Monthly Archives: August 2016

Companies have compelling stories that will drive their stocks

Ahead of Jefferies’ 2016 Consumer Conference next week, its consumer sector equity analysts named top picks within the sector.

“Broadly, Dan sees three things that can drive the stock higher from here, namely: sustained improvements in Walmart U.S. comp store sales, a reacceleration in eCommerce growth and an improvement in International operations,” the report said.

Jefferies analyst Kevin Grundy has a buy rating on Procter & Gamble (PG) . Grundy also has a price target of $95 on the stock.

“Kevin expects P&G’s slimmed down portfolio, better focused on geographies and categories where the company can (and should) win, to drive a return to 3.5% organic sales growth by FY18, in-line with the industry but ahead of (consensus) 2.5-3% expectations, and up from 1% average growth during FY15-16e. A positive inflection in organic sales growth and EPS upside (+2% vs. Street in FY17/18) are likely catalysts to restore P&G’s premium multiple,” the report said.

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Procter & Gamble is a holding in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Cramer and Action Alerts Plus Research Director Jack Mohr wrote in a recent weekly roundup:

Shares continued to trade higher this week on little news. We would be buyers under $80, and while we are not in PG for meaningful share appreciation, we consider it a safe income investment (3.3% yield) amid a low-rate environment. We like to view PG as an “equity bond” — a stock that can be viewed akin to a bond due to the stable and predictable nature of its underlying operations. We continue to view PG as a solid long-term investment at a reasonable price and reiterate our $85 price target.

Colleges and universities are helping out students

This article has been updated from its original publication on June 17 with information about Democratic candidate Hillary Clinton’s proposal for affordable tuition as well as information regarding the U.S. Military Academy. The newest slide is first on the list. 

College student debt is soaring, as many recent graduates are well aware. It follows, then, that prospective students would be making the affordability and profitability of their education a priority when selecting their future school.

The notion of free college tuition has made it to the presidential campaign trail. Democratic candidate Bernie Sanders proposed free tuition at all public colleges and universities. Hillary Clinton has come out with her own tuition affordability proposal, under which students from families earning $85,000 or less would be eligible for free tuition at four-year public colleges and universities. The threshold would expand to families making $125,000 or less by 2021.

“American families are drowning in debt caused by ever-rising college costs and it is imperative that the next president put forward a bold plan to make debt-free college available to all,” Clinton said in a statement, as cited by The Wall Street Journal.

In the short term, some colleges and universities are already looking to alleviate the financial burdens many students are subjected to after graduation.

Some schools, including members of the Ivy League, are looking to increase their competitiveness in recruiting and enrolling undergraduate students by making it more affordable for low- and middle-income students to attend — namely by replacing needs-based loans with grants or scholarships as well as covering the entire cost of tuition for some based on family income.

There are also some small colleges that offer free tuition and cover the cost of other expenses for all of their students. The catch? These schools tend to be super-specialized or based on Christian values. Some of these schools are considered Work Colleges, which is a group of seven colleges in the U.S. that integrate part-time work as part of a student’s total education.

But just because a college covers tuition doesn’t mean that all expenses will be covered. It varies widely what each school will and won’t cover.

Vijay Bhagavath expects these five stocks to outperform major indices

Networking and communications companies may not be the first stocks that come to mind when investors think of “hot” technology stocks, but opportunities arise as these companies capitalize on the booming trends in cloud computing, Wireless communication, big data and the Internet of Things.

Deutsche Bank equity analyst Vijay Bhagavath named five telecom and networking stock winners in a note to clients on Monday.Bhagavath expects these stocks to outperform major indices over the next one to two years, he wrote in the June 13 note.

“The core insight underlying our rerating call on CSCO is the accelerating transition we note from ‘Box’ to ‘Systems,’ based on a secular shift to Software and Recurring Revenues,” he wrote Monday. “CSCO’s gross margin inflecting to mid-60s and low-to-mid-30s operating margin, albeit at below consensus topline (due to the Software/SaaS mix shift), is the key to rerating the multiple in FY17/18.”

Bhagavath has a price target of $35 on Cisco. He expects the stock to trade at a price-to-earnings ratio of approximately 13 based on 2017 earnings estimates (and closer to where Oracle (ORCL) is trading), he said.

“The core insight underlying our rerating call on CSCO is the accelerating transition we note from ‘Box’ to ‘Systems,’ based on a secular shift to Software and Recurring Revenues,” he wrote Monday. “CSCO’s gross margin inflecting to mid-60s and low-to-mid-30s operating margin, albeit at below consensus topline (due to the Software/SaaS mix shift), is the key to rerating the multiple in FY17/18.”

Bhagavath has a price target of $35 on Cisco. He expects the stock to trade at a price-to-earnings ratio of approximately 13 based on 2017 earnings estimates (and closer to where Oracle (ORCL) is trading), he said.

Bhagavath has a price target of $36 on CommScope, which implies a 20% stock outperformance.

“ACIA is thematically ‘disrupting’ the status quo optical component value chain by introducing Moore’s Law economics in Optical Networking. ACIA is our Top Idea on double-digit growth trends in 100G+ Optical rollouts at Web 2.0s and Telcos (+$3B opportunity for ACIA; +30% CAGR).”

 Bhagavath has a price target of $50 on Acacia Communications.
 The company does not pay a dividend.