Markets

Watch List Wednesday – Stocks to Buy in 2023

April 26, 2023

2149

Microsoft had great earnings (as expected) and GOOG/L was not a disaster.

That means there’s hope although FRC continues to die and other banks may follow and, this morning, if the Dollar hadn’t been shot back down to 101.3 (down 0.5%) we’d be having a really bad open following-up on yesterday’s sell-off.

When the “good” news is that the Fed is going to stop tightening because we’re in a Recession – then maybe it’s still not yet time to jump in and buy stocks. That is why we have a Watch List and it’s not too different from the Watch List we had on December 28th but we’re adding back the positions that were already in our portfolios – now that we’ve cashed them out as well.

Generally, we look for Blue-Chip type companies with low debt, low p/e and reasonable anticipated growth. As we are including legacy prices from December, I’m going to leave those in place (in the descriptions) so we’ll know at what price we began watching – regardless of the date we begin.

AAPL – $164 is 2.6Tn and 26x earnings but the fact that earnings are $100B, which is enough money to buy most other companies – keeps them interesting. Still, too high for now but if they come back down below 20x – we want them (again).

ABNB – I think AI is going to help them tremendously as it’s ideal for managing tens of thousands of listings as if it’s all one big hotel reservation system. ABNB has $7.5Bn of cash net of debt as they simply don’t know what to do with $2Bn in annual profits.

AKAM – $83.50 is $13Bn and 15x earnings and cloud services is a growing space.

ALL – $136 is $36Bn and 15x and topping in a range they will likely break over. Higher rates are good for insurance companies, who are forced to park their reserves in “safe” assets.

AMZN – $102.50 is “only” $1Tn and 2022 was a bust (-$2.7Tn) but it should pay off in 2023 and 2024 as we head over $20Tn in annual profits, which makes $1Tn just 5x so STUPIDLY cheap.

APD – $312 is $69Bn and 26x so not cheap but explosive growth in a very niche specialty gases company so we’d love a shot at another dip.

APO – $63.40 is $36Bn and not even 10x earnings. Nice little Wealth Management firm that should grow nicely as Investors seek help in a troubled market.

ARCC – $18 is $10Bn and they make $1.2Bn so 8x AND they pay a $1.82 dividend.

AVGO – One of my all-time favorite stocks. $553 is $231Bn and 13x and hopefully the chip sector stays choppy and they go back on sale around $400.

BA – $190 is $113Bn and 83x as they lost $5.5Bn last year and only expect to make about $1.1Bn in 2023 so no rush to buy them but they used to make $8-10Bn a year, which would make $113Bn crazy cheap as they move from the investing cycle to the sales cycle with 7 years worth of back-orders at full production.

BBAR – Who’d have thought an Argentine Bank would be “safe”? $4.42 is $902M and they make $225M so pretty much 4x. It’s always tricky to track foreign banks as you’re constantly converting but I’m pretty sure they are also debt-free. Pays a nice 0.20 dividend too!

BBY – $74.50 is only $16.25Bn and BBY has $44.6Bn in sales and makes about 3% while AMZN has $560Bn in sales and makes about 3% yet AMZN trades at 56x and BBY trades at 12x. It’s not like AMZN is a surprised to consumers and will take BBY’s market share – what they have is pretty solid for reasons I’m sure you are aware of when you find yourself in BBY (or Fry’s for you West-Coasters). And what if I told you they also have $700M net of debt?

BCS – $7.81 is $30Bn and only 5x their $5Bn earnings but $47Bn in debt is a bit scary with rates rising. On the other hand, $1.7Tn in assets with rates rising is a nice plus too. This is one where we are very interested in seeing how the Earnings Reports look going forward.

BFI – $1 is $24M and they are selling $180M worth of hamburgers but losing $20M doing it. They have $118M in debt and will need to dilute but, after that, they will be very interesting – so we wait patiently.

BIG – $15 is $432M and they are expecting to lose $200M in 2023 and another $20M next year before things turn around so it’s risky and they have $400M in debt – which is the entire market cap and just $62M in cash – so they’ll have to dilute to borrow more or pay crazy rates. They usually make $200M so all will be forgiven if they execute but no hurry at all on this one.

BIIB – $304 is $44Bn and they make $2.2Bn so 20x is not cheap but back at $200 they would be a huge buy.

BKNG – $2,000 is $78Bn and 16.5x and they were a stronger contender in October at $1,600 but they took off into Thanksgiving and fell out of the running over price issue only. There is still the threat that Covid could once again impact travel.

BLK – $703 is $106Bn and 20x so not particularly cheap but no debt (net) and good growth makes them well worth watching for another dip to $550, where they are a definite buy.

BGFV – Just the cutest little retailer (sporting goods) at $9, which is $200M and only 6.5 times earnings. $25M in cash net of debt means any expansion is going to move the needle for them so a nice little Retail investment.

BNTX – $160 is $39Bn and 9x but a lot of that is Covid vaccine money that is winding down. Still, they have $13Bn in cash net of debt and a proven model so, like MRNA – I like them for the long-term.

BRK.B – To me, this is like playing SPY but with a better mix – hand-selected by Warren Buffett. $305 is $678Bn but, unfortunately, 20.6x so not cheap and these days they have $84Bn in debt, which is smart as they borrowed cheap and made acquisitions that have driven revenues up 30% during Covid so we’d love to buy them again – IF they go on sale around $260 (18x).

BX – $89.33 is $63.67Bn and they expect to make $3.3Bn this year and $4.5Bn next year.

BXMT – They just got so cheap we got interested. $22.25 is $3.8Bn and that’s 7.7x and I guess traders are bailing because they don’t believe Blackstone knows how to manage a changing rate environment? In 2007 this was a $500 stock but fell to $12 in 2009 and never regained it’s former glory. But they make $500M a year!

BYD – Small casinos. This is how we like to play sports betting too – indirectly. $55 is $5.75Bn and 10x earnings.

C – One of the better banks being treated like one of the worst for some reason. $44.40 is $86Bn at 7x earnings so ridiculously cheap and probably because $208Bn in debt is scary but that’s balanced out by $2.35Tn in Assets under Management.

CAKE – $31.50 is $1.6Bn and 10.5x. I can’t understand why they are so unloved.

CAN – $2.82 is $469M and they made $486M last year but this year they will lose $389M so they can make over $1Bn next year. Chinese AI chip supplier seems like a winner to me and they still have $700M in the bank.

CAT – Whenever they are down we sing! They are like the Boeing of construction equipment – backlogged for years. $243 is $126Bn and 16x so not where we want to buy them but $160 would be a gift if we get a nice drop.

COF – Banks with coffee shops and no tellers – what could go wrong? $91 is $35Bn and that’s only 5.7x so SOMEONE thinks it’s a bad idea but these guys are killing it.

COIN – $54 is $12.5Bn and their competitors have been falling like dominos so this is a “last man standing” play to me. They have $1Bn in cash, net of debt but they did lose $2.6Bn in 2022 so it can go fast but they project $900M in losses this year and $500M next year and then profits in 2025. Will be great if it works.

CIM – One of our favorite RIETs. Again, people have no faith but $6.20 is $1.44Bn and that’s 6.2x and these guys didn’t even lose money in 2020.

CLF – $16.20 is $8.4Bn at 11x reduced expectations. If there’s no Recession, they will fly higher and they only took a small loss in 2020 so nice to have for the long run.

CMCSA – This is NBC/Universal and Xfinity and Sky in Europe. $35.28 is $150Bn and 9.2x earnings while DIS gets 19x earnings – even with all the screw-ups.

CROX – $124 is $7.7Bn and they make $750M so still cheap down here. One of my favorite Retail plays.

CRSP – $49 is $4Bn and they are losing $500M a year at the moment. They do have $1.8Bn in the bank, so they have a few years to get it together.

CVX – Not many oil companies I like. They make 70% of their profits refining and have strong ties in Venezuela, which is opening up. $178 is $342Bn and 10.6x and only $8.2Bn in debt – very nice!

DAL – Well, now we know why I don’t love LUV. DAL cancelled less than 20% of their flights last week. $32.50 is $20Bn and that’s just 6x earnings but we already have them (maybe we’ll buy more).

DIS – $88 is $154Bn and 19x. Iger is back and he might kitchen-sink the quarter but, after this report I’m likely to be interested in getting back in. (We did get back in and again we’re watching earnings to decide if we’re going back).

DKS – $117 is $9.5Bn and that’s 9.5x, so I guess they must be making $1Bn?

DOW – Another one that’s too cheap anticipating a Recession. $50.65 is $35Bn and that’s 11.4x but they lost $1.3Bn in 2019 so not a stock you want if there is a Recession – though we do have some in our portfolios and will be happy to DD on weakness.

DVN – $53.21 is $35Bn and they make $4.5Bn so 7.77x and a lovely $5.06 dividend too!

EBAY – $41.47 is $22.5Bn at that’s less then 10x. Not a lot of growth but I’m very happy with stocks that simply make 10% per year on my money.

ERJ – $10.93 is only $2Bn and earnings are still erratic as they make very expensive planes and a single delivery shoved forward or back can make or break a quarter but they are making $400M this year and should do more like $700M next year, which would be 3x. I very much like that they are going after the VTOL market too.

ET – $11.87 is $36.6Bn which is only 8.3x but this one is all about the $1.06 (8.9%) dividends which we can jack up with short puts and calls. One of my favorite dividend stocks.

EXPE – $87.60 is $13.67Bn and that’s just 9.4x for a great travel stock.

FDX – $173.20 is $43.7Bn and that’s 11.2x.

F – Why did FDX go before F? That’s not how the alphabet works… Anyway, $11.63 is $46.7Bn and that’s 6.7x, which is ridiculous.

FF – $8.13 is just $355M and they made $88M in 2019 but only break-even so far this year but last Q was $15.8M so, if this Q is good – we need to get on the train before it leaves the station.

FL – $37.79 is $3.5Bn and that’s 8.9x for one of my favorite retailers. $26,034 per employee is great for the space.

FRO – $12.14 is $2.7Bn and that’s just 4.7x.

GE – They are suspended pending figuring out what’s left after the spin-off.

GES – $19 is $1Bn and they make $150M so just over 6x earnings is STUPID. We were using them for an income play in the Butterfly Portfolio.

GILD – $86 is $110Bn and 13x and that’s AFTER taking off huge since November. We have lots in our portfolios.

GLW – $36 is $30Bn and 16x. Also took off recently.

GNRC – Still way too cheap at 107, which is $6.4Bn and 14x for a nice growth stock.

GOLD – Still below $20, which is $34Bn and they should make $1.5Bn this year so call it 22x, which is why we get stuck at the $20 line.

GOOGL – 92.18% – that is their 2022 market share for search. $90 is $1.1Tn and that’s only 17x, which is silly. ‘

GPRO – I thought their move towards the high-end market was a good one but they haven’t caught on. $4.28 is a sad $663M and they make $50M, which is fine and they have $226M net of cash, which is 1/3 of the market cap so I still like them, even if no one else seems to.

HAL – Almost should be off the list as it popped from $25 to $40 but $40 is $36Bn and that’s 13.7x so still not too high but it ain’t $25, which was below 10x.

HON – $212 is $141Bn and 23x and 212 is also the area code my Dad lived in when he consulted for Honeywell 45 years ago. Blasted up from $180 in November but always a good stock to own when they are cheap if you like long-term reliability.

IBM – $145 is $130Bn and 15x and right on track for our positions.

IEP – At $53, $18Bn seems OK as it’s up 10% from $11.5Bn in 2018, when they made $515M. They pay a nice 15% dividend if it lasts so I was interested if $50 shows to be a clear bottom as a fun dividend play.

IGT – No longer cheap so back to watching. $28.14 is $5.6Bn and they are making $330M – so not terribly expensive but we came in around $18 so not that exciting here.

IMAX – $19.75 is $1Bn and they should get back to making $50M so call it 20x. This is a Butterfly stock we wait to buy when on sale.

IP – $37.40 is $13Bn is 12x and I see it as a Carbon play of sorts and, of course, paper packaging is being pushed vs plastic.

ISRG – Way up from under $200 and $269 is $95.5Bn is 50x, so back to being a problem for me on the price though I love the company. I think they’ll make $3Bn next year but that’s still 30x – would have been 20x before the rally and THAT I can endorse.

IVZ – $19.60 is $8.7Bn is 11.3x and it’s yet another investment management firm not getting enough respect.

JACK – Expanding back to the East Coast, where they used to be in the 70s but there was some food poisoning thing and they retreated and never came back. They had another on in the 90s that was much worse on the West Coast so, on the bright side – I’d say they have figured out food safety by now. $72 is $1.5Bn is 12.5x – love it!

JETS – I generally don’t like ETFs but this is a nice, general bet on the recovery of air travel without exposure to one airline (LUV)’s screw up. You have to analyze each component but it’s a good blended price.

JWN – Back in 2008/9, my nieces or my kids and their friends would come home from the mall with bags and I’d say “How the Recession going?” and they’d say “What Recession?” Ah, good times! Invest where the Top 10% shop because, if they stop shopping – the World is ending anyway, so what’s the difference? $16.50 is $2.7Bn is a ridiculous 7x earnings.

JXN – Yet another underpriced financial planner. They specialize in annuities. $35 is $3Bn is 2x (yes, not a typo) so, if you like free money – this might be for you. Oh yes, and they have $1.6Bn cash net of debt!

K – $68.50 is $23.5Bn and they make $1.4Bn so 16.7x and we use them as a Butterfly Stock, not growth.

KHC – $42.50 is up from $34 when we picked them but it’s still only $52Bn which is 15x. Again, simple questions to ask in a Recession: “Will I stop buying ketchup?” If no – then buy KHC.

KO – I was just talking about how great they are. $63.85 is $276Bn and they make $11.5Bn so 24x means we wait for a pullback. Usually a Butterfly stock.

LABU – Another ETF. Biotech. Seems too cheap to me.

LEVI – In a Recession, will you stop wearing jeans? If no, buy LEVI. $16.80 is $6.5Bn is 12x. They made it through two World Wars, the Great Depression and the San Francisco Earthquake – I think they’ll make it to 2025…

LOGI – I thought LEVI’s chart was stuck. $67 is 10.5Bn is 16.7x.

LOVE – Sactional Furniture. $26.60 is $402M and 11x. Love them long-term.

LYB – $92 is $29Bn is 9.4x and I LOVE specialty chemicals because they are such a small part of the overall costs but they are also usually vital.

LVS – Macau is opening and that’s huge for them. They punched way higher from when we were looking and $52.50 is $39Bn is 48x but they can easily make $2Bn in 2024 so $50 isn’t really that bad.

MDT – People are getting older and need more replacement parts – it’s a simple premise. MDT just took off on slam-dunk earnings and $91 is $121Bn and they make $7Bn, so not overpriced with nice growth.

MET – $72 is $58Bn is 9x and insurance companies have massive reserves they have to invest conservatively so higher rates are great for them. Was a Butterfly play.

META – We already bought a lot of this. Too cheap at $130, which is $345Bn, which is 16.4x but that’s because they are plowing 1/3 of their earnings into building the Metaverse. All they have to do is stop and they are back to 12x or, if they make $10Bn on the Metaverse…

MGM – $38 is $14Bn is 62x but, like META, they are building and building although MGM is building real casinos – like the one in Massachusetts. They can easily go back to making over $2Bn a year so 7x down the road.

MIDD – Newton’s law of thermodynamics states that, even in a Recession, you need heat to cook food. $144 is $7.6Bn is 15x.

MMP – I love pipelines! $55.35 is $11.25Bn and they make $1Bn (11x) AND pay a $4.19 dividend – what’s not to love?

MO – One day, cannabis will be legal and MO will sell joints. Until then, $47 is $84Bn and they make $9Bn so 9.3x while paying a $3.76 dividend is very nice! And keep in mind they are still paying for Tobacco settlements and the JUUL fiasco and those are their profits…

MP – US rare Earth! $21.67 is $3.85Bn and they make $200M but should be $300M+ in 2024. They have net $500M in the bank so I love them down here.

MRNA – Still not getting any respect for vaccine sales in 2023 but they project $8Bn and a $1.7Bn profit and $185 is 70Bn so 40x but they have $7Bn in the bank and huge prospects so I consider them a well-funded startup with incredible potential and an already proven (and FDA-approved) process for dealing with the World’s worst pathogens. I’d rather play them than any random Biotech.

MT – Buildings gotta get built sometime. $29 is $23Bn is 9x.

MU – Do we have too many chips this week or not enough? Well, we are priced for too many at $56, which is $62Bn and MU is losing $2Bn this year but usually they make about $6Bn, which would be 10x so it’s an investment.

NFLX – $342.50 is $152Bn and that’s about 30x earnings now. Was $200 when we liked it and took off.

NKE – $126 is $196Bn and that’s 34x as they also took off since we liked them.

NRG – Now this one got cheaper! $32 is $7.4Bn and only 6.2x but x is erratic to say the least. They pay a nice $1.40 dividend too. Down because they are spending $2.8Bn on a Smart Home company (VVNT all cash) and they don’t make any money and NRG already had $7.7Bn in debt – so it’s all very concerning.

NYCB – They benefitted from Signature Bank’s failure. I’m not sure they’ll be allowed to continue their 0.68 dividend but $9 is $6.5Bn and they were already making $900M without picking up SBNY’s accounts for free.

NLY – Speaking of dividends: $3.52 is 15.4%! $22.75 is $10.6Bn and that’s only 6.5x – love these guys!

NRG – $34 is $8Bn and they are making about $1.2Bn but $7.6Bn in debt is a bit scary but kind of normal for utility companies.

OMI – $20.70 is $1.5Bn and that’s 9x. $2.4Bn in debt concerns me with just $190M in profits and the growth isn’t that exciting so I’d stay conservative.

OLN – $56.40 is $7.7Bn and 9x. I always love my specialty chemical companies.

PAA – This is my favorite dividend stock. Currently paying $1.07 at $12.90, which is $9Bn and I like the companies that move and store /NG better than the companies that produce it. At the moment, they are making $1.7Bn so stupidly cheap though $8Bn in debt keeps them from being perfect.

PACW – $24.70 is $3Bn and only 6.5x.

PARA – Still unloved at $20.30, which is $13Bn, which is 15.7x but that’s in a rebuilding year. I believe they will be bought at $30 in the 2nd half.

PBR – $11.50 is $75Bn and 2x. Now that the turmoil is over in Brazil, this is a nice pick.

PHM – $50.70 is $11.5Bn and 7x. $2.7Bn is not too much debt for a home-builder.

PM – $102 is $158Bn is 17.8x. I like big and steady.

PRU – $99 is $36Bn is 8.4x. Now stupidly low at $87.

QSR – Took off. $67 is $20.5bn and that’s now 22x.

RAIL – $3.38 is $58M and they should make their first $4M this year with great growth.

RKT – Not making money this year as they re-tool but something to keep an eye on at $9.

RH – One of my favorite stocks so cheap at $300, which is $7.2Bn and 17x.

RIG – Flew up to $6 recently, which is $4.3Bn and they haven’t made money since 2016 but they do have $6.2Bn in debt so there’s no way I’d chase them. We liked them at $3.

RIO – Also flew up to $78, which is $124Bn and 10.5x. What a bargain it was before!

RWLK – 0.64 is just $38M and the company has $67M in cash net of debt and they “only” lose $19.6M last year so they have 3 years (hopefully) to get it together and I think they are on the right track.

SKT – Another favorite, now $18.33, which is $1.9Bn and 24.2x. At 20x I’d start accumulating ($15).

SLB – Another one that took off. $57.35 is $81.4Bn and 19x.

SOFI – Still not getting any respect at $6.23, which is $5.8Bn but they are growing revenues at about 25% and should start making a profit next year.

SONY – $89 is $109Bn and 15x

SPG – Another favorite. $124 is $40Bn is 20x.

SPWR – Stock of the Decade is currently unloved at $16.33, which is $2.8Bn and 30x. Next year earnings should double so a nice play for the patient.

STLA – $15 is $49Bn is 3.3x.

SWK – $86 is $13Bn is 20x.

SYF – $35.40 is $16Bn is 7.4x. Not much growth but steady profits.

T – After 100 years, still gets no respect. $19.23 is $137Bn and 7.5x.

TGT – $162 is $75Bn and 17x but it’s a rough year and back under 10x at this price next year.

THC – $51.50 is $5.5Bn is 9x. Silly.

THO – Like BA, they have a multi-year backlog to fill. $79 is $4.25Bn and they made $1.1Bn in 2022 but only $320M this year.

TNDM – $42.70 is $2.75Bn and they don’t actually make money but fast-growing diabetes care with $250M in CASH!!! is very interesting to me.

TM – $146 is $198Bn and 9x. Silly.

TMUS – $145 is $180M and 22x.

TROX – Was cheaper. $16.50 is $2.5Bn and still less than 9x.

TRVG – $1.66 is $600M is 7.6x.

TSLA – $133 is $421Bn is 31x but there’s enough growth there that we just jumped in when they touched $100.

TTE – $64 is $160Bn is 5.4x. So silly… And that’s AFTER gaining 50% from the October lows!

TUP – $4.18 is $186M is 4.7x.

TWO – $17.78 is $1.5Bn is 7.5x.

UL – $55 is $139Bn and they are good for $7Bn so 20x is not terrible and we used them as a Butterfly play.

UHS – Blasted higher on us. Now $150 is $10.6Bn and 13.8x.

V – $225 is $555Bn is 26x.

VALE – Yet another one that’s up 50% since we picked them. $18 is $82Bn is 7.2x still.

VMC – $179 is $24Bn is 27x.

VTRS – Very out of favor at $9.18, which is $11Bn but these guys made $2Bn in 2022 and should make about $3.5Bn this year – it’s the $17.9Bn in debt that hurts them. VTRS spun out from PFE in Nov 2020 as a way of dumping $25Bn in debts and using the declining revenues of these biosimilars to pay it down over time. At some point things should level off.

WBA – $36 is $31Bn is 7.7x.

WHR – $150 is $8Bn is 9x. People NEED washing machines, refrigerators and dishwashers. They are not optional things and WHR has been doing this since 1911 – I think you can say they are pretty solid in their market share.