Saturday, July 7, 2012

"We have come to a fork in the road where we either need to stay aggressive with growth or seek shelter from the storm with safe stocks with good fundamentals"

Dow Jones Industrial Average 12,772.42 (Down) Week ending July 06, 2012

The Road Not Taken by Robert Frost
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I-
I took the one less traveled by,
And that has made all the difference
Frost decides to take the road lest traveled and it works out for him. In this case, I believe this would be to stay with an `aggressive growth policy, but I will leave you solutions for both paths, so you have the freedom to choose. 

Mellanox Technologies Ltd. (Symbol MLNX, $73.72) would be the "Aggressive path" to take on your continuing road of investment. 

"Mellanox Technologies Ltd. provides supply semiconductor-based interconnect products that facilitate data transmission between servers, communications infrastructure equipment and storage systems."  Investors Business Daily gives Mellanox a 99 rating which means it has outperformed 99% of the stocks tracked over the last 12 months.  

 Mellanox Technologies is projecting 2012 earnings per share of $2.33 and on to 2013 it is projecting earnings of $2.69 per share. The PE here is high, 31.91, but can be justified by 5 year sales growth of  41.67%. Also the long term projected earnings growth is 44.60%. The PEG ratio is 1.37, which reflects the interest in the stock. 

The One year Total Return on this Yokneam, Israel stock is 144.11%. The 3 year Total Return is 512.29% , so definitely the aggressive less traveled path.

One blip in the stats on a quarterly basis in this kind of market could violently send the this stock price careening way lower or way higherSo keep an eye out for Bears and Wild Boars on your woodsy aggressive path to investment success!

For those of you that are not as adventurous and want to arrive at your destination without anticipating to much dangerous travel should probably do best to purchase: 

Hershey Co. (Symbol HSY, $72.24) .

Hershey actually has an IDB rating of 97 , so no slouching off here in performance. I can recall a few years back that stockholders were banging the table and demanding better performance and management is delivering it. 

HSY is projecting 2012 earnings of  $3.21 per share and 2013 earnings of $3.54 per share. 5 year earnings growth has been running at 39.13%. This path should be fairly safe as long there are no supply problems with Cocoa beans. I think the cows should continue to produce Milk out there in Pennsylvania Dutch country.

(Amish do not like having their pictures taken because they consider it vain.)

Hershey is not really super cheap here with a PE of 22.43 and a PEG ration of 2.14, usually a danger zone. But they have delivered and improved earnings consistently. They have a Return on Equity of 73.76%. They also offer a 2.10% dividend yield right here as an added appreciation bonus.

Consistency. HSY has delivered a One Year total return of 26.31% and a Three Year total return of 109.60%. This is the more traveled path to take for your investment

(Lancaster County in PA is beautiful by the way.  We spent our Honeymoon there, and it is the location of the Hershey Amusement Park, Dutch Wonderland for the little kids, and the Strasburg Railroad and the PA. Railroad Train museum for the big kids.)

 Robert Frost
So which ever path you decide on, you and Robert Frost can contemplate whether it is the right one. One usually has a sense about these things.

For me, I just like being on the mountain road where ever it goes to!


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