Midterm elections are just four months away. At the recent MoneyShow Las Vegas, four leading investment experts — Keith Fitz-Gerald, Mike Larson, Mark Skousen and Louis Navellier — offered their top stock ideas that could perform well in any political environment. Here are excerpts from their panel discussion.
Keith Fitz-Gerald, Money Map Press
The midterm election to me is all about security. It’s about consistency and tapping into quality. It’s about looking for those companies that are going to be very hard to mess with if there’s an unanticipated electoral result.
So, with that in mind, the companies that I chose as midterm election picks are companies that I think are going to be very hard-pressed to fail. I’m on the offense because I’m playing defense and I want quality CEOs, quality results and quality numbers.
The very first pick that I’ve got is BlackRock (BLK), the world’s largest asset manager. We’re talking $6.9 trillion under management. Its investment portfolio is bigger than the gross domestic product of every country in the world except for the United States and China.
It dominates the investing landscape, particularly when it comes to exchange-traded funds. CEO Larry Fink is aligned with my thinking. He’s making a preemptive move into China for the very same reasons I am — the growth, financial modernization and economic change there have made China a critical priority.
Now, what is really intriguing to me about BlackRock is that their deal pipeline allows them to see things that the rest of the world simply doesn’t. To me, I think that’s going to be source of stability no matter what happens in the elections. I think it’s going to be a source of growth no matter who gets voted in.
The second idea I’ve got for you is Visa (V). For the fiscal year, we’re talking about adjusted earnings of $5.07 billion, which is a year-over-year increase of about 13%.
Visa processes trillions of transactions around the world and they do it accurately, they do it quickly, and they do it with great precision. As the world turns, people are going to use credit mechanisms and contact list payments. It’s inevitable and it’s imminent and I think that’s the best play out there.
BioTelemetry (BEAT) is make cardiac monitoring and mobile glucose monitoring, medical imaging equipment. But what’s interesting to me is that they’re the largest and most profitable “connected health” company in the world. They monitor more than one million patients a year. They supply data to 28,000 unique referring physicians every month.
Now, the reason I like this company is that it was selected by Apple (AAPL) as a primary strategic partner. Everybody talks about iPads and iPhones and all these other things, but Apple hasn’t been a device company for a long time. What I’m interested in here is that this company could potentially be an acquisition when Apple transitions to a medical devices company.
Imagine what happens if your doctor prescribes an iWatch for you and your insurance company pays for it? Imagine what happens when margins and price points are suddenly paid for by somebody else? I think that could boost Apple’s bottom line significantly.
Another area I like is data protection and cloud solutions. Eighty percent of the Fortune 500 companies run data through F5 Networks (FFIV) and, if you look at it, cybersecurity is a $120 billion market alone, growing 35 times over the last 13 years. I think it’s going to grow, on average, about 15% a year over the next three to five years so here again unstoppable trends that are backed by trillions of dollars must have products.
Last but not least, I like Adobe Systems (ADBE). Some 1.5 trillion annual customer data transactions are going through Adobe’s Cloud business; 6 billion electronic and digital signatures are processed every year using their document cloud service, and more than 90% of the world’s creative professionals already use Adobe products.
To me, its products are going to move on to more than one billion mobile and desktop devices. That’s the key. Again, what I’m talking about is unstoppable trends backed by trillions of dollars, common use and must-have products.
Mike Larson, Weiss Ratings
A lot of my current picks — and my worldview — center around the idea that we’re very late in the economic and credit cycle in this extremely long-term bull market.
Some of the picks that I mention are a little more macro in nature and they’re balanced out by a few micro stories, a few companies that I think are going to prosper even if we’re at a very late stage in this economic cycle or economic expansion. I’ll go through a few of them.
Extra Space Storage (EXR) is my first pick, with a 3.4% yield and an $11.6 billion market cap. They’re in the self-storage space. They’ve got more than 1,500 self-storage facilities, 1.03 million units, and no state or region of the U.S. makes up more than 17% of its portfolio. So it’s diversified geographically, which is something that I like.
I think it’s sort of a non-economic type of pick because unlike other sectors of the real estate market, self-storage is really something that can prosper whether the economy is booming or not. People have to relocate when they’re positive on the market or when they’re not. And, frankly, we all have a lot more stuff than we used to and you see it in this company’s numbers.
It’s been a strong performer and grown its dividend by more than 210% over several years, and it still, despite doing a lot of M&A over the course of its history, only has about 5% of the national market. So there’s room for expansion on that front as well; that’s one that I like.
Next is MGE Energy (MGEE), with a $1.9 billion market cap and a 2.3% yield. It is a Madison, Wisconsin-based electric and gas utility. It’s not a real sexy story, but they’ve been around since 1855. They’ve increased their dividend every year for the last 42 years and paid a dividend every year for the last century.
There’s nothing to get too excited about in terms of revenue or earnings growth. Again, it is a little bit stodgy. But I think that it’s a solid, conservative and potentially rewarding defensive play if I’m right about where are in this cycle.
If you look at the Financial Select Sector SPDR (XLF), it’s under its January high despite rallies in sectors like tech. So if you’re looking to hedge, or if you’re looking for a potential speculative pick, I do believe that for the first time in many, many years, there may be some value in looking at a bet against the financial sector.
Finally, one last thing I would point to is ProShares UltraShort Euro (EUO). This is a pick that’s predicated on an advance in the dollar. I think that there are a lot of headwinds for the dollar in people’s minds and worries about our debt load and things like that but, frankly, we have it better off than a lot of other regions and currencies, including Europe.
The euro is the most heavily weighted component of the Dollar Index, about 58%, and when you look at where our interest rates are relative to Europe’s, the Fed is actually tapering and dialing down the balance sheet versus Europe, where that’s not happening yet.
Frankly, if you look at a lot of the borrowing that’s been going on in emerging market economies and so on, those countries are starting to get into a lot of trouble. They’ve borrowed a lot of money in dollars, their currencies are going down, and their stock markets are underperforming. I think a lot of money is going to be repatriated into the dollar. So, long story short, I think ProShares UltraShort Euro is a nice additional play.
Louis Navellier, Navellier & Associates
The dollar was weak until a couple months ago and now it’s at a high and so when the dollar gets strong, it hurts the multinationals and you’ve got to be more domestic and so there’s a little seismic shift.
We have two dividend growth stocks and then we have three growth stocks. Just so you know where these stocks came from, we rank stocks on an A, B, C, D and F basis. Our Dividend Grader goes for stocks that double their dividends every six or seven years. We have thousands of stocks in our database and, today, I only have 14 AA stocks. Two of my favorites are Boeing (BA) and Valero (VLO).
Boeing has a dividend yield of 2%, sales are forecast to be up 6%, and earnings are forecast to be up 28.4%. Obviously, their backlog for airplanes is incredible. Boeing also benefits from the defense business, so it’s a solid stock.
Valero is pretty simple. The spread between WTI and Light Sweet Crude, the Brent Crude, is at the highest level in three years. The wider the spreads get, the more money the refineries make. It’s as simple as that.
Valero’s dividend yield is 2.76%, sales are forecast to be up 19.3% and earnings are forecast to be up 82.1%. You get to have your cake and eat it, too, with Valero. You get a nice yield and you get stunning sales and earnings growth. We’re going to watch those crack spreads, the spreads between the intermediate to sweet crude, and we’ll ride this as long as we can.
Now, I’m on to the growth stocks. Abiomed (ABMD) makes these heart pumps so when our heart is failing, they have a little heart pump that keeps us going. A lot of people like it. It’s a supplemental pump and their sales are forecast to be up 30.6%. We have positive analyst revisions so I’m very, very pleased with Abiomed.
NVIDIA (NVDA) is my largest holding. It has to go up because I own so much. We are up 470% or so in it, but they have beaten 11 quarters in a row. Their sales are forecast to be up 49.7%, earnings are forecast to be up 83.5%, and it has positive analyst revisions.
NVIDIA did announce in the latest quarterly earnings they won’t make as much from the cryptocurrency craze. But most of the business comes from graphic chips and energy efficient chips.
They dominate everything, computers, cellphones, tablets, gaming, and then, of course, the artificial intelligence chips that are driving our cars and things. Obviously, that’s going to be standard equipment like lane avoidance and all that stuff, so it’s coming, they’re winning, and it’s as simple as that.
IPG Photonics (IPGP) is a chip company. They make optical components, optical chips, and optical connectors. Obviously, due to cloud computing, the speed of light is a big deal to speed up the server farms in all our devices. Even when you buy audio equipment now, everything is optical.
If you have a receiver for your fancy TV, everything is going to be optical. As we network more and more, you have to have optical so IPG Photonics is our pick there. Their sales are forecast to be up 11.7%, earnings should be up 16.8%, and there are positive analyst revisions.
Mark Skousen, Forecasts & Strategies
I would not write off the Republicans losing the House but if they do, then we’re in gridlock — and gridlock has actually been pretty good for the markets overall.
The RMR Group (RMR) is a Newton, Massachusetts-based business property owner. It has 1,400 properties, hotels, senior living, retail outlets and medical buildings, so even though they’re physical properties and stuff, there’s a lot going for them.
Return on equity is 49% when the industry is only 11%, profit margins are 26%, and there is no debt and $126 million in cash. It has a P/E ratio of 12, a PEG ratio of 0.9. I’ve never seen anything that low as far as a PEG ratio.
Another one I like is Teladoc (TDOC). Motley Fool said Teladoc could be one of three stocks to tell your children about, so that’s one worth paying attention to. It’s really an online tele-medicine.
Think of its smartphone app as a “doctor in your pocket” or a play on online doctor visits, a market that is growing very rapidly. It has 7,500 clients and 220 of the Fortune 1000 companies now use their service.
Revenues doubled in the last year. They are losing money. Usually, I like to recommend stocks that the companies are making money, but they will be making money soon. It’s not quite there, but almost.
HealthEquity (HQY) is a Utah-based medical service firm, the number one provider of health savings accounts. It has 3.4 million accounts, profit margins of 21%, revenues up 29%, and earnings up 45%. Again, it has no debt and $240 million in cash so HealthEquity is really on fire and you should take a look at that.
Main Street Capital (MAIN) is a financial stock, a business development company. It’s best of the breed. Main Street Capital is unique. Of the 6,000 or so stocks that trade, it is the only one that pays a monthly dividend plus two special dividends every year, in July and at Christmas time.
The yield is 7.5% even though it’s increased. It’s up 125% over the last five years that I’ve recommended it. The profit margin is 83%. It really is a tremendous idea. For anybody who wants income on a monthly basis, there’s nothing like this firm’s rising dividend policy.
Source: Read Full Article