third thing. It must be made strong. It will contain nothing until you fill it up. If you take out more than you put in, it will be empty. 

No comments:

Post a Comment