Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Posts Tagged ‘best stocks’

Facebook the Next Big Winner?

By for Profit Confidential

260213_PC_leongGoogle Inc. (NASDAQ/GOOG) traded above $800.00 on February 19, and I still can’t believe I missed out on an early investment opportunity when the stock first debuted at $100.00 in August 2004. The company has become the king of the Internet space and the favorite of retail and institutional investors in the equities market. In fact, Google now appears to be the new Apple Inc. (NASDAQ/AAPL), which has disappointed investors and is sliding downward on the chart. (Read “Mr. Cook Better Have a ‘Plan B’ for Apple.”)

The comparative stock movement of Google versus Apple in the equities market is obvious on their stock charts. While Apple has continued to slide lower since trading at over $700.00 in September 2012, Google has moved in the opposite direction, with its recent breakout above $800.00, based on my technical analysis.

aapl-apple-inc

Chart courtesy of www.StockCharts.com

Going back to September 2012, Wall Street was so hyped up on Apple in the equities market that several analysts started to assign a $1,000 price target to the company, suggesting Apple would be the first $1.0-trillion company in the history of the equities market. Of course, it didn’t quite pan out that way.

On the other hand, just as we had seen with Apple in September, we are now seeing euphoric analysts jumping all over Google, highlighted by a $1,000 price target from Bernstein Research.

While I’m not convinced Google can reach this magical peak within a year, I do feel the stock will inevitably trade at $1,000, unless the company decides to split the stock. But then again, co-founders Lawrence Page and Sergey Brin … Read More

The Great Money-Making Opportunities You Can Find in Israel

By for Profit Confidential

The Great Money-Making OpportunitiesIsrael is the “Silicon Valley” of the Middle East. The country is not widely known as a place to find high-growth technology companies, but the reality is that this small and dynamic country of 7.9 million people, nestled on the Mediterranean Sea, is just that.

The country has the second largest number of start-up companies in the world, trailing only the United States. There are about 59 Israeli companies listed on the U.S. stock exchanges, trailing only China, with 153 companies, and Canada, with 152. (Source: NASDAQ web site, last accessed February 12, 2013.)

My stock analysis suggests that one of the best stocks and a top Israeli stock listed in the U.S. equities market is pharmaceutical giant Teva Pharmaceutical Industries Limited (NASDAQ/TEVA), a developer of generic and branded drugs and active pharmaceutical ingredients.

Technology and health care are some of the leading industries in Israel, based on my stock analysis. The country has seen a steady rise in technology companies that have performed well on the world stage, as my stock analysis also shows. (To see what’s on my radar in Internet stocks, read “Here Are My Favorite Internet Plays.”)

I will mention a few that I’m familiar with, but again these stocks are not to be construed as buy recommendations; rather, they’re more for information purposes.

A small-cap technology stock that has excellent long-term potential for above-average price appreciation is Petach Tikva, Israel-based ClickSoftware Technologies Ltd. (NASDAQ/CKSW), according to my stock analysis.

ClickSoftware creates solutions that allow companies to manage resources efficiently and effectively. The company develops and sells workforce management and service optimization solutions that … Read More

Look Out McDonalds!

By for Profit Confidential

Look Out McDonaldsI’m not a big eater of fast foods, but as a business, this market offers some good opportunities for investors, namely with the top three operators: McDonalds Corporation (NYSE/MCD), YUM! Brands, Inc. (NYSE/YUM!), and rising star Chipotle Mexican Grill, Inc. (NYSE/CMG). The mainstay in the group is McDonalds, but YUM!, comprising Taco Bell, Kentucky Fried Chicken (KFC), and Pizza Hut, offers investors a diversified fast food play. The upstart is Chipotle Mexican Grill, which offers superior growth rates; but this is already discounted in the stock’s higher valuation as compared to the other two companies.

A problem we are currently seeing is some slowing in fast food sales in markets outside of the United States, namely China in the case of McDonalds and YUM!, according to my stock analysis. YUM! is currently being investigated by several law firms, accusing the company of intentionally being overly optimistic of its recent growth in its key China market in order to drive its share price higher. Of course, YUM! subsequently disclosed that its poultry supplier is being investigated by the Chinese government on concerns about safety. (Source: “Shareholder Rights Law Firm Johnson & Weaver, LLP Announces Investigation of YUM! Brands, Inc.,” Business Wire, January 11, 2013, last accessed January 25, 2013.)

The same is occurring for McDonalds as far as its poultry suppliers. McDonalds, a bellwether for the fast food industry, is continuing to report stalling in its global same-store revenues after reporting a dismal 0.1% rise in the fourth quarter, compared to 3.1% for 2012. While the company beat the fourth-quarter revenues and earnings estimates, McDonalds warned that January will … Read More

Why the Big Mac Will Need to Fend Off KFC, Burritos

By for Profit Confidential

Big Mac Will Need to Fend Off KFCWhen consumer spending on fast foods slows, you have to take note. This is the case with McDonalds Corporation (NYSE/MCD), a bellwether for the fast food industry, after the maker of the “Big Mac” reported some recent stalling in its global same-store revenues. The stock fell after the news of the slowing, but it has since rallied after reporting a 2.4% rise in global comparable sales in November, which was a surprise…but a nice one.

My stock analysis is that McDonalds is feeling the impact from Europe, where the company derives about 40% of its system-wide revenues. Comparable sales in Europe increased a moderate 1.4% in November, which is not great, but given the financial crisis over there, the numbers were not bad, based on my stock analysis. Revenues in Asia-Pacific, the Middle East, and Africa edged 0.6% higher in November.

My stock analysis is that McDonalds has been the top performer in the restaurant sector over the past decade, following the dramatic shift in the company’s menu offerings to include healthy meals in hopes of broadening its target market. (Read about my favorites in the discount retail sector in “From Discount to Big Box: Some Retailers to Watch.”)

McDonalds Corp Chart

Chart courtesy of www.StockCharts.com

This strategic shift worked, as McDonalds is tops on the fast food chain at this point, leaving Burger King Worldwide, Inc. (NYSE/BKW) and The Wendys Company (NASDAQ/WEN) behind, according to my stock analysis.

Yet based on my stock analysis, there’s a growing list of rivals who all have targeted McDonalds as the company to emulate to try to take some of its market share.

In … Read More

When You Need to Buy Technology Stocks

By for Profit Confidential

Need to Buy Technology StocksThe tech-laden NASDAQ fared the best in November with a 1.1% advance, which was well ahead of the 0.3% gain in the S&P 500 and 0.5% decline in the DOW. Yet technology and growth stocks have not fared in the equities market since the end of the first quarter, with the NASDAQ down 2.6%, versus a 0.6% advance by the S&P 500 and 1.4% decline by the DOW.

In spite of the sluggishness of technology stocks, I suggest you continue to follow my investment strategy; buy good technology stocks on market weakness in the equities market, as long as you are willing to hold on to these stocks for the longer-term and ignore the near-term volatility.

A classic example of a technology stock that fell into the doldrums and provided a good buying opportunity was Facebook, Inc. (NASDAQ/FB), which traded at a low of $17.55 on September 4 prior to rallying $11.00 a share, or a whopping 63.0%, to over $28.00 on Monday. Facebook is exciting investors with its new plan of generating revenues from its one billion subscribers in such areas as mobile advertising. The reality is that Facebook has an impressive one billion pairs of eyeballs that can be extremely valuable if a sound strategy is executed. Again I would look to accumulate on price weakness down to the low-$20.00 level. The company’s biggest threat is Google Inc. (NASDAQ/GOOG) in the equities market.

FB Facebook, Inc. Nasdaq stock market chart

Chart courtesy of www.StockCharts.com

Another major technology stock that is going through a rough patch is Apple Inc. (NASDAQ/AAPL), which at below $600.00 is down over 16.0% from its record high of $705.00 on September … Read More

Newmont—the “Best of Breed” of All Gold Stocks

By for Profit Confidential

Gold ProducersThere’s been plenty of talk around here regarding gold and whether the precious metal is heading for $2,000. In my view, the current global risk will support and drive gold higher. (Read “The Stock Market Event You Need to Guard Against Right Now.”)

For any gold investor, the question is whether to buy the physical bullion or gold mining stocks. If you like the idea of holding the actual gold, you can always fly to Dubai and buy the metal from the vending machines, like Michael outlined yesterday in his article. But for the average investor, I favor gold stocks over the higher risk of other commodity options.

An investment strategy would be to buy a mixture of exploration-stage gold mining stocks along with small to large gold producers. Under this scenario, you can play both the potential aggressive gains of exploration stocks and the steady returns of the large gold producers.

For investors interested in exchange-traded funds (ETFs), the SPDR Gold Trust ETF (GLD) is worth a look and is currently trading in a sideways channel, above the 50- and 200-day moving averages (MAs).

SPDR Gold Trust Chart

 Chart courtesy of www.StockCharts.com

At the top of my list of gold stocks is Newmont Mining Corporation (NYSE/NEM); in my view, Newmont is one of the best stocks in gold, because this stock will generate value for your portfolio for years to come. I’ll go even so far as to say that this stock is the only one you will need to own for the next decade, with its good price appreciation potential and dividend.

Missing its earnings-per-share (EPS) estimates in three … Read More

What’s the Matter with Apple?

By for Profit Confidential

Matter with AppleWhat the heck is going on with Apple Inc. (NASDAQ/AAPL)? The stock has corrected 25.5% since trading at a record high of $705.00 on September 21.

Don’t panic yet, as my stock analysis is that we are seeing some portfolio adjustments and profit-taking by institutions and retail investors prior to the year’s end.

Fundamentally, nothing has changed, based on my stock analysis.

I still consider Apple to be one of the best stocks in technology, but the company is clearly facing increased competition in the lucrative tablet, mini-tablet, and smartphone markets.

The stock does have an attractive valuation of nearly nine times its estimated fiscal 2014 earnings per share (EPS) of $58.66 per diluted share, which is Thomson Financial’s consensus EPS estimate. Its price/earnings growth (PEG) ratio of 0.5 is a cheap bargain, based on my stock analysis.

The chart shows a challenge at the 50-day moving average (MA). Failure to hold could see a breakdown of the upward trendline, followed by a potential downward move to the $400.00 level, based on my technical analysis.

Apple Chart

Chart courtesy of www.StockCharts.com

My stock analysis is that there are clearly some concerns that Apple may not be able to continue on its merry way. Chief rival Samsung sold a staggering 97 million mobile phones in the third quarter, well above the 23 million “iPhones” sold by Apple, according to Gartner. A recent Forbes article suggests that the success of Samsung is due to its much broader assortment of available phones versus Apple’s single phone. (Source: “Samsung Extends its Lead Over Apple,” Forbes, November 15, 2012.)

I’m not ready to throw in the … Read More

These “Best Stocks” Ignore the Broader Market

By for Profit Confidential

“Best Stocks” Ignore the Broader MarketHindsight is always 20/20 in the investment business, and one of my biggest regrets is not investing in MasterCard Incorporated (NYSE/MA), which turned out to be an outstanding wealth creator on the stock market. I always follow and research what I call the “best stocks” in the marketplace because it helps me define the attributes of a successful stock market investment.

MasterCard spent the first few months trading range-bound around $46.00 a share on the stock market when it went public in the spring of 2006; then it moved strongly higher, appreciating to $300.00 a share in just two years. The position pulled back like everything else on the stock market in the last half of 2008 to $150.00 a share and spent the next year recovering. Recently, it hit an all-time record high of $483.00 a share, and Wall Street keeps increasing the company’s earnings outlook. To me, MasterCard is one of the market’s best stocks. The company’s stock chart is below:

Mastercard Chart

Stock chart courtesy of www.StockCharts.com

Visa Inc. (NYSE/V) has also done well on the stock market, though nowhere near as well as MasterCard. Discover Financial Services (NYSE/DFS) tanked badly during the financial crisis, hitting $5.00 a share during the low in March of 2009. Discover is now trading at an all-time high of $40.00 a share for a huge gain of 700% since its low. American Express Company (NYSE/AXP) has basically just mimicked the S&P 500 index over the last 20 years.

As much as the stock market is defined by its major indices, the contrast in performance between American Express and MasterCard is extreme. I’m … Read More

Why You Should Watch Israel for Start-ups

By for Profit Confidential

Watch Israel for Start-upsWhat if I were to tell you that Israel is the Silicon Valley of the Middle East? The country is not widely known as a place to find high-growth technology companies, but the reality is that this small and dynamic country of 7.9 million people nestled on the Mediterranean Sea is just that. The country has the second greatest number of start-up companies in the world, trailing only the U.S. There are over 120 Israeli companies listed on U.S. exchanges, including about 60 on the NASDAQ, which is second only to China. While I continue to view China as a top-growth area longer-term, the current malaise towards the integrity of Chinese companies makes Israeli stocks more trustworthy than Chinese stocks, based on my stock analysis. (Read “Chinese Stocks Hindered by Mistrust.”)

Based on my stock analysis, one of the top Israeli and best stocks listed in the U.S. equities market is pharmaceutical giant Teva Pharmaceutical Industries Limited (NASDAQ/TEVA), a developer of generic and branded drugs and active pharmaceutical ingredients.

According to my stock analysis, technology and healthcare are two of the leading industries in Israel. My stock analysis shows the country has seen a steady rise in technology companies that have performed well on the world stage.

I will mention a few that I am familiar with, but these stocks are not meant as specific investment recommendation. They are more for information purposes, based on my stock analysis.

A small-cap technology stock that has excellent long-term potential for above-average price appreciation is Petach-Tikva, Israel-based ClickSoftware Technologies Ltd. (NASDAQ/CKSW), according to my stock analysis.

ClickSoftware creates solutions that allow … Read More

Gold Stocks Lagging the Spot Price—Time to Buy

By for Profit Confidential

Gold Stocks Lagging the Spot Price—Time to BuyOn the stock market, gold stocks recovered from their recent correction, but they are still lagging the recovery in the spot price of gold. The same goes for silver stocks, whose stock market performance is even more behind the spot price action. Institutional investors have lost a lot of their affinity for gold stocks, even though they still might like gold’s long-term prospects. In many ways, speculating in gold stocks is higher risk than just buying gold if you believe the spot price is poised to advance. Of course, the stock market return potential is greater with gold mining companies, but there are a lot of factors at play beyond your control as an investor.

There are a lot of options now if you want to express a position in gold, for example. There are all kinds of leveraged funds, which can double the returns (or losses) generated by the changes in the spot price. Many of them trade in the form of exchange-traded funds (ETFs) on the stock market, and they aren’t a bad way to go if you believe the spot price is going to move.

The actual number of attractive gold mining companies that trade on the stock market is very small, in my view. (See “Gold Stocks Becoming a Great Value in This Market.”)

Everything within the sector becomes more attractive when the spot price is soaring, but if you own gold mining companies, you want the ones that hold up on the stock market when the spot price doesn’t. There aren’t that many of them around.

The reason for this is … Read More

Who Benefits in an Economy and Stock Market Like Today’s?

By for Profit Confidential

Benefits in an Economy and Stock MarketIf you’ve been stock picking the last little while, you know it’s tough just to keep your buck, let alone make one. Stock picking is a lot easier when there’s wind at your back. During the technology bubble of the late 1990s, you didn’t even need to do much stock picking; you could have just bought the NASDAQ Composite. Now, in a slow growth environment, making money from the stock market is a lot more difficult.

Stock picking is a lot harder these days, but that doesn’t mean that there aren’t great companies out there benefiting from the big changes taking place in the U.S. economy. Times might be tough at Saks Incorporated (NYSE/SKS), but things are booming at Ross Stores, Inc. (NASDAQ/ROST) and Dollar Tree, Inc. (NASDAQ/DLTR). Thinking about the retail demographic and weak consumer spending, a great investment strategy was to sell the luxury providers and to buy the discount retailers.

The recent stock market performances of Ross Stores and Dollar Tree speak for themselves. Ross Stores was trading just a bit over $20.00 a share in early 2010; now it’s around $70.00. Dollar Tree was trading at $16.00 a share in January 2010; now it’s at $53.00. Just as simple as it was to buy any big, brand-name technology stock in the late 1990s; some of the best stocks in recent history were discount retailers.

Hindsight is always 20/20, but stock picking in any environment can be as simple as asking: who benefits? In any given time period, some industries do much better than others. The key is to be just in front of the trend, before … Read More

The Best Stocks in a Weak Stock Market

By for Profit Confidential

The Best Stocks in a Weak Stock Market The stock market may seem trendless but corporate earnings are holding up okay. It’s very early days in this earnings season, but the financial sector’s performance was impressive. However, the stock market yawned at the news, with institutional investors more worried about the U.S. and Chinese economies and what kind of monetary stimulus might come next. The kind of trading action we have today will likely last going into next year—this is a market that’s so unsure of itself. (See “Blue-Chips: Watch & Wait for the Best Ones to Correct Further.”)

In this lackluster environment, some of the best stocks for risk-capital speculators are in the biotechnology sector. No matter what happens in the rest of the economy, the demand for pharmaceutical cures and therapies remains unabated. Some of the best stocks I’ve comes across lately have been related to the biotech or medical sectors in some form, and these shares can always move briskly if the news is right. Biotechnology as a stock market sector has much less correlation to the broader market and this can be advantageous when there’s no particular trend (like now).

Naturally, the best stocks are always the ones that go up right after you take on a position. But making money from the stock market in a no-trend environment is extremely difficult. Even a fast-growing business can have a tough time getting its share price up if the rest of the stock market is stuck in the doldrums.

The best stocks in any given sector tend to be in and out of favor quickly, so as a speculator, you have to be … Read More

Why Getting the Business Cycle Right Is the Only Thing That Pays

By for Profit Confidential

dividend paymentTwo decades ago, everyone was making money from the stock market. There was a boom, and some of the best stocks were in the technology sector, mostly due to the proliferation of the Internet. You didn’t even need to own the best stocks; just owning the index was a profitable investment strategy. Then, the best stocks and the rest of the market came apart, because valuations got too extreme for the amount of earnings being generated. Many companies in the technology sector are still today recovering from the stock market bubble that burst.

Take Intel Corporation (NASDAQ/INTC), for example. This company is still growing its revenues and earnings, but what used to be one of the market’s best stocks turned out to be a big dud. The company’s stock price hasn’t done anything for years. In fact, Intel’s stock market price on a split-adjusted basis is the same now as it was in November 1998. That’s 13 1/2 years of dividend payments, but no bankable capital appreciation for long-term holders of the shares.

Another company with a similar story is Cisco Systems, Inc. (NASDAQ/CSCO), which is now trading at the same split-adjusted price as in October 2008. Even if the company’s dividend payments covered the inflation rate, if you still owned the stock from that time, you wouldn’t have made a dime.

The notion that long-term investing in the stock market is the only way to go is a total bust as far as I’m concerned. Long-term investing works—but only if you own the right businesses at the right time during the business cycle. Things happen; industries change and … Read More

Spot Gold Is Going Down, But Attractive
Stock Market Opportunities Are Going up

By for Profit Confidential

precious metalsThe stock market and a number of commodities are in correction and this is no surprise at all. I want to repeat my view that all kinds of solid, growing gold mining companies are becoming very attractively priced right now and, as a sector, it’s worth putting gold stocks on your radar screen.

It’s a bit too early to jump right in with the spot price of gold likely to experience more downside. From a stock market perspective, most gold stocks began pulling back hard in mid-March, affecting even the best stocks within the sector. We’ve got to see the spot price of gold bottom out from its current downtrend and then I think we’ll have another really good entry point for considering new positions.

Investing in gold has always been a risky business, but it’s a worthwhile endeavor if you’re a stock market and commodities speculator. The key, like always, is to get the cycle right—timing in the investment business is everything. Even though the long-term trend might still be intact, the spot price of gold could easily go down to $1,200 or $1,100 an ounce. Why not? Gold has been in a bull market since 2002. The current price action in spot gold is very similar to the correction that occurred 2008/2009 and I wouldn’t be surprised at all if it repeated this trend: correction, recovery, consolidation, and then re-acceleration. It does take time.

Right now, there are large, medium and small producers of gold trading for reasonable prices on the stock market. A lot of these companies have little to no debt and are sitting on large … Read More

Seeking the Market’s Best Stocks? Look for the Best Brands

By for Profit Confidential

chinese stocksSome of the best stocks in the market are also the best business brands. Even in bad stock market conditions, many have turned out to be excellent wealth creators, and not just long-term, but over the last few years—and months.

You might consider Starbucks Corporation (NASDAQ/SBUX) to be a $40.0-billion mature company with its big growth story over, but the company and its shares are still doing great on the stock market. Starbucks has been one of the stock market’s best stocks; it’s been going straight up since the financial crisis, more than quintupling.

Another well-known brand, NIKE, Inc. (NYSE/NKE) has been one of the market’s best stocks in recent years. You’d think that business might be slowing for a running shoe maker, but the stock was trading in the low $20.00-per-share range in the early 2000s, and then bounced between $40.00 and $60.00 in the late 2000s. Now it’s trading right around its all-time record high on the stock market of over $110.00 per share…and it is not expensively priced.

Other great branded companies that have been some of the best stocks on the market have been McDonald’s Corporation (NYSE/MCD), (see The Winning Strategy When There’s No Stock Market Catalyst), Kraft Foods Inc. (NYSE/KFT), Under Armour, Inc. (NYSE/UA), lululemon athletica inc. (NASDAQ/LULU), Coach, Inc. (NYSE/COH), YUM! Brands, Inc. (NYSE/YUM)…and the list goes on. A lot of these stocks may have had periods of consolidation or they stumbled for a little while, but, for the most part, they’ve just kept going up, and that’s why they are some of the best stocks in the equity landscape.

As we all … Read More

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