Sell Harman (HAR) due to Buyout Offer from Samsung
The Board of Directors of Harman International Industries (HAR) has come to a definitive agreement with Samsung Electronics, in which Samsung will acquire Harman for $8 billion. Harman’s shareholders will receive $112 per share in cash. The deal is expected to close in mid-2017.
But don’t let your invested capital stagnate for the next six to nine months, waiting for Samsung to close the deal before cashing in your shares. Sell HAR now, and reinvest your capital into other growth opportunities! Sell HAR.
Technology companies, auto manufacturers and venture capitalists will be paying attention to technology-leading auto supply companies in the wake of the Harman M&A deal. Could we see additional consolidation in the sector? If so, then owning BorgWarner (BWA – yield 1.6%) would be a good idea. BorgWarner is a maker of engineered automotive systems and components for power train applications. BWA is an undervalued growth & income stock. BWA continues to trade in a range between 33.50 and 36. There’s no additional major price resistance until BWA approaches 45.
In unrelated news from November 9, BorgWarner increased the quarterly dividend by 8% to 14 cents per share. Buy BWA.
Additional Portfolio Changes
Carnival (CCL – yield 2.8%) – In recent months, the prospects for Carnival’s 2017 EPS growth have diminished, from 17.1% in April to 11.3% today. The stock remains attractive and undervalued, but I’m moving the rating to Buy because there’s less upside now. CCL broke past 49 last week. We’ll assess the stock’s valuation as it approaches medium-term resistance at 54-55. Buy.
Johnson Controls (JCI – yield 1.9%) is moving from the Buy Low Opportunities Portfolio to the Growth & Income Portfolio. JCI reported fourth-quarter EPS from continuing operations of $1.21 last week, when the market was expecting $1.06 (September year-end). The company reported 4% organic sales growth in its fourth quarter, the highest since third quarter 2012. The company is expected to earn $2.70 per share in 2017, and then see EPS rise 15.6% in 2018. Organic sales are expected to rise 2% to 4% in 2017.
JCI broke out of its five-month trading range last week. I’m raising the rating to Strong Buy based on attractive future earnings growth, dividend yield, undervalued P/E and bullish price chart. Buy JCI now. Strong Buy.
Legg Mason (LM – yield 2.8%) – Repeatedly this year, LM rose to 35, fell and rebounded, as it is doing now. Aggressive growth investors, dividend investors and value investors should consider owning this substantially undervalued mid-cap stock. I’m raising LM to Strong Buy. Last week’s sector rotation into financial stocks could be the catalyst to launch LM past 35. Strong Buy.
Universal Electronics (UEIC) – We bought UEIC because the market overreacted to minor bad news on November 4. Fourth-quarter delays in product shipments changed the near-term earnings outlook, which are now expected to rise 3.9% and 23.4% in 2016 and 2017. UEIC remains undervalued. The stock is already up 20% since joining the Buy Low Opportunities Portfolio. I’m lowering my recommendation to Buy because there’s less upside now. Your six-month best-case scenario—other than a corporate buyout—is that the stock will rebound to its recent highs around 77. Buy.