A Key Concept of Bank Deregulation: One Size Does Not Fit All
Investors have heard repeatedly that all sizes of banks across the U.S. were lumped together with large money center banks when Dodd-Frank banking legislation was implemented in 2010, to the great harm of many banks. BB&T CEO Kelly King spoke to that point last week:
“The material issue in regulation today--and it’s a big deal—is the changes in leadership of these various agencies of people that have business experience, and several cases banking experience, and they have a better understanding, I believe, of how to allow supervision to be, of course, confining when necessary but supportive when appropriate. And I believe you’re going to see them moving toward more flexible regulation.”
“When I first started in banking ... the regulators operated on the approach of ‘we will supervise this bank based on the inherent risk in that organization’. The drift of the regulatory agencies over the last ten years has been standardized regulation and supervision. So all of the larger banks will be supervised the same. So there was a tendency to want to supervise BB&T the same as you would the top four or five banks which is completely not just apples and oranges, it’s like comparing apples and turtles. To compare BB&T to some of the very largest institutions makes no sense at all.”
“I believe you’re going to see a movement back toward where we and others will be regulated based on the inherent risk in the company. That will be very good news.”
More on the Global Industry Classification Standard (GICS)
I wrote to you recently about upcoming changes in the Global Industry Classification Standard (GICS), which classifies stocks into 11 sectors and dozens of industries, and is commonly used in professional portfolio management as a guideline to portfolio diversity. A few days ago, I expanded on the topic in Forbes, adding several specific buy and sell recommendations. And just so you don’t have to drop everything and read the article in order to glean my best buy recommendation from the article, I told investors that above all other stocks, I think they should own Apple (AAPL).
Since the sector reorganization will strongly affect the formerly-named telecommunications sector, I commented on Verizon (VZ), AT&T (T), the AT&T-TimeWarner (TWX) merger and my assessment as to what portfolio managers are most likely to do with those telecom stocks. The article also features a comparison between Alphabet’s (GOOGL) and Facebook’s (FB) relative attractiveness as growth stocks.
Come to the Cabot Wealth Summit in August!
This year’s Cabot Wealth Summit takes place August 15-17 in Salem, MA—a short, surprisingly scenic drive north up the Massachusetts coast from Boston. (For scenery comparison, driving across Kansas or Nebraska rates a one out of ten, whereas driving from Boston to Salem rates at least an eight.) Everything about Salem is small-townish, picturesque and friendly. The Hawthorne Hotel bears no resemblance to either a Hyatt chain hotel nor Motel 6. It’s so New England!
Once you arrive at the conference, you’ll spend lots of time with everyone at Cabot: all of the wonderful people who are based in Salem that handle your questions and service; and all the analysts, including those who fly in from the South, the West, and Europe! What’s more, whether you’re new to stock investing (and maybe attending because your spouse twisted your arm!) or an equity options aficionado, you’ll meet many dozens of friendly investors with whom to share, learn and enjoy evening camaraderie. Some of our guests will travel from far corners of the U.S., Canada and maybe also from around the globe.
I hear that the Hawthorne Hotel rooms are filling up rapidly. If you have trouble acquiring a reservation, please contact the Cabot Customer Service team at (800) 326-8826 or email support@cabotwealth.com for alternate lodging suggestions.
I won’t see the guest list until August, so if you’re already signed up, let me know! (Susan already checked in with me. Hi Susan! Everybody else is welcome to give me a wave through email.)
Send questions and comments to Crista@CabotWealth.com.
PORTFOLIO NOTES
Buy-Rated Stocks Most Likely* To Rise More Than 5% Near-Term:
Guess? (GES)
Knight-Swift Transportation (KNX)
Southwest Airlines (LUV)
*I can review price charts and make an educated determination about what’s likely to occur, but I will sometimes be wrong. I cannot control the stock market; I can only guide you through it.
Today’s Portfolio Changes:
PulteGroup (PHM) moves from Hold to Strong Buy.
Last Week’s Portfolio Changes:
Baker Hughes, a GE Co. (BHGE ) moved from Buy to Strong Buy.
PulteGroup (PHM) moved from Strong Buy to Hold.
Updates on Growth Portfolio Stocks
Apple (AAPL – yield 1.6%) manufactures a wide range of popular communication and music devices. AAPL is an undervalued growth stock, expected to see EPS increase 24.8% and 15.3% in fiscal 2018 and 2019 (September year-end). The corresponding P/Es are 16.4 and 14.3. AAPL rose to a new all-time high in May. Last week I stated, “A temporary pullback could bring AAPL down to 187.” The pullback arrived. Buy AAPL now. Strong Buy.
Bank of America (BAC – yield 1.6%) is an undervalued growth stock. The bank’s credit card delinquency rate fell notably from 1.63% in April to 1.55% in May. BAC has traded between 29 and 33 all year. There’s room for traders to buy low within that trading range and make 10% profit as BAC retraces its recent peak. I will likely sell near 33 in favor of a smaller-cap financial stock. Hold.
CIT Group (CIT – yield 1.2%) operates both a bank holding company and a financial holding company that provide financing, leasing and advisory services to small and middle market businesses, consumer markets, and the real estate and railroad industries. CIT is rapidly increasing money market fund deposits via its online banking. CIT Group’s presentation at last week’s Morgan Stanley Financials Conference can be accessed here. Analysts expect EPS to grow 25.4% and 25.2% in 2018 and 2019. The corresponding P/Es are quite low at 13.2 and 10.6. There’s room for the 2019 P/E to rise to 13 (near its industry peer average) as investors see CIT achieve its stated financial goals, pushing the share price to about 63, and offering new investors a potential 23% profit. CIT is low within its 2018 trading range, between 49 and 56. Strong Buy.
D.R. Horton (DHI – yield 1.2%) is America’s largest homebuilder, based in Ft. Worth, TX and operating in 26 states. The company also provides mortgage, insurance and title services. There were several million dollars worth of large call option purchases on DHI last week, as reported by Jacob Mintz, Chief Analyst of Cabot Options Trader. The 2018 consensus earnings estimate rose a fraction last week, with D.R. Horton expected to see EPS grow 33.9% and 19.7% in 2018 and 2019. Price/earnings ratios (P/E) remain low at 11.3 and 9.4 for fiscal 2018 and 2019. DHI pulled back about 5% last week, and will likely continue trading between 41 and 46 for at least a few weeks before climbing further. Buy DHI now. Strong Buy.
KLX Inc. (KLXI) – In the coming months, Boeing (BA) will acquire KLX’s Aerospace Solutions Group (ASG) and KLX will spin off its Energy Services Group (ESG) to shareholders. At a current price of $72 per KLXI share, minus the value of the Boeing-ASG transaction at $63, the market is valuing the rapidly-growing and profitable ESG business at $9 per share. If you own KLXI and wait for the two M&A transactions to take place, you will have $63 cash per share returned to you, and you will own shares of the new KLX Energy Services (KLXE). The Boeing cash transaction is expected to be completed by September 1, and the KLXE spinoff could happen at any point between now and the completion of the Boeing transaction. KLXI can potentially rise to 80 this summer, reflecting a more fair value of the KLXE spin-off. Hold.
Knight-Swift Transportation Holdings (KNX – yield 0.6%) is a truckload carrier formed from the September 2017 merger between Knight Transportation and Swift Transportation Company. KNX is an undervalued mid-cap aggressive growth stock. Analysts expect full-year EPS growth of 67.4% and 19.0% in 2018 and 2019. The corresponding P/Es are 18.0 and 15.1. KNX is actively recovering from the March-April downtrend, but nobody has missed their opportunity to potentially earn a 20% profit as the stock retraces its 2018 high of 50. Buy KNX now. Strong Buy.
Martin Marietta Materials (MLM – yield 0.8%) is a supplier of crushed stone, sand, gravel, cement, concrete and asphalt. Consensus earnings estimates have been rising since early May. Analysts now expect full-year EPS growth of 28.4% and 23.5% in 2018 and 2019. The corresponding P/Es are 24.9 and 20.1. MLM is nowhere near as undervalued as it was when it joined the Growth Portfolio, giving new investors less reason to buy the stock.
MLM has paused in an uptrend, trading quietly at 230. MLM will almost certainly cease its run-up once it reaches 240. I intend to sell at that time, in favor of a more undervalued growth stock. It would be wise for you to put in a sell limit order in the area of 237 to 239, so that you can get out during an erratic spike in the share price without having to stare at the computer (which is exactly how I handle almost all of the stocks in my personal portfolio when they retrace former highs). Hold.
PulteGroup (PHM – yield 1.2%) is a U.S. homebuilder and a very undervalued growth stock. Consensus earnings estimates reflect 60.7% and 12.4% EPS growth in 2018 and 2019. The corresponding P/Es are 8.9 and 8.0. PHM peaked in January at 35. Last week, I moved PHM from Strong Buy to Hold after a quick run-up to 33. Subsequently, homebuilder stocks fell after the Fed’s interest rate increase. Now that PHM has dipped below 30 again, I’m moving it back to a Strong Buy recommendation. If you’ve never done any short-term trading, and want to stick your toe in the water, buy PHM now and sell it when it reaches above 34. Strong Buy.
Quanta Services (PWR) provides specialized infrastructure and network services to the electric power, oil and natural gas industries. Investors may access Quanta Services’ May/June 2018 Investor Presentation here. PWR is an undervalued mid-cap growth stock. Wall Street expects EPS to grow 39.6% and 14.9% in 2018 and 2019. The corresponding P/Es are 13.0 and 11.3. PWR is trading between 35.5 and 37 as it recovers from its April downturn and heads back toward its January high of 40. Once the stock breaks past 40, there will be no upside price resistance in sight. Buy PWR now. Strong Buy.
Southwest Airlines (LUV – yield 1.2%) is the largest U.S. domestic air carrier, transporting over 120 million customers annually to over 100 locations in the U.S., Central America and the Caribbean. Yesterday, Evercore ISI added LUV to its core ideas lists, and Barron’s featured LUV in this June 9 article, Southwest Airlines’ Stock Is Flying Under the Radar. On the Investor Relations page of Southwest’s website, you may access the company’s 33-page Investor Presentation Booklet that clearly demonstrates Southwest’s financial successes, operational strengths and competitive advantages. The company was featured in the June issue of Cabot Undervalued Stocks Advisor.
LUV is an undervalued stock that’s experiencing aggressive earnings growth, although this year’s profit growth expectation has fallen quite a bit since LUV joined the Growth Portfolio in November 2017, due mainly to rising fuel costs. At this point, analysts expect EPS to grow 24% and 18.2% in 2018 and 2019. The corresponding P/Es are 12.0 and 10.1. The stock appears capable of emerging, quite soon, from a solid trading range at long-term price support. There’s 17% upside to the March high of 61, and 26% upside to the January high of 66. Buy LUV now. Strong Buy.
Supernus Pharmaceuticals (SUPN) focuses on the development and commercialization of products for the treatment of central nervous system diseases and psychiatric disorders, including epilepsy, migraine and ADHD. SUPN is an undervalued, small-cap stock with a high degree of institutional ownership. Analysts expect full-year EPS to grow 50% and 37.0% in 2018 and 2019. Corresponding P/Es are 29.1 and 21.2. After reaching a new all-time high in May, SUPN began a consolidation phase, trading between 54 and 58. I expect new highs again in the coming months. Buy SUPN now. Strong Buy.
Voya Financial (VOYA – yield 0.08%) 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. 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 12.2 and 9.7. After a big run-up in its share price, VOYA has traded sideways for six months, with the trading range narrowing toward the upper end of the range. VOYA appears capable of rising past 55 to new all-time highs in the near term. Buy VOYA now. Strong Buy.
Updates on Growth & Income Portfolio Stocks
BB&T Corp. (BBT – yield 2.9%) is a 145-year-old financial holding company with $222 billion in assets and 2,100 financial centers that serves businesses and individuals. BB&T Chairman and CEO Kelly King presented at the Morgan Stanley Financials Conference on June 12. (Access the 30-minute webcast here.) Mr. King has been with BB&T for 45 years. He discussed efforts to increase digitalization, which is resulting in expenses being flat to down in 2018. Institutional investors are most focused on banks’ loan growth—as opposed to deregulation, credit quality, etc.—and BB&T is well-positioned to benefit from currently-increasing commercial and industrial (C&I) loan demand. To further capitalize on improving C&I loan trends, BB&T is working toward closing medium-sized business loans faster, from 28 days to 3 days by year-end. In conjunction with its recent Regions insurance acquisition, BB&T is restructuring its large-scale and successful insurance brokerage business with a goal of substantially raising profit margins within a couple of years.
BB&T is in a multi-year cycle of increasing its net interest margin (NIM) as the company earns higher income from investments and its growing loan portfolio, while keeping costs down via an increase in non-interest bearing deposits and extending maturities on lower-yielding CDs. Wall Street expects BB&T to commence with M&A activity by buying a smaller bank within its region shortly after BB&T is in compliance with new bank legislation and its related requirements. BB&T’s consensus earnings estimates have consistently risen since late December. Analysts expect full-year EPS to grow 43.7% and 8.5% in 2018 and 2019. Corresponding P/Es are 13.0 and 12.0. Bank stocks pulled back last week. I expect a relatively prompt rebound, with BBT rising toward price resistance at 55.5. Hold.
Blackstone Group LP (BX—yield 7.5%*) is the world’s largest and most diversified alternative asset manager with $450 billion in client assets. The company raises tens of billions of dollars from investors and deploys the capital into private equity, lower-rated credit instruments, hedge funds and real estate. Analysts expect Blackstone’s economic net income (ENI) to grow 3.2% and 11.4% in 2018 and 2019. Corresponding P/Es are 11.5 and 10.3.
Blackstone’s share price shot upward in recent weeks. Since that move was somewhat predictable, I want to walk you through it if you’re not already well-studied in technical analysis. First, pull up a six-month solid-line price chart on BX. (You can access price charts at StockCharts.com.) You can see that BX declined this year during the February market downturn, and you might recall that financial stocks fell further in March. BX bottomed and stabilized in April.
Now look at the share price action between mid-April and the end of May. The stock repeatedly rose to 32, then pulled back. Importantly, each pullback was less deep than the prior pullback. This is the chart pattern that I refer to when I say that the stock is “ratcheting upwards”. (Sometimes the tops get higher each time, as with PulteGroup (PHM), and sometimes the bottoms get higher each time, as with BX and TiVo (TIVO).) This trading pattern is bullish, signaling near-term capital appreciation, and also providing opportunities to buy more shares a little bit cheaper, every couple of weeks.
The market’s abuzz over various alternative asset managers potentially or definitely converting from limited partnerships to C-corps. Is that why BX is rising? There’s no apparent correlation in recent price chart patterns among its industry peers. While KKR & Co. LP (KKR) shares are rising, Apollo Global Management LLC (APO) shares are trading flat and Ares Management (ARES) shares are falling. Ares became a corporation on March 1 and KKR is scheduled to convert on July 1. Credit Suisse commented in late May that if Blackstone follows KKR’s lead, and converts from a partnership to a C-corp. in 2019, the value of BX shares could rise 50%.
BX is rising toward its March high of 34. There’s additional price resistance at 35.5 from January. Growth & income investors should expect modest capital appreciation and a large dividend yield. A C-corp conversion could provide tremendous capital appreciation, but the prospect of a conversion remains somewhat of a longshot. Strong Buy.
*The payout varies each quarter, with the total of the last four announced payouts, plus the $0.30 special 2018 distribution, yielding 7.5%.
Comerica (CMA – yield 1.4%) is a financial services company engaged in domestic and international business banking & lending, wealth management and consumer services. Investors may access President Curt Farmer’s presentation at last week’s Morgan Stanley Financials Conference here. Comerica guided analysts upward on this quarter’s loan growth, as much as 50% higher than what analysts were expecting. The company is in a strong position to capitalize on rising interest rates that contribute to increases in net interest margin (NIM) through its variable rate loan portfolio (90% variable rate vs. 10% fixed rate loans), compounded by a high percentage of non-interest bearing deposits. Consensus earnings estimates for Comerica have risen during most weeks since I began recommending the stock. Earnings per share are now expected to increase by 41.2% and 12.1% in 2018 and 2019. The corresponding P/Es are 14.0 and 12.5. The ex-dividend date was June 14. CMA has traded sideways since February. You can see on the price chart that the lows within the trading range have become incrementally higher as the months pass, and that’s a constructive price chart pattern. CMA could surpass 102 to new all-time highs in the next few months. I will likely sell CMA after that run-up, due to fair 2019 valuation, although if 2019 earnings estimates continue to rise, my outlook for the share price will become more bullish. Hold.
Commercial Metals Company (CMC – yield 2.0%) is a recycler and manufacturer of steel and metal products, including rebar and fence posts. U.S. industrywide pricing is expected to remain strong due to robust economic activity, lower steel supply, and lower import volumes due to tariffs. The company is expected to report third quarter earnings per share of $0.42, within a range between $0.35 and $0.49, on the morning of June 21 (August year-end). Last week, steel industry peers Nucor (NUE) and Steel Dynamics (STLD) each raised second quarter earnings projections. Wall Street analysts expect full-year EPS to grow 103% and 59% in 2018 and 2019. The 2019 P/E is 10.5. CMC continues ratcheting toward its 2018 high of 26. CMC is an extremely undervalued aggressive growth stock, and I plan to keep it in the portfolio longer term. Strong Buy.
DowDuPont (DWDP – yield 2.2%) – The Dow Chemical Company (DOW) and E.I. du Pont de Nemours & Company (DD) finalized their merger on August 31, 2017 , forming DowDuPont, which is composed of three divisions: Agriculture, Materials Science and Specialty Products. DowDuPont intends to separate these divisions into three publicly-traded companies in 2019. Jim Cramer made a bullish buy recommendation on the stock last week. DowDuPont was featured in the June issue of Cabot Undervalued Stocks Advisor.
Wall Street analysts project EPS to grow aggressively at 23.8% and 17.5% in 2018 and 2019. The respective price/earnings ratios (P/Es) are 16.3 and 13.9. DWDP rose above a recent 12-week trading range in early June, and will now likely trade between 67 and 73 for a while, on its way toward retracing its January high of 76. I expect additional capital appreciation after the stock rests near 76 for a while, and additional gains as the spinoffs add to the total return. Buy DWDP now. Strong Buy.
GameStop (GME – yield 10.0%) will present at Oppenheimer’s 18th Annual Consumer Conference on June 19. The stock rose dramatically yesterday when news stories emerged that a private equity firm might buy the company. I would caution you that this is not new news, and might not be imminent. However, I fully expect that there will either be a buyout, or that GameStop will hire a prominent CEO to head up the company. GME surged past 15 yesterday. If there’s no buyout news this week, I would expect a pullback in the share price. Sell Half.
The Interpublic Group of Companies (IPG – yield 3.6%) is a large conglomerate of advertising, marketing, communication and public relations companies serving all global markets. Its clients include Alphabet (GOOGL), Microsoft (MSFT) and Coca-Cola (KO). Wall Street expects full-year 2018 EPS to grow 22.7%, though 2019 EPS growth slows to 8.1%. I will likely sell soon. Hold.
Schlumberger (SLB – yield 3.0%) is the world’s largest oilfield service company. The number of U.S. rigs drilling for crude oil and natural gas declined by three last week to a total of 1,059, up 126 vs. a year ago, reflecting an increase in oil rigs and a decrease in natural gas rigs. A June 12 Schlumberger presentation at the Wells Fargo West Coast Energy Conference seems to be the cause of last week’s share price weakness in SLB and in Baker Hughes’ (BHGE) shares, compounded by weakness in the price of oil. Schlumberger is experiencing slower-than-expected revenue growth in Russia and the Middle East this quarter, offset by strength in Asia, Europe, Africa and Latin America. While the company is already making progress on ramping up revenue after some project delays, the quality of earnings was temporarily affected, causing Schlumberger to project slower second quarter earnings growth than analysts had expected. You can access the audio presentation, transcript and slides here. Consensus earnings estimates declined last week, with EPS now expected to grow 32% and 49% in 2018 and 2019. The corresponding P/Es are 33.8 and 22.7. SLB is an undervalued aggressive growth stock. Strong Buy.
WestRock Company (WRK – yield 2.9%) is a global packaging and container company. Investors may access WestRock CEO Steve Voorhees’ presentation at last week’s Vertical Research Partners 2018 Materials Conference here. The June quarter performance is coming in on track with the company’s previous earnings guidance. Shipments and backlogs remain strong. WestRock repurchased 1.7 million shares of stock thus far in the third quarter (September year-end). The company’s acquisition of Kapstone Paper and Packaging is expected to close in the early fall. Analysts expect full-year EPS to increase 53.8% and 15.9% in 2018 and 2019. The corresponding P/Es are low in comparison at 14.8 and 12.8. The share price suffered in late May and has slowly begun its rebound. The trading range has a gradual upward slope, and there’s 15% upside as the stock retraces its January high at 69. Buy WRK now. Strong Buy.
Updates on Buy Low Opportunities Portfolio Stocks
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. CFO Paul Clancy presented at the Goldman Sachs 39th Annual Global Healthcare Conference on June 12. (Access the webcast here.) Alexion announced last week that positive results from one of the two large Phase 3 studies of ALXN1210 were selected for presentation on June 17 at the Annual Conference of the European Hematology Association (EHA) in Stockholm, Sweden. ALXN1210 has received Orphan Drug Designation (ODD) in the U.S. and EU. Alexion also announced a partnership with Complement Pharma last week and an agreement with BridgeBio Pharma to develop ALXN1101 in pursuit of effective rare disease therapies. Alexion is an undervalued aggressive growth stock, expected to achieve 19.6% and 21.7% EPS growth in 2018 and 2019. The corresponding P/Es are 16.9 and 13.9. As ALXN recovers from this year’s correction in the broader stock market, it’s recently trading between 114 and 123. I expect ALXN to retrace its January high of 128 in the coming months. Strong Buy.
Baker Hughes, a GE co. (BHGE – yield 2.2%) offers products, services and digital solutions to the international oil and gas community. The number of U.S. rigs drilling for crude oil and natural gas declined by three last week to a total of 1,059, up 126 vs. a year ago, reflecting an increase in oil rigs and a decrease in natural gas rigs. Wall Street expects full-year EPS to grow 83.7% and 100% in 2018 and 2019. The corresponding P/Es are 41.2 and 20.6. Energy prices and energy stocks weakened in recent days, which I was not expecting. BHGE continues to offer tremendous growth and value, but it’s possible that the stock could trade down to 30 in the short term. Strong Buy.
Guess?, Inc. (GES – yield 4.0%) is a global apparel manufacturer, selling its products through wholesale, retail, ecommerce and licensing agreements. Revenue growth largely stems from expansion in Asia and Europe, while rising operating margins are contributing to multi-year earnings per share (EPS) growth. Last week, Guess? co-founder Paul Marciano stepped down from his position as Executive Chairman, as the company and the Securities and Exchange Commission made a monetary settlement over complaints of sexual harassment. GES was featured in the June issue of Cabot Undervalued Stocks Advisor. Wall Street expects EPS to grow 42.9% and 32% in 2019 and 2020 (January year-end). Corresponding P/Es are very low in comparison to earnings growth rates, at 22.6 and 17.2. GES is a small-cap stock with a market capitalization of just $1.8 billion. GES is rising towards its recent high of 26, and I expect additional gains later this year. Buy GES now and buy more on pullbacks. Strong Buy.
Skechers USA Inc. (SKX) is an apparel company that designs and manufactures affordable footwear for people of all ages. The company is based in California, and sells its products in over 160 countries and territories in Asia, Europe, the Middle East and the Americas, through wholesale, retail and e-commerce venues. SKX is an undervalued mid-cap growth stock, with minimal debt on the balance sheet. Earnings per share are expected to grow aggressively at 18.5% per year in 2018 and 2019. Corresponding P/Es are 14.0 and 11.8. SKX stabilized after a big fall in April, and is not yet rebounding. Buy SKX now. Strong Buy.
TiVo (TIVO – yield 5.1%) is an entertainment technology company that joined the Buy Low Opportunities Portfolio specifically because it’s a takeover target. The company is interested in being acquired or going private because the shares are so undervalued. TiVo intends to complete the process of its strategic review by the time second quarter results are reported in early August. There are no recent news stories or changes in earnings estimates, but there was a large $360,000 call option purchased on TIVO last week, as reported by Jacob Mintz, Chief Analyst of Cabot Options Trader. The share price remains with a narrowing trading range, with the price dips becoming progressively higher over the last four months. I expect a surge in the share price when TiVo’s management announces some sort of M&A decision. Expect volatility. Strong Buy.
Universal Electronics (UEIC) is a manufacturer and cutting-edge world leader of wireless remote control products, software and audio-video accessories for the smart home; with a strong pipeline of new products. Universal Electronics’ management met with institutional investors at this month’s Baird 2018 Global Consumer, Technology and Services Conference. I highly encourage shareholders and fans of home media technology innovation to listen to the half-hour webcast, which is accompanied by a slide presentation.
UEIC is a dramatically undervalued micro-cap stock. Analysts expect EPS to fall 16.4% in 2018, then to rise 43.4% in 2019. The 2019 P/E and the long-term debt ratio are extremely low, at 8.6 and 3% respectively. UEIC is gradually recovering from a big fall in May. UEIC will likely trade liberally between 28 and 40 in the coming months. Patient investors could dollar-cost-average into the stock in anticipation of its recovery. Strong Buy.
