Sunday, October 2, 2016

Bubble? What bubble? I see plenty of good stocks to buy for 2017. This market has been in a self correcting mode all year in individual stocks.

Dow Jones Industrial Average 18,308.15  Week ending 09-30-2016

I am finally back. My first two picks are Growth stocks that are being offered at a value right now. You don't always need to look at companies trading below book value to find a margin of safety and a good value investment. The first two stocks are both discount product retailers.

Five Below ($40.20 Symbol FIVE) is a stock I have been following for a long time based right here in Philadelphia PA. This is the first opportunity I have seen it at a price that it can be purchased. The company has a PEG ratio of 1.49 and a Return on Equity of 26%. The company has no debt and a Current Ratio of 2.80. EPS for 2016 is $1.32 per share and projected to be $1.61 for 2017. I like this to buy here and to trade up the $55 per share. Sales for the last 5 years have been 33.4%.

Dollar General Inc. ($69.99 Symbol DG) is a stock that I like at a margin of safety here down from a $95.00 price. The company has a PEG ratio of 1.20 and a Return on Equity of 22.90%. The company is projected to open 1000 new stores in 2017. The company is projecting 2016 EPS of $4.27 and 2017 earnings of $4.91 per share with a forward PE of 14.26. This 75 year old company has EPS growth for the last 5 years of 16.70%. The company also pays a 1.43% dividend to kick in to your pot of wealth. I would buy it here and ride it back up to that $95.00 number. The 2017 earnings justify it. 

Community Health Systems Inc. ($11.54 Symbol CYH) is a pure value play here. This one has a current book value 0.68 and a Price to sales of 0.07. Community took a big right off hopefully cleaning the books so they can sell the company. The company is projected to earn $1.99 per share in 2017 which is a forward PE of 5.8. Sales in the past 5 years have been up 9% per year. Current Ratio is 1.80. I like this one back up to $17-$18 per share. 

GreenLight Capital RE, LTD ($20.44 Symbol GLRE) is the company of the famous hedge fund manager David Einhorn. This company will have 2016 earnings per share of $1.16  and projected earnings of $2.97 per share for 2017 which is a forward PE of 6.88. The company has no debt.
The current Price to book ratio is 0.96. The quarter over quarter sales are up 29.90%. I like it as a trade up to $30.00 per share.

Insys Therapeutics, Inc. ($11.79 Symbol INSY) is a biotech pharmaceutical company. Back in the 1980's every company ended with "-tronics". Now in 2016 every pharma company ends with the name "therapeutics"! This company is an odd combination of being a speculative pick and a value pick all at the same time. 2016 earnings per share are projected at $0.66 per share and for 2017 look like $0.86 per share. The company has a PEG ratio of 0.64 and a Return on Equity of 20%.  Also this "Therapeutics" company did $311 million in sales last year. A healthy Current Ratio of 3.30 , this company should trade up to its target price of $24 per share. EPS for the next 5 years is projected at 28% a year. I think any bad news is behind them and this is a great entry point. This company has some dynamic pharma products in the area of pain management. 

"It's about time Freewilly wrote another blog entry. I miss his value picks"

So don't panic here. The stock market is not coming to an end, it is just getting a little more complicated. Keep some cash handy so you can pick up bargains on your target list when they show up cheap on your radar. 

Enjoy the rest of your weekend.


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