samedi 1 août 2015

Some US stocks to watch (that I don't own)

The stock market is pretty high. It's hard to find something attractive. You have to use a screener to find interesting things... and even if you do, you won't find a lot of stocks at interesting prices.

Even if I consider that my 15 stocks are enough for my portfolio, I'm always looking elsewhere to find prettier girls to fuck. So, I'm always reading, or taking a look at my impressive watch list. And sometimes, I use a screener. There's a screener on Google Finance but I prefer the one that is avalaible on Value Line. Here's some of the metrics I use to build my screener (I use some other metrics too, but not as important as these):

PE: under 20 (at least, the forward PE should be under 20)
ROE: over 20
EPS growth per year for the last 5 years: over 15%
Projected EPS growth per year for the next 5 years: over 15% (Value Line guys are conservative, they usually underestimate growth so, if they estimate a 15% growth, it'll probably be higher)
Long term debt/Capital: Maximum 50%.

That screening should extract companies that:
  • achieve high growth year over year;
  • possess a certain moat;
  • are not too pricey
  • don't have a high level of debt. 
Usually, when you find a cheap stock with a high ROE, it's because that stock is related to resources, which is not a very good thing. Just take a look at the fucking TSX since the beginning of the year. Canada is so much related to resources that our fucking index is stalling or regressing when oil price drops. Fuck us!

Here's some US companies that seem interesting to me. I don't own shares of any of these companies but I could buy some stocks one day. Maybe soon. Maybe later. Maybe never.

1- Chicago Bridge and Iron (CBI)
Not my type of stock (services to the consumers in the energy infrastructure), but some superinvestors bought shares of this company in the last month. The metrics are pretty good for a company in this industry and the price is dirty cheap. Please note that Warren Buffet is an investor of this company. I like this stock because it's cheap and because some great investors are behind it.

Beta: 2,1
Forward PE: 9
ROE: 22
EPS growth last 5 years: 23%
Dividend: 0,5%
Market Cap: 5,6B$
Superinvestors in: Arnold Van Den Berg, David Einhorn, Robert Torray, David Tepper, Francis Chou, Warren Buffett, Thomas Russo (7 people)

2- Union Pacific (UNP)
One of the best railroad managers out there. Maybe the best. I like railroads companies because barriers to entry are pretty high and viability of the business is almost guaranteed. However, becoming rich by owning a railroad company is an utopy. Aim at a 10-15% yield for the long term and it should be achievable. I like this stock because it's maybe the best railroad stock in America and because it's the cheapest of all the best railroad stocks at the moment.

Beta: 1
Forward PE: 15
ROE: 24
EPS growth last 5 years: 25%
Dividend: 2,3%
Market cap: 85 B$
Superinvestors in: David Winters, Lee Ainslie, Thomas Russo (3 people)

3- Biogen (BIIB):
Do I have to repeat once again that I love biotech/healthcare stocks? Biogen has always been pricey but recently, the price took a nice dive (21% down in the last month) because of a cut in the outlook. That company is full of cash and they may announce an acquisition in the next year because they can buy a lot of things. I think it's my favorite pick in this list because of the high ROE and because of the sector.

Beta: 0,9
Forward PE: 18
ROE: 32
EPS growth last 5 years: 30%
Dividend: 0%
Market Cap: 75 B$
Superinvestors in: Nobody

4- Mylan (MYL):
Like Biogen, Mylan's share price took a nice dive too (about 18% down in the last month) because people were so sad that it wasn't bought by Teva. Teva instead bought generics from Allergan. Snif snif. It's so fucking sad. Just take a look at the growth of earnings in the recent years and you'll find some relief. Like all the major biotechs, they'll probably acquire something else or be acquired by a bigger company (why not Valeant?). I like this company for the EPS growth and for the sector but the ROE is a little low for me.

Beta: 1,2
Forward PE: 12
ROE: 14
EPS growth last 5 years: 52%
Dividend: 0%
Market Cap: 27 B$
Superinvestors in: Thomas Russo (1 people)

5- Zoetis (ZTS):
Zoetis is the most expensive suggestion of this list but Bill Ackman is a big owner of that one. When Bill Ackman is around, activism is in sight. Take note that Ackman has bought for about 75 M$ of this stock in the beginning of july at a price of 48$ per share, which is about the actual price of the shares. I like this stock for the very high ROE and for the superinvestors who are behind it (Bill Ackman and Robert Goldfarb are among my favorite investors). However, the price is high and the growth is so-so.

Beta: 0,9
Forward PE: 26
ROE: 50
EPS growth last 5 years: (ZTS doesn't have a long track record. EPS are growing about 10% per year for the last years)
Dividend: 0,7%
Market Cap: 25 B$
Superinvestors in: Bill Ackman, William Fries, Robert Olstein, Robert Goldfarb/David Poppe (4 people/institutions)

2 commentaires:

  1. I was wondering, given want things that have Longterm debt/capital of 50% of less, how does that square with existing holdings such as Valeant?

    Love your blog.

  2. Yo Nick,

    Let's say that Valeant is an exception. I'm comfortable with Valeant for two reasons: very high acquisition rate (which is successful until now) and lots of successful insider by my side.