Positive but Thinning Out
Current Market Outlook
There’s not much negative to say about the market if you’re looking at the major indexes—all remain in solid intermediate-term uptrends, and longer-term, there are many bullish signposts for the overall market. But it’s also a fact that this rally has become awfully thin—the number of stocks hitting new highs is half (or less) of what we saw earlier this month, and the rotation between extended growth (those that got going back in April/May), fresher growth (those that got going in the past month or so) and cyclicals is becoming more frequent and intense. Once again, none of this necessarily portends doom, but there’s little doubt that making money has become tougher, so factor that into your plan—possibly buying smaller positions, entering on weakness, and focusing on what’s attracting buyers.
That’s just what our screens do, and this week’s list has another batch of in-favor stocks. For our Top Pick, we’ll go with JD.com (JD), a well-traded name that just reacted positively to earnings, and whose group (China) is picking up steam.
| Stock Name | Price | ||
|---|---|---|---|
| The AZEK Company (AZEK) | 39.88 | ||
| Big Lots (BIG) | 53.65 | ||
| DaQo New Energy Corp (DQ) | 124.59 | ||
| Elastic (ESTC) | 103.35 | ||
| Emergent BioSolutions, Inc. (EBS) | 125.55 | ||
| Etsy (ETSY) | 128.74 | ||
| JD.com (JD) | 76.18 | ||
| Natera (NTRA) | 65.49 | ||
| Trade Desk (TTD) | 466.66 | ||
| Whirlpool (WHR) | 181.38 |
The AZEK Company (AZEK)
Why the Strength
One area benefiting from COVID-19 is the $328 billion home remodeling industry. Recent surveys show that 76% of homeowners in the U.S. have embarked on at least one home improvement project since the start of the pandemic, and they’ve each spent an average of $17,140. And that’s good news for The AZEK Company, which manufactures low-maintenance, wood-free, residential and commercial building products, such as decks, rails, trim and accessories. It also serves the residential outdoor market and the commercial segment with bathroom partitions and lockers. AZEK sells its products through more than 4,000 dealers and 35 distributors throughout the U.S. and Canada. Although in business for 30 years, this firm just went public in June, right in the middle of the pandemic, and used a portion of the proceeds to pay down debt, which had been (and still is) a bit of a worry for some investors. (It also invested $180 million in expanded capacity to meet the new demand.) Still, it’s the improving results and optimism about housing demand that’s keeping buyers interested: In fiscal Q3, AZEK reported EPS of $0.13, beating analysts’ estimates by $0.03. Sales also beat forecasts, coming in at $224 million. The company saw a 5.5% increase in its residential segment (to $193 million), with 9% growth in decks, rails, and accessories. Going forward, AZEK is forecasting 12% sales growth and EBITDA growth of 14% to 19% year-over-year, though as the home improvement trend continues to strengthen, that outlook will likely prove low.
Technical Analysis
AZEK has has been very strong since coming public, with just one down week since. We like that, despite being so young, the stock has respected its 25-day line (usually when a stock acts as it “should” it tells you some bigger players are taking an interest), and the action during the past couple of weeks has been excellent, with AZEK surging to new highs. If you’re game, we advise aiming for weakness.
| Market Cap | $6.13B | EPS $ Annual (Sep) | |
| Forward P/E | 52 | FY 2018 | 0.40 |
| Current P/E | 77 | FY 2019 | 0.48 |
| Annual Revenue | $851M | FY 2020e | 0.54 |
| Profit Margin | 7.1% | FY 2021e | 0.78 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 224 | 1% | 0.11 | -31% |
| One qtr ago | 246 | 12% | 0.13 | 62% |
| Two qtrs ago | 166 | 21% | 0.13 | 62% |
| Three qtrs ago | 216 | 13% | 0.16 | 60% |
AZEK Weekly Chart
AZEK Daily Chart
Big Lots (BIG)
Why the Strength
Many companies have seen their fortunes rise because of the pandemic, but there might not be a more dramatic example than Big Lots, a closeout and discount retailer that has been around since 1967 but had been struggling for years, even as low-priced/dollar store-type thrived. But the company has turned a 180 of late. First off, the quarter ending in April saw a meaningful acceleration in sales and earnings growth, driven by a 10%-plus gain in same-store sales. And the story has only gotten better since; In June, the firm completed $725 million of sales/leaseback transactions, dramatically boosting liquidity (it paid off debt, could start buying back a bunch of shares and has kept its dividend in place, yielding 2.4%). Then later that month, Big Lots said it expected earnings for the quarter ending in July to be north of $2.50 per share (compared to 53 cents a year ago), well ahead of estimates. And then, in late July, it said business was still humming, with same-store sales at the high end of its mid- to high-20% forecast! Of course, Big Lots isn’t suddenly a great long-term growth story, but perception has steadily improved, with most thinking this uptick in business will stick around. Analysts have been stampeding over each other to hike earnings estimates—they now see $6.46 this year (up 76% from last year and up from $4.25 just two months ago!), and even assuming some backsliding in 2021, see Big Lots earnings about $5 and spinning off a ton of free cash flow. The next big update comes this Friday morning (August 28), when the firm will report earnings.
Technical Analysis
BIG went from zero to hero after the market bottom, rising nine of 10 weeks and pushing to 52-week highs by late May. Shares then began a choppy rest period (they made no net progress for a couple of months), but heavy selling never appeared, and now BIG has kicked back into gear, bouncing off its 50-day line and running to new highs. Volume on the upmove has been light, so we’re more interested in buying dips, especially ahead of earnings.
| Market Cap | $2.00B | EPS $ Annual (Jan) | |
| Forward P/E | 8 | FY 2018 | 4.04 |
| Current P/E | 12 | FY 2019 | 3.67 |
| Annual Revenue | $5.47B | FY 2020e | 6.46 |
| Profit Margin | 3.4% | FY 2021e | 4.99 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 1.44 | 11% | 1.26 | 37% |
| One qtr ago | 1.61 | 1% | 2.39 | -11% |
| Two qtrs ago | 1.17 | 2% | -1.80 | N/A |
| Three qtrs ago | 1.25 | 2% | 0.53 | -10% |
BIG Weekly Chart
BIG Daily Chart
DaQo New Energy Corp (DQ)
Why the Strength
The IEA forecasts that 167 gigawatts of renewable capacity will become operational this year, with solar accounting for about half of that. And in China, new capacity installations are forecast to double this year, thanks to lots of government incentives and advanced technology that lowers module costs by 41%. That activity is boosting the fortunes of companies like Daqo New Energy, a company that manufactures and sells polysilicon to photovoltaic products in China. In spite of disruptions due to the coronavirus, Daqo had a very good second quarter, and there should be a lot more where that came from. The company reported EPS of $0.47 per share, up 262% over last year, and trashing estimates, the third time in the past four quarters it’s surpassed expectations, while its revenues were also up at a triple-digit rate. Looking to the next quarter, the company’s management said that it is still seeing “very positive momentum in solar PV demand in both domestic and overseas markets, supported by further capacity expansions by downstream mono-wafer customers.” Prices for mono-grade polysilicon are now $11k to $12k per kilogram, compared to approximately $7.5/kg in the second quarter. The company also remarked that reductions in energy and material usage were decreasing its costs. It expects to sell approximately 17,000 MT to 17,500 MT of polysilicon during the third quarter. Even better, analysts see earnings exploding higher both this year and next, which should keep the buyers interested.
Technical Analysis
DQ was in a choppy uptrend last year and actually built a solid base during and after this year’s crash. But it wasn’t until June that the stock really got going, passing resistance in the mid 60s and nearly doubling by the start of this month! It could use more of a rest, but DQ has now been consolidating for nearly a full month as the 25-day line has caught up. You could start small here or (preferably) on weakness.
| Market Cap | $1.70B | EPS $ Annual (Sep) | |
| Forward P/E | 12 | FY 2018 | 7.22 |
| Current P/E | 23 | FY 2019 | 3.31 |
| Annual Revenue | $505M | FY 2020e | 10.53 |
| Profit Margin | 5.2% | FY 2021e | 15.49 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 134 | 102% | 0.47 | 262% |
| One qtr ago | 169 | 108% | 2.58 | 244% |
| Two qtrs ago | 119 | 57% | 1.74 | 10% |
| Three qtrs ago | 83.9 | 25% | 0.65 | -67% |
DQ Weekly Chart
DQ Daily Chart
Elastic (ESTC)
Why the Strength
The quest for ever-more powerful search engines is the Holy Grail for web developers. While Google dominates the majority of mainstream searches, there’s also a lucrative market for enterprise searches. Elastic is a leader in this field, offering self-managed software for enterprise search, security and analytics needs. Its search engine, Elasticsearch, is used by tech titans like eBay, Walmart and T-Mobile, as well as countless smaller firms. It basically allows site designers to insert a web site function similar to Google search to search apps, websites and workplace tools, plus it can be also be used as an analytics platform for searching and analyzing data (used by Uber and Match.com). A high customer growth rate last quarter (along with a recent analyst upgrade) underscores its attractiveness. Its Q4 earnings featured robust metrics, with a same-customer revenue growth rate of over 30% and plenty of billings from long-term customers (a major positive going forward). But it’s the eye-popping revenue growth that demands attention; the top-line increased 53% in Q4 and 57% for fiscal year 2020 (despite COVID-related setbacks). Subscription revenue, meanwhile, was up 110% for the quarter and 101% for the year, and Q4 calculated billings grew 52%. Management guided for Q1 revenue of around $121 million (+34%) and $535 million for full-year 2021 (+25%), in-line with estimates. Elastic has also expanded into other markets (including app performance monitoring and endpoint security), and its focus on innovation should keep the growth trend intact. Earnings are due this Wednesday, August 26.
Technical Analysis
After debuting in October 2018 at 70, ESTC consistently struggled to get above the 100 level. It failed in its first attempt at overcoming this level in February last year, and while it briefly penetrated above the level last summer, it quickly reversed and commenced a long slide down. The stock finally bottomed in March and has been on the upswing ever since; it was stymied by the century mark in late June, but after a five-week rest, it exploded higher last week on big volume before today’s dip. Earnings are a risk, but you could start small ahead of the report.
| Market Cap | $9.29B | EPS $ Annual (Apr) | |
| Forward P/E | N/A | FY 2019 | -0.86 |
| Current P/E | N/A | FY 2020 | -0.93 |
| Annual Revenue | $428M | FY 2021e | -0.91 |
| Profit Margin | N/A | FY 2022e | -0.79 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 124 | 53% | -0.12 | N/A |
| One qtr ago | 113 | 60% | -0.28 | N/A |
| Two qtrs ago | 101 | 59% | -0.22 | N/A |
| Three qtrs ago | 89.7 | 58% | -0.32 | N/A |
ESTC Weekly Chart
ESTC Daily Chart
Emergent BioSolutions, Inc. (EBS)
Why the Strength
Emergent is an established player in the COVID-19 vaccine development race, with several initiatives involving vaccine/therapeutic development and manufacturing. In March, the firm partnered with Novavax to manufacture that company’s NanoFlu seasonal flu vaccine, along with an experimental COVID-19 vaccine candidate; Emergent has the flexibility to ramp up coronavirus-related work if the candidate shows promise (recent test results are promising, with antibody responses in subjects four times higher than those who had recovered from COVID). Emergent is also partnering with Johnson & Johnson to manufacture its lead COVID-19 vaccine candidate, and there’s a partnership with AstraZeneca to manufacture doses of the University of Oxford’s COVID shot—all told, its deals total $1.4 billion. But Emergent does more than just make vaccines for other companies; it develops therapies based on plasma from recovered COVID patients (with two candidates in Phase 1 testing). It also makes anthrax vaccines, plus a nasal spray (NARCAN) for treating opioid overdose. Emergent’s pipeline is bulging and features an anti-cholera infection candidate for children, a preclinical phase universal influenza vaccine and a Phase 1 Zika virus therapy. Unlike many biopharmas, Emergent is profitable and boasted per-share earnings of $1.73 in Q2 (well above the 33-cent consensus). The top line was up 62%, and management anticipates even more strength in the second half of the year. Analysts concur, seeing revenue growth of about 40% in the next two quarters, along with higher earnings. With multiple key partners in the vaccine race, the odds favor Emergent coming out a winner.
Technical Analysis
EBS got going after the market bottom and has enjoyed a huge run, though it’s had some big hiccups along the way, including a sharp drop in early June and another in mid July. But earnings caused the stock to go nuts, rallying all the way to 137 before pausing the past three weeks. We’re OK nibbling here, though we’d prefer to try to sharpshoot an entry in the low 120s.
| Market Cap | $6.82B | EPS $ Annual (Dec) | |
| Forward P/E | 21 | FY 2018 | 2.35 |
| Current P/E | 27 | FY 2019 | 2.88 |
| Annual Revenue | $1.26B | FY 2020e | 6.36 |
| Profit Margin | 26.8% | FY 2021e | 6.99 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 395 | 62% | 1.98 | 890% |
| One qtr ago | 193 | 1% | 0.01 | N/A |
| Two qtrs ago | 360 | 33% | 1.57 | 101% |
| Three qtrs ago | 312 | 80% | 1.21 | 120% |
EBS Weekly Chart
EBS Daily Chart
Etsy (ETSY)
Why the Strength
Etsy has always had a good business, as its leading position in handcrafted, unique and differentiated goods (88% of users say that Etsy has items you can’t find elsewhere), along with some heavy investment in its website (national TV campaign, better search capabilities, offsite ads, improved marketing tools for selling, broadening product selection, etc.) and bolt-on acquisitions (Reverb, bought out this month, is thought of as the Etsy of musical instruments) has driven steady sales and (usually) cash flow growth over time. And now the pandemic has taken a solid foundation and supercharged it. In Q2, not only did sales and earnings soar (see table below), but so did gross merchandise volume (up 147% to $2.7 billion), EBITDA (up 279%), active buyers (60 million, up 39%) and sellers (3.1 million, up 35%). Masks were a big boost to business, but even excluding them, gross merchandise sales lifted 114%, and what’s encouraging is that customers are buying more frequently (those making at least six purchases a year totaled four million in Q2, up 64% from a year ago). To be fair, there’s some concern that some of this boost to business is a one-time thing, but analysts are thinking most new customers will stick around, and bigger picture, Etsy believes it’s captured just 5% of its immediate market (and much less of its potential market down the road). This remains a good story with plenty of upside as e-commerce booms.
Technical Analysis
ETSY nosed to new highs in early May, which put it in the leadership camp. But unlike most growth stocks that got going back then, ETSY has remained in good shape; the stock’s pullbacks in May/June and July were tidy and gave way to higher prices and the current rest has been normal so far. A little weakness toward the rising 25-day line would be tempting.
| Market Cap | $15.7B | EPS $ Annual (Dec) | |
| Forward P/E | 67 | FY 2018 | 0.61 |
| Current P/E | 107 | FY 2019 | 0.76 |
| Annual Revenue | $1.13B | FY 2020e | 1.93 |
| Profit Margin | 22.5% | FY 2021e | 2.18 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 429 | 137% | 0.75 | 436% |
| One qtr ago | 228 | 35% | 0.10 | -58% |
| Two qtrs ago | 270 | 35% | 0.25 | -22% |
| Three qtrs ago | 198 | 32% | 0.12 | -20% |
ETSY Weekly Chart
ETSY Daily Chart
JD.com (JD)
Why the Strength
The boost in e-commerce due to the coronavirus pandemic has been global, and JD.com is one of the big beneficiaries of that trend in China, as it’s China’s largest direct-to-consumer retailer (sort of like Amazon here in the U.S.). In its second quarter report, the company said that its customer count jumped 30% year-over-year, to 417.4 million, with 80% coming from lower-tier cities across China, an encouraging sign that the e-commerce trend is really broadening out. That growth resulted in revenues climbing to 201.1 billion yuan ($28.5 billion), up 30% from last year, which marks a big acceleration. (Both EPS and revenues beat analysts’ expectations.) The Chinese retail market is rapidly going digital, with e-commerce penetration rising from 6% in 2012 to 25% in the first half of 2020, and with the top 20 retailers in China controlling only 18% of the market (compared to 48% that the top 20 retailers in the U.S. have), the potential for JD to grow its market share even further is immense. But retail e-commerce is just the beginning for JD. Last year, it spun out its healthcare unit (JD Health) into a subsidiary that offers 30-minute pharmacy delivery, telemedicine service (a big beneficiary of COVID-19), genetic testing and solutions to digitize hospital systems. Its JD Cloud supports its own marketplace and provides digital services to other companies and government agencies. And JD just announced it has acquired a controlling stake in Chinese express transport company Kuayue Express Group for three billion yuan ($432 million). Analysts expect the good times to continue, as do big investors.
Technical Analysis
JD broke out around the turn of the year and got to 42 before starting to chop around. But even through the crash, the stock was hitting higher highs (45 in March, 48 in April), with its uptrend gaining steam in May and June. Then came a beautiful, tight five-week base before exploding to new highs following the quarterly report. We think any modest dip will offer a solid entry point.
| Market Cap | $99.8B | EPS $ Annual (Dec) | |
| Forward P/E | 51 | FY 2018 | 0.34 |
| Current P/E | 64 | FY 2019 | 1.02 |
| Annual Revenue | $91.9B | FY 2020e | 1.46 |
| Profit Margin | 2.9% | FY 2021e | 2.15 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 28.5 | 30% | 0.50 | 52% |
| One qtr ago | 20.6 | 15% | 0.28 | -15% |
| Two qtrs ago | 23.9 | 22% | 0.08 | 14% |
| Three qtrs ago | 18.9 | 24% | 0.29 | 142% |
JD Weekly Chart
JD Daily Chart
Natera (NTRA)
Why the Strength
The global genetic testing market is growing and expected to increase by $5 billion in the next four years alone. Early detection screening is in particularly high demand, and Natera (whose tests are focused on DNA analysis) is a leader in the field, providing non-invasive prenatal tests (NIPT) for prospective parents and early-stage pregnancies, as well as screening for genetic abnormalities. The firm is divided into three segments: reproductive health, oncology and organ transplantation, and markets seven molecular diagnostic tests. Natera’s oncology segment offers a cancer screening service, Signatera, which is a custom-built circulating tumor DNA test for multiple cancer types (including esophageal and GI cancer). Its transplant segment technology enhances the ability to assess otherwise undetected rejection events that might lead to loss of a transplanted organ. But it’s in reproductive health where Natera leads the pack, with an expansive portfolio of tests for identifying genetic disorders. These tests are major revenue drivers, and the firm processed approximately 234,100 tests in Q2—an increase of 21%. While it reported a net loss, total revenue was 17% higher in Q2, driven primarily by sales of its Panorama prenatal and Horizon genetic tests; analysts predict low double-digit revenue growth in the next two quarters. Natera also has $571 million in cash and is well cushioned against economic headwinds. Looking ahead, management sees the NIPT market as being only around 15% to 20% penetrated, leaving a large runway for future growth.
Technical Analysis
NTRA was in a tight consolidation pattern between October and February, and it looked like the stock was preparing for a major rally. But in March, panic struck and NTRA fell from 40 to 18 in just two weeks. It quickly bottomed, however, and rallied back to 50 in May, then spent three months establishing another launching pad. This time, lift-off was successful, with the stock hitting a record high of 66 before hesitating. Use dips to do some nibbling.
| Market Cap | $5.19B | EPS $ Annual (Sep) | |
| Forward P/E | N/A | FY 2018 | -2.22 |
| Current P/E | N/A | FY 2019 | -1.79 |
| Annual Revenue | $342M | FY 2020e | -2.58 |
| Profit Margin | N/A | FY 2021e | -2.34 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 86.5 | 16% | -0.75 | N/A |
| One qtr ago | 94 | 41% | -0.45 | N/A |
| Two qtrs ago | 83.2 | 24% | -0.46 | N/A |
| Three qtrs ago | 77.9 | 19% | -0.33 | N/A |
NTRA Weekly Chart
NTRA Daily Chart
Trade Desk (TTD)
Why the Strength
The Trade Desk continues to quietly expand its market dominance in the growthy internet-connected TV (CTV) advertising space. Trade Desk—the largest aggregator of CTV ad impressions across every major content provider—was previously covered here in July. Its digital advertising software platform allows clients to purchase optimal impressions across various ad formats and devices. The firm’s future growth strategy is predicated on this year’s shutdown driving changes to the media landscape, which will presumably push advertising beyond traditional TV and into data-driven (so-called programmatic) strategies across multiple channels. Management had expected revenue to drop in Q2 due to COVID effects (and the top-line indeed fell 13%), yet first-half results were better than expected, with six-month revenue up 7% from a year ago. Trade Desk reported substantial improvement in ad spend as the quarter progressed, with growth in that key metric turning positive on a yearly basis at the end of June (attributed to clients’ quick adoption of data-driven advertising as markets reopen). Mobile video ad spend was up 15% in Q2, while audio spend increased 20% and CTV spend growth was up a very solid 40%. Trade Desk also expanded its partnership in CTV with FreeWheel, enabling buyers and sellers to transact across both direct sold and programmatic advertising. The firm guided for Q3 revenue growth of 9% at the mid-point, with EBITDA of around $30 million (+100%). Growth should gradually accelerate from there—in fact, assuming the economic recovery continues, we see no reason the current view won’t prove too conservative.
Technical Analysis
TTD has been on a steady climb in the last five months and it’s calmed down nicely of late. After the February/March crash low, it soared all the way back to its highs by early May and rallied to around 475 by early July. It’s since been consolidating above its 50-day line (no net progress during the past six weeks), which sets up a good risk-reward situation—we’re OK nabbing some here with a stop under the 50-day.
| Market Cap | $21.9B | EPS $ Annual (Dec) | |
| Forward P/E | 146 | FY 2018 | 2.70 |
| Current P/E | 116 | FY 2019 | 3.69 |
| Annual Revenue | $680M | FY 2020e | 3.23 |
| Profit Margin | 32.1% | FY 2021e | 3.84 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 139 | -13% | 0.92 | -3% |
| One qtr ago | 161 | 33% | 0.90 | 84% |
| Two qtrs ago | 216 | 35% | 1.49 | 37% |
| Three qtrs ago | 164 | 38% | 0.75 | 15% |
TTD Weekly Chart
TTD Daily Chart
Whirlpool (WHR)
Why the Strength
Whirlpool needs no introduction, as its numerous appliance brands are found in homes all around the world. Still, while highly profitable, the firm has been mostly meandering for years, unable to really click the growth button. And the pandemic wasn’t kind as buying dried up; in Q2, sales and earnings nose-dived, but in that rubble were actually a few encouraging signs. First, earnings of $2.15 more than doubled estimates, while the 14% decline in organic sales (excluding currencies and a spinoff last year) also bested Wall Street’s expectations. (Cash flow was actually less negative than a year ago as cost cuts took effect; the firm is aiming to suck out $500 million of costs going forward.) Second, the industry as a whole is obviously recovering; shipments of big-ticket appliances were down 10% or so in April and May, but were basically flat in June and it’s a good bet growth will continue to pick up as economies reopen and recover. And third, a booming U.S. housing market carries only good tidings—North America makes up around 63% of revenues, so as new construction (housing starts are up from a year ago) and existing home sales (hit their highest level since 2007 last month!) surge, so should demand for Whirlpool’s appliances. It’s not a great growth story, of course; earnings are still expected to fall this year, but it’s cheap (14 times expected earnings, which are likely low), pays a solid dividend (2.7% yield) and should deliver some upside surprises in the months ahead as demand improves.
Technical Analysis
WHR chopped around for years before crashing with the market in March. It bounced pretty solidly after that, but didn’t really show anything special; like many cyclical stocks, shares rested in June south of its prior highs. But the action during the past few weeks has been outstanding, with a bounce off its 50-day line, a modest gap up on earnings in July and a persistent run north of 180 before a little dip at the end of last week. If you want in, aim for dips.
| Market Cap | $11.28B | EPS $ Annual (Dec) | |
| Forward P/E | 14 | FY 2018 | 15.18 |
| Current P/E | 13 | FY 2019 | 16.00 |
| Annual Revenue | $18.8B | FY 2020e | 13.03 |
| Profit Margin | 3.3% | FY 2021e | 15.68 |
| Qtrly Rev | Qtrly Rev Growth | Qtrly EPS | Qtrly EPS Growth | |
| ($M) | (vs. yr-ago-qtr) | ($) | (vs.yr-ago-qtr) | |
| Latest qtr | 4.04 | -22% | 2.15 | -46% |
| One qtr ago | 4.33 | -9% | 2.82 | -9% |
| Two qtrs ago | 5.38 | -5% | 4.91 | 3% |
| Three qtrs ago | 5.09 | -4% | 3.97 | -13% |
WHR Weekly Chart
WHR Daily Chart
Previously Recommended Stocks
Below you’ll find Cabot Top Ten Trader recommended stocks. Those rated HOLD are stocks that traded within our suggested buy range within two weeks of appearing in the Top Ten and still look good; hold if you own them. Stocks rated WAIT have yet to dip into our suggested buy range … but can be bought if they do so within the next week.
Those stocks rated SELL should be sold if you own them; they will no longer be listed here. Finally, Stocks in the DROPPED category are those that failed to trade within our buy range within two weeks of our recommendation; that’s not a bad thing, we just never got the price we wanted. Please use this list to keep up with our latest thinking, and don’t hesitate to call or email us with any questions you may have. New recommendations each week are in green.
| HOLD | |||||
| 8/10/20 | Agnico Eagle Mines | AEM | 79.5-82.5 | 79 | |
| 7/13/20 | Alibaba | BABA | ? | 244-254 | 276 |
| 7/20/20 | Arconic | ARNC | 15-16.5 | 23 | |
| 8/17/20 | Berry Global | BERY | 51.5-53.5 | 52 | |
| 6/22/20 | Big Lots | BIG | 32.5-35 | 54 | |
| 6/1/20 | Bill.com | BILL | 69-73 | 94 | |
| 8/17/20 | Builders FirstSource | BLDR | 28-29.5 | 28 | |
| 6/8/20 | Carrier Global | CARR | 21.5-23 | 30 | |
| 8/17/20 | Cerence | CRNC | 53.5-55.5 | 54 | |
| 8/10/20 | Chart Industries | GTLS | 69-73 | 74 | |
| 5/11/20 | Chegg | CHGG | ? | 58-62 | 73 |
| 3/23/20 | Cloudflare | NET | 19-21 | 38 | |
| 3/23/20 | Coupa Software | COUP | 124-132 | 297 | |
| 11/11/19 | Dexcom | DXCM | 196-205 | 423 | |
| 8/10/20 | Digital Turbine | APPS | 21.5-24 | 26 | |
| 9/9/19 | DocuSign | DOCU | ? | 55-58 | 204 |
| 8/17/20 | First Solar | FSLR | 69-72 | 77 | |
| 7/27/20 | Floor & Décor | FND | 69-72 | 73 | |
| 8/10/20 | Freeport McMoRan | FCX | 13.3-14.5 | 15 | |
| 8/10/20 | Freshpet | FRPT | 99-102.5 | 114 | |
| 5/26/20 | Horizon Therapeutics | HZNP | 45.5-48 | 73 | |
| 4/20/20 | Immunomedics | IMMU | 20.5-22 | 41 | |
| 8/17/20 | Innovative Ind. Prop. | IIPR | 116-121 | 121 | |
| 7/27/20 | Invitae | NVTA | 30-32.5 | 34 | |
| 8/17/20 | iRhythm Technologies | IRTC | 168-174 | 214 | |
| 7/13/20 | Kinross Gold | KGC | 7.2-7.6 | 9 | |
| 8/3/20 | Kirkland Lake | KL | 49-52 | 52 | |
| 6/22/20 | LGI Homes | LGIH | 84-87 | 119 | |
| 8/17/20 | L Brands | LB | 26-28 | 30 | |
| 8/10/20 | LivePerson | LPSN | 55-58.5 | 60 | |
| 6/29/20 | Meritage Homes | MTH | 71.5-74 | 104 | |
| 3/30/20 | Nvidia | NVDA | 250-270 | 509 | |
| 3/30/20 | Okta | OKTA | ? | 118-126 | 205 |
| 8/10/20 | Ollie’s Bargain Outlet | OLLI | 100-103.5 | 105 | |
| 7/13/20 | Pacira Pharmaceuticals | PCRX | 54-56 | 60 | |
| 4/27/20 | PayPal | PYPL | ? | 117-122 | 199 |
| 4/6/20 | Peloton | PTON | 27-29 | 67 | |
| 8/3/20 | Penn Nat’l Gaming | PENN | 34-36.5 | 56 | |
| 8/3/20 | PINS | 33.5-37 | 33 | ||
| 7/20/20 | Plug Power | PLUG | ? | 8.0-8.7 | 12 |
| 8/3/20 | Qorvo | QRVO | 127-131 | 132 | |
| 8/3/20 | Qualcomm | QCOM | 106-110 | 116 | |
| 8/17/20 | Quanta Services | PWR | ? | 48.5-51.5 | 51 |
| 7/13/20 | Redfin | RDFN | 34.5-36.5 | 46 | |
| 7/13/20 | Roku | ROKU | 147-154 | 149 | |
| 7/20/20 | SAIA Inc | SAIA | 120-125 | 133 | |
| 7/27/20 | Sailpoint Tech | SAIL | 30-32 | 39 | |
| 8/3/20 | Scott’s Co. | SMG | 154-159 | 173 | |
| 7/27/20 | Sea Ltd | SE | 110-116 | 150 | |
| 8/17/20 | Shift4 Payments | FOUR | 47.5-49.5 | 50 | |
| 5/26/20 | Spotify | SPOT | ? | 184-191 | 269 |
| 7/13/20 | Sunrun | RUN | 27.5-29.5 | 51 | |
| 8/10/20 | Taiwan Semi | TSM | 75-78 | 79 | |
| 11/11/19 | Tesla | TSLA | 320-335 | 2014 | |
| 6/8/20 | Trade Desk | TTD | 338-358 | 467 | |
| 5/11/20 | Twilio | TWLO | 175-187 | 245 | |
| 7/6/20 | Ultragenyx Pharm. | RARE | ? | 83-88 | 85 |
| 7/27/20 | Watsco | WSO | 220-230 | 243 | |
| 5/11/20 | Wingstop | WING | 116-122 | 166 | |
| 8/10/20 | Zillow | Z | ? | 77-80 | 84 |
| 4/6/20 | Zscaler | ZS | 61-64 | 136 | |
| WAIT | |||||
| 8/17/20 | HubSpot | HUBS | 267-277 | 285 | |
| SELL RECOMMENDATIONS | |||||
| 5/4/20 | Bandwidth | BAND | ? | 90-94 | 158 |
| 6/29/20 | Crispr Therapeutics | CRSP | 71.5-75 | 87 | |
| 7/20/20 | DR Horton | DHI | 61.5-64 | 76 | |
| 6/15/20 | Lululemon | LULU | ? | 291-301 | 376 |
| 6/1/20 | Pan American Silver | PAAS | 27-29 | 33 | |
| 8/3/20 | Pinduoduo | PDD | 91-96 | 83 | |
| DROPPED | |||||
| 8/10/20 | Maxar Technologies | MAXR | 22-23.5 | 26 | |
The next Cabot Top Ten Trader issue will be published on August 24, 2020.