We did not see any significant price movement among our recommended stocks in the previous week. Economic reports indicated robust recovery with single-family sales rising to a seasonally adjusted annual rate of 733,000 homes, beating market forecasts. On the monetary side, the Fed hiked interest rates by a quarter point from 1.25% to 1.5%. The impact of the newly proposed tax cuts will partially offset the increase in the target rate, and I do not see any significant long-term effect to any of our recommendations.
Discovery Communications (DISCA) is nearing its fair value and is up 35% from its buy price. You could sell a few shares to make a quick profit and hold the rest for the long term. Discovery, with the acquired assets of Scripps, stands as an excellent acquisition candidate in the increasingly consolidating media space. In the event of such a consolidation, we can expect further upward movement in price. Since the stock is nearing its fair value, I’m changing my recommendation from buy to hold. HOLD.
In an article I wrote on November 21 titled ‘Finding value stocks in retail industry’, I discussed the urgency of brick and mortar retailers to focus on the short-window delivery system. Target’s recent acquisitions of Shipt (a crowdsourced uber-like delivery platform) and Grand Junction (a transportation technology company for same day delivery) has shown management’s agile strategy to compete with online retailers.
Target (TGT) with revenue of around $70 billion, generates a free cash flow of about $4 billion. The company’s stock is much cheaper than its larger peers Wal-Mart and Costco. This is a long-term bet, based on management’s strategic initiatives and its current discount price. I recommend that you start accumulating Target with a fair value of $85 per share. BUY.
Closing prices on December 27, 2017.
