Today’s news: Sell Delek U.S. Holdings (DK) and PBF Energy (PBF); buy Blackstone Group (BX) and Knight-Swift Transportation (KNX); Voya Financial (VOYA) joins the Growth Portfolio as a Strong Buy.
I’m recommending the sale of both Delek U.S. Holdings (DK) and PBF Energy (PBF) today because they’ve gone up at a rapid pace that’s unsustainable. There is absolutely no bad news that’s driving this decision, and I am open to repurchasing both stocks in the future, especially if they have big price corrections.
Delek U.S. Holdings (DK) joined the portfolio on February 2 at an average cost of 32.41. Yesterday’s closing price of 55.46, plus 45 cents per share in dividends since February 2, gives DK an approximate return of 72.5% in four months. We’re past the record date, so everyone who owned DK as of May 18 will receive the next dividend on June 4, whether you sell now or keep the stock. Sell.
PBF Energy (PBF) joined the portfolio on March 6 at an average cost of 31.36. Yesterday’s closing price of 47.65, plus 30 cents per share in dividends (which were paid yesterday), gives PBF an approximate return of 52.9% in three months. Sell.
The portfolio stocks that I’d be most inclined to buy today, based on their likelihood of rising promptly, combined with the size of the potential near-term capital appreciation (plus dividends, if applicable), are Blackstone Group (BX – yield 7.8%) and Knight-Swift Transportation (KNX – yield 0.6%).
Voya Financial (VOYA – yield 0.08%) joins the Growth Portfolio today. Formerly named ING U.S., Voya is a retirement, investment and insurance company serving approximately 14.7 million individual and institutional customers in the United States. This Fortune 500 company manages $541 billion in assets.
Voya reported a strong first quarter earnings beat that featured expanding margins, improving life insurance loss ratios and upside earnings surprises within its investment management, retirement and employee benefits divisions. Earnings estimates have been rising—Wall Street projects Voya’s earnings per share (EPS) to grow 119% and 25.4% in 2018 and 2019. The corresponding price/earnings ratios (P/Es) are 12.4 and 9.9. (It’s normal for investment firms to have P/Es within a range of 10-15, no matter how strong their earnings growth.)
Voya is well into a multi-year process of improving its business operations and profitability. The sale of the majority of the company’s variable and fixed annuity operations will be completed within a couple of months. The sale of Voya’s life insurance segment is also a possibility. In addition, management is focused on expanding the company’s return on equity (ROE) to a range of 13.5% to 14.5% by 2019, and has thus far been reaching ROE milestones ahead of schedule.
VOYA is a mid-cap stock with a market capitalization of $8.5 billion and heavy institutional ownership. The company plans to complete a repurchase of $1 billion of its common stock during the second quarter.
Similar to Delek and PBF Energy, Voya is expected to achieve huge earnings growth in 2018, followed by very attractive earnings growth in 2019. The difference is the price charts. Whereas DK and PBF just experienced tremendous price run-ups, and are overdue to rest, VOYA experienced tremendous run-ups in 2016 and 2017, then rested for the past six months. VOYA now appears capable of rising out of its stable trading range, past 55 to new all-time highs. Buy VOYA now. Strong Buy.