Stock of the Week #8: Pfizer (PFE)

By: Prem Samritpricha

2 Reasons to Buy the Stock:

• Ibrance drug to drive top-line growth
• High possibilities of the stock thriving in the near future

Summary:

This summary focuses solely on highlighting Pfizer’s drug Ibrance and how it is changing the landscape of treating breast cancer. Breast cancer is currently one of the most lethal diseases in America. Sadly, according to breastcancer.org, around 12% of women will acquire breast cancer in their lifetime. In 2015, there were 231,840 women who were diagnosed and of those, 40,290 died. In 2016, these numbers are increasing at a rate of 6.4%, with a .4% rise in death. On February 3, 2015, the Food and Drug Administration also known as the “FDA” granted Ibrance, one of Pfizer’s leading breast cancer drugs. It has been proven that patients who were given Ibrance live on average 20.2 months longer deprived of breast cancer and without Ibrance, 10.2 months.

Ibrance already has a good reputation as it has been recommended by 5,000 physicians and is currently being taken by over 20,000 patients. The feedback has been tremendous and has a huge effect on patient’s quality of life. At this, Ibrance is booming in Europe, so much so that it is apparent this particular drug is what is going to be key in Pfizer’s growth.

 

 

Stock of the Week #07: Dow Chemical (DOW)

By Prem Samritpricha

3 Reasons to Buy the Stock:

• Changes in business model
• Higher margins led to higher profits for fiscal 2015
• Upside potential

Summary:

Dow Chemical (DOW) has been making smart and clever moves. Since 2015, the company has changed a couple things to its business model with the most efficient move being to focus on high growth and high margin markets. The company distinguished the first polyethylene product conveyed from its Sardara joint venture plant, alongside with starting up the world’s largest propylene facility.

2015 proved to be a very decisive year for DOW as the company dumped its direct ownership of MEGlobal. It declared a reformation of Dow Corning Silicones, and split off Dow Chlorine Products and vended the AgroFresh, Sodium Borohydride, and ANGUS businesses. These moves made a huge difference, raising its margins over the past 13 consecutive quarters, increasing its earning and strengthening their cash position. In 2015, the company produced earnings per share growth of 9%, up to $2.94 compared to 2014.

The company’s cash on their balance sheets continues to steadily grow as a result of the aforementioned. Specifically, DOW’s full year managing cash flows went up by 16%, and up to $7.5 billion compared to 2014. DOW also sports a healthy dividend and is shareholder friendly having repaid $2.7 billion to investors with share buybacks and dividends in Q4 of 2015 alone. We see the strength in their new operating focus as a quality investment idea and believe DOW is set to climb higher in 2016.

Stock of the Week #06: RRD

By Prem Samritpricha

3 Reasons to Buy the Stock:

• Growing free cash flow amount
• Change in industry
• Dividend payout ratio cash flow bridge

Summary:

RRD is a worldwide provider of combined communications. The firm deals with over 60,000 customers worldwide to be able to better custom communication resolutions. In 2015, the company’s net sales were 11.39 billion with a non-GAAP adjusted EBITDA margin of 10.6%. Therefore, the free cash flow was in the $400 to $500 million range.

The difference that RRD is making is changing the industry, because they were suffering from decreasing product volumes and competitive pricing dynamics. The company’s legacy distributing and retail services business, which includes magazines, catalogs, retail, books, and directories, still accounts for almost 25% of their sales. RRD is also the biggest printer in North America, with the largest product and service contribution. The US printing market, discounting newspaper is roughly a $125 billion dollar industry. With RRD’s diverse service offerings, they are in a good position to keep and increase market share.

RRD’s dividend payout ratio is progressive and seizes the trajectory of the company’s free cash flow production and dividend growth. With the strong net cash amount on their balance and a business model that keeps producing a substantial amount of free cash flow, RRD is in a good position to continue paying and even increase their dividend in the long run.

Stock of the Week #05: F

By Prem Samritpricha

3 Reasons to Buy the Stock:

• Strong dividend which could increase
• Attractive price with strong lines of business
• Low energy prices will continue to make for a healthy auto industry

Summary:

Even though Ford’s share price has been struggling, we believe there are some underlying items which makes the company an attractive investment right now. Ford is a dividend paying machine giving its share price a floor to its intrinsic value and we believe Ford could raise it’s dividend this year. Add together Ford’s $.60 dividend with the $.25 special dividend which was just revealed and its yield jumps to more than 7%.

Primarily using Ford’s historical P/E, we believe it’s currently undervalued. Ford’s normal P/E over the last 5 years is just short of 10, with the least being around 2 and the highest being around 20. The lowest analyst estimate is $14, but the average analyst estimate for the stock is almost $17. Thus, if Ford is in-line with their average P/E it will trade around $15, which is an increase of about 30% from current levels.

With oil and gas looking to remain low for the foreseeable future, the derivative effect will continue to be a boost to the auto industry, further benefiting Ford. The low prices have helped the increase in vehicle renovations amongst consumers, and it reduces the input costs for the company.

You can also find this write up on:

Seeking Alpha & StockTwits

*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.

Stock of the Week #04: GM

By Prem Samritpricha

3 Reasons to buy the stock:

• Healthy quarterly dividend
• GM expected to earn between $5.25 and $5.74 a share
• Increased their stock buyback program by $4 billion, which takes the total to $9 billion

Summary:

We believe shares of GM are currently trading at a discount to their fair value. Given the auto industry’s current climate, with a P/E of 11.12, we believe GM is undervalued and has room to run in 2016.

GM has a new management team which has been implementing cost cutting measures
as well as focusing more on the quality of GM’s products. Mary Barra, GM’s CEO, has made major contributions thus far, saving the company about $1 billion on overall costs.

Lastly, GM’s balance sheet is rock-solid. The company has an abundance of cash on hand and gigantic credit lines. The company has a total of $37.2 billion worth of liquidity accessible. The company also has a $9.4 billion of long-term debt, albeit, at low interest rates. So long as GM’s sales continue upward as we believe they should then so too will their stock.

You can also find this write up on:

Seeking Alpha & StockTwits

*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.

Stock of the Week #03: ADDYY

By Prem Samritpricha

3 Reasons to Buy this Stock:

• The shares have recovered from their 2014 decline
• The recent pullback offers a good entry point for investors
• Recent efforts to boost US sales will continue to work

Summary:

Germany defeated Argentina to win the world cup in 2014, which both are best Adidas selling soccer jerseys. Unfortunately, the world cup boost was still not sufficient enough to reach their financial objectives for the year. Adidas projected their income to be in the range of $1,095M to $1,255M only to revise this to be approximately $858M.

As a result of this, Mr. Mark King, who is Adidas’ head of North America, suggests that to be successful in the US, they have to be about US sports. His argument is that despite soccer being more popular around the world, they cannot ignore the opportunity in traditional American sports. Initiative Adidas has already taken as a result of this have been:

• To fund Arizona State University, who previously was a Nike school
• Sponsor more than 500 National Football League and Major League Baseball players
• Sign Kanye West

Many have been criticizing the company’s signing of Kanye West, speculating he won’t be able to bring the brand back and compete with Nike since he was passed by Under Armour recently. Every signature shoe Kanye West has come out with have been sold out on their opening day and some times they have even been resold for more than their initial price. As a result of tackling opportunities both within the sports world as well as the music and entertainment space, we see shares of Adidas recovering from their recent decline going into 2016.

You can also find this write up on:

Seeking Alpha & StockTwits

*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.

Stock to Watch #02: AMGN

By Prem Samritpricha

*Missed our last stock of the week? Check it out here: FIBER/SOTW*

3 Reasons to Buy this Stock:

• Recently increased dividend to $1 with a $2-$3 billion buyback program throughout 2016
• $11 billion in research and development spending
• The Kyprolis drug is targeted to produce $330 to $350 million in revenue

Summary:

Amgen (AMGN) continues to produce cell based drugs cheaper and faster than most competitors, keeping them at bay. Amgen isn’t slowing down at all in terms of topline growth. The company recently built a production facility last year in Singapore and is working on another facility in Tuas, Singapore. It’s noteworthy that this second facility will produce carfilzomib, which is the dynamic ingredient of Kyprolis. For those that don’t know, Kyprolis is a cancer-fighting drug which Amgen bought in 2013, for $10.4 billion as a key item to continue their topline growth at about 4% over the next few years. Overall, the company is continuing to invest in pioneering and innovative technologies at a rate other competitors just cannot afford to do. We believe the market has not priced in these strengths and thus, we believe Amgen is worth a further look.

*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.

 

 

Stock of the Week #01: BA

By Prem Samritpricha

*Note: This post was drafted before BA’s recent earnings release and this morning’s buyback and dividend raise disclosures.

3 Reasons to Buy this Stock:

• $20 billion revenue in 2014
• Has a $410 billion worth of back order
• The commercial airline market is expected to double

Summary:

Boeing is the biggest aerospace company in the world. First, they deal with commercial airlines. Second, they specialize in space and security systems, which also involves satellites. Third, they produce military aircrafts, weapons, and defense systems. Even though, Airbus who is their biggest competitor, who just recently built a plant in Alabama will be keeping the competition high in the industry, we are poised that Boeing will continue to thrive. This is mainly due to their specialty in broad manufacturing of commercial airlines, military aircrafts, weapons, and many more. Though, Airbus does specialize in helicopters, we see this as no threat to Boeing.

You can also find this write up on:

Seeking Alpha & StockTwits

*Disclosure: Stocks discussed to watch are strictly the JU FIBER Club’s opinion and not a recommendation to buy or sell positions.