Stock picks for 2018-19 "Holiday Sale"

Discussion in 'Markets & Economies' started by SlyGuy, Oct 27, 2018.

  1. SlyGuy

    SlyGuy Active Member

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    I think we have a lot of pessimism in the markets right now. It seems to happen this time of year anyways, but it might be magnified with the trade tariffs and the mid-term USA elections here in 2018. We have seen a lot of volatility and loss of value across NYSE and other major markets (Tesla up 8% yesterday, Amazon down 8% today), but that doesn't always have to be all bad. It is pretty routine with the Q3 earnings announcement spikes and high overall market volatility that this time of year tends to usher in. The good stocks get dragged down with the bad ones, so I would like to turn it into a positive thing and get some quality stocks at discount prices :)

    So, the question is: what are you buying (or watching closely) now that the "holiday sale" season is underway? I was thinking we could maybe each make a few picks with brief reasoning (include current share price... and other metrics if you want). This should be fun to look back at in the spring time. As they say, "a high tide lifts all ships"... but the better ships definitely get lifted faster and higher when stock markets rebound.

    I'll start with a few I've recently bought or am watching for additional unwarranted drop in:

    -AT&T (T)... $29, P/E ratio 5.50, dividend 6.88%. This is a pretty big discount for a Dow dividend aristocrat. They are now at the lowest point in over 5 years. The market punished AT&T pricing since their Q3 earnings were under estimates, but that should have been expected to be a transitional period with their purchase of Time Warner Cable in summer 2018. With a good showing of their new 5G wireless phone speeds, diverse business operations, and a quality long term track record, there is no cause for concern here. This prize piggy just got caught in the storm with all the average ones.

    -GrubHub (GRUB)... $89, P/E ratio 58.25, no dividend. This is about as risky as I tend to get with growing companies, but this one is making good moves, steadily expanding, and holding very little debt (since they are expanding gradually). Their Q3 earnings were good with roughly 50% more sales and almost double the profits from Q3 one year ago, but due to the overall slump of Wall Street and inflated expectations of GrubHub growth rate, that wasn't enough for GRUB to avoid a very bad market reaction (down over 35% in Oct 2018 alone!). Their biggest hurdle going forward is winning the race with UberEats. Uber talks a big game in their press releases, but back in reality, I expect them to be focused on their IPO, Lyft IPO, and many other things than UberEats in 2019. Look for GrubHub to continue to excel at their main (and only) focus: pull away in the online ordering and delivery space. It will be a rocky road in profitability and stock price as with any growing company, and the current valuation is high but justified, especially after the recent dip.

    -Macys (M)... $32, P/E 5.98, dividend 4.66% and L Brands (LB)... $30, P/E ratio 9.63, dividend 7.89%. These two sorta go together since they are victims of mall stores having trouble with increased online shopping. The bankrupt news of Sears/KMart and Toys-R-Us really underscored that just this year and caused price headaches for the whole retail sector. LBrands (originally The Limited stores... then Limited Brands, now L Brands) is Victoria Secret, Bath & Body Works, and a few other things for anyone who isn't familiar. These retail stocks are ones you can wait a bit to buy since their pivotal earnings period is for Christmas in Q4, which won't be announced until sometime in February. Nonetheless, they pay good dividends and would be value picks whenever the whole market hits a real bad skid. Macys is the safer play since they're bigger and L Brands is starting to get fairly heavy in debt which might drop their dividend, but both companies do well online as well as in the malls. Neither is going out of business anytime soon, and they will continue to gain business as other competitors go belly up. Women are always going to want to try stuff on, so malls won't disappear completely, lol. Let the gamblers buy Lululemon or other trendy newer retail competitors while you with the ones that have performed well and paid dividends for decades... and will continue to.

    -Kraft Heinz (KHC)... $55, P/E ratio 6.27, dividend 4.57%. This could have just as easily been Proctor & Gamble or Nestle or another giant food company that pays good dividend, but Kraft is the one that is a bit down right now on price and therefore P/E. Much like AT&T above, you can pretty much set it and forget it... and enjoy healthy safe dividends. With 10yr US Treasury bonds not paying much and interest rates expected to rise, your money is probably better parked in something like this during a bear market. There is very little danger to owning either of these for a year, or even 5+ years if you wanted to.

    ...as for Gold $1235 and silver, I don't see a whole lot happening. The best thing for metals would be the Democrats doing well in the US midterm elections in November and stock markets continuing to stumble further, but I think metals are likely to continue to go essentially sideways for most of 2019. It usually take a big US dollars printing stimulus package for them to spike, and that doesn't happen much with Republicans having Presidency and majority. We shall see.

    Excited to see people's picks...
     
    Last edited: Oct 27, 2018

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