In Focus – ABT

To determine whether a company is one of the best stocks to buy now requires a detailed analysis of that company. In our “In Focus” reports we perform a more detailed analysis of one of the roughly 2,000 companies we follow. In this report, we will be covering Abbott Laboratories.

Background

Abbott Laboratories (ABT) develops, manufactures, markets, and sells a diversified line of healthcare products. At the end of 2014, it had four business segments: Established Pharmaceutical Products, Nutritional Products, Diagnostic Products, and Vascular Products.

Abbott Laboratories is located in Abbott Park, Illinois. But it has a worldwide presence and does business in over 150 countries.

Stock Fundamentals

Analyzing a firm that goes through a major spinoff is a little tricky since it is hard to determine what performance to attribute to what part of the company. It is for this reason that analyzing ABT is a little more difficult than the average company since it spun off its pharmaceutical operation, AbbVie, in 2013. But we believe we can make the following points.

Despite ABT’s somewhat modest equity-asset ratio (0.461), its financial strength is excellent. Its worldwide presence, diversified customer base, and diversified product lines allow it to use more leverage than the average company. Consequently ABT possesses one of the strongest balance sheets of any company we follow.

ABT’s has experienced (and will probably continue to experience) relatively low and modest growth in sales and profits. ABT excels in the reliability with which it has achieved this growth. It is also reliably cash flow and free cash flow positive.

If we had to sum up ABT as succinctly as possible, we would say it is a very safe company with very little profit potential. It is the proverbial low-risk/low-return investment. It is an excellent choice if you are a risk-averse investor who wants a rock-solid dividend. It is only an average investment, if you are slightly more demanding.

Stat Sheet – Abbott Laboratories    4/29/16

Ticker ABT
Industry Biotechnology & Drugs
Price $ 38.90
Market Cap  $ 58,174
Dividend Yield 2.67
Dividend/CFOp 0.461
Equity/Assets 0.506
Average Equity/Assets 0.450
Financial Strength Above Average
Growth Prospects Below Average
Beta 0.94
Price Volatility Below Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

We cover 2,000 companies. If you would like to see more research on all these companies, click the link below.

Best Stocks to Buy Now

If you would like to learn why we like, in particular, the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

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In Focus – ABT

In Focus – ABAX

Determining whether a company is one of the best stocks to buy now requires a detailed examination of that company. In this report we will be doing that detailed examination of the firm Abaxis.

Background

Abaxis (ABAX) develops, manufactures, markets, and sells portable blood-analysis systems for use in veterinary or human patient-care settings. The company markets its primary product for veterinary use under the name Vet scan, and for human use under the name Piccolo. The veterinary market accounts for about 80 percent of sales. ABAX is headquartered in Union City, California.

Stock Fundamentals

ABAX is a classic growth stock. It has had tremendous growth and will probably continue to have tremendous growth. It uses very little debt, just recently started paying a modest dividend, and although it has a low beta, its price can be erratic.

Unfortunately, it is like a classic growth stock in another way. It has a very high price. It has a P/E ratio of roughly 40. It has a price-sales ratio that places it in the top quartile of all the stocks we cover. And in terms of its cash flows, its multiple is even higher.

As we mentioned above, future growth for this company looks promising, and ABAX is very profitable. But overall its fundamentals are not compelling enough to warrant anything higher than an average grade. We rate ABAX a hold, and we do not consider it one of the best stocks to buy now.

Stat Sheet – Abaxis    4/29/16

Ticker ABAX
Industry Medical Equipment & Supplies
Price $ 45.32
Market Cap  $ 1,029
Dividend Yield 1.06
Dividend/CFOp 0.341
Equity/Assets 0.867
Average Equity/Assets 0.875
Financial Strength Average
Growth Prospects Above Average
Beta 0.76
Price Volatility Above Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

If you would like to see research on the other stocks we cover, some of which we do consider the best stocks, click the link below.

Best Stocks to Buy Now

If you would like to learn why we have a preference for the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

In Focus – ABAX

In Focus – SHLM

In this regular recurring report, we do a more in-depth analysis of one of the several thousand companies we follow. In this report we report on A Schulman Incorporated (SHLM).

Background

A Schulman Incorporated (SHLM) is a supplier of plastic compounds and resins. SHLM is in many different types of markets, including industrial, automotive, consumer products, and packaging.  SHLM operates mainly in four lines of business: masterbatch, engineered products, rotomolding, and distribution.

The company is headquartered in Akron, Ohio. It has a worldwide business presence. It conducts business in North America, Europe, the Middle East, Africa and Asia (Pacific).

Stock Fundamentals

SHLM’s operating performance over the past seven to eight years has actually been pretty good. Its sales have been relatively strong and steady. It has consistently paid (and even increased) its dividend over the last business cycle. And it does not score poorly on the other metrics we look that reveal a firm’s operating efficiency.

Our greatest problems with SHLM are these. It has taken out a great deal of debt to fund its latest acquisitions. Its leverage ratio is now above its long-term average and it is above what we consider prudent or optimal. It has weakened its balance sheet in other ways. In the face of a slowing economy, this move could prove very painful.

Additionally, SHLM is no longer cheap. Its price-to-sales ratio is modest. But on most other multiples, it is richly priced. And when these ratios are put in relative, SHLM looks even more expensive.

On balance, we feel that SHLM’s overall fundamentals are below average. And we would not consider it one of the best stocks to buy now.

Stat Sheet – A Schulman Incorporated    4/28/16

Ticker SHLM
Industry Chemicals – Plastics & Rubber
Price $ 27.92
Market Cap  $ 816
Dividend Yield 2.94
Dividend/CFOp 0.267
Equity/Assets 0.196
Average Equity/Assets 0.348
Financial Strength Below Average
Growth Prospects Below Average
Beta 1.74
Price Volatility Average
Stock Fundamentals D

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

We cover 2,000 companies. If you would like to see more research on all these companies, click the link below.

Best Stocks to Buy Now

If you would like to learn why we usually favor the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

In Focus – SHLM

In Focus – AOS

Determining whether a firm is one of the best stocks to buy now requires a detailed examination of that firm. In this report, we will be focusing on A.O. Smith Corporation.

Background

A.O. Smith (AOS) is a manufacturer of water heating equipment. The company serves both commercial and residential markets, primarily in the U.S. And it is headquartered in Milwaukee, Wisconsin.

The company operates in one segment, Water Products. Water Products business includes water heaters, water heating equipment, copper-tube boilers, water treatment products, and water tanks.

Stock Fundamentals

AOS maintains a fairly conservative balance sheet. This is good, because its core business can be quite erratic. It has some of the lowest scores for the consistency of its growth of any firm we cover, and its beta is definitely on the high side.

The news isn’t all bad. Over the last seven to eight years, AOS has been able to grow its dividend along with its profits. AOS deserves high marks for the reliability with which it has grown its dividends since (at least) the crisis year of 2008.

Unfortunately the market has recognized this ability as well. The price of A.O. Smith’s stock is now almost 700 percent higher than it was at the end of 2008.

AOS is a good company; but it is not a good stock. It is justifiably richly priced. And it presents no bargain. We do not consider AOS one of the best stocks to buy now.

Stat Sheet – A.O. Smith Corporation    4/29/16

Ticker AOS
Industry Electronic Instruments & Controls
Price $ 77.33
Market Cap  $ 6859
Dividend Yield 1.24
Dividend/CFOp 0.203
Equity/Assets 0.547
Average Equity/Assets 0.411
Financial Strength Above Average
Growth Prospects Average
Beta 1.48
Price Volatility Above Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

We cover many more companies in addition to AOS. If you would like to see just some of the research we make available on these other companies, click the link below.

Best Stocks to Buy Now

If you would like to learn why we have a bias in favor of the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

In Focus – AOS

Ideas for Dividend Investing

Investing in the best dividend growth stocks can be an excellent source of high return from your investment in the stock market, with a minimum of risk. However, for this, you will need to keep the following things in mind.

Focus on Stock Selection-

The health of the economy, the strength of a sector, and the popularity of industries are all secondary in importance. Ultimately, good stocks make money and bad stocks lose money (at least relatively). Skilled stock selection (especially if you are a long-term investor) is paramount.

We advise you to invest in the stocks of those organizations that have established a long-term record of stability, growth, and profitability. Incidentally, do look at dividend payments of those companies to see whether any reduction in the dividend payments ever happened; it is usually not a good idea to invest in those companies, which have seen a reduction in dividend payments.

Embrace Fundamental Analysis-

Always remember the words of Warren Buffet, “Price is what you pay, value is what you get.” Do not make your decisions after focusing on movements in the price of the stock. Doing this is a little bit like going to the grocery store on a very empty stomach. Your opinion is clouded and you tend to make many bad decisions.

Instead, try to learn a company’s actual value using fundamental analysis. The financial fundamentals are the true drivers of the stock. And to learn the true value, you must study the true drivers.

This sounds almost simplistic, but it is incredible how many people violate this bit of common sense. Try to put blinders on and ignore what is happening to the price of the stock. Focus on the financial fundamentals.

Go Safe

You must have heard from many people ‘no risk, no gain’, but only those risks that are taken prudently result in gains. If you see a treasure in a well and you jump into the well without thinking whether jumping in the well is safe or not and how you will come out from that well, you may gain the treasure, but lose your life.

Many people do not overestimate the return they will achieve from an investment; instead they underestimate the risk they have to endure from an investment. The best way to remedy this tendency is to purposely and deliberately focus on the risks involved in an investment. Like an athlete trying to correct a bad throwing motion, most investors should focus on and even overemphasize their weakness.

An excellent way to emphasize reducing risk is to invest in those organizations which have higher income than dividends, as this policy would be a kind of assurance that if a company sees a downturn, then the dividend will not likely sink. Dividends are the single most useful variable in a policy to “Go Safe.”

Stay Calm

Do not become overexcited when you see a surge in the stock market and do not become distraught when you see a fall in the stock market, as the stock market is one of the most erratic markets in existence. One thing you can be certain of when a stock goes up or down wildly, is that the true value of the stock probably changed only a fraction as much.

Instead, have an emergency plan always ready with you that will guide you to take the right decisions at the right times. Remember, market drops are opportunities to buy good companies that are being punished for silly reasons.

Ideas for Dividend Investing

In Focus – AIR

Determining whether a company is one of the best stocks to buy now requires a detailed examination of that company. In this report, we do a detailed analysis of AAR Corporation.

Background

AAR Corporation (AIR) is a diversified supplier of products and services to the worldwide aviation and defense markets. The company operates in four business segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul (MRO); and Structures and Systems.

AIR is headquartered in Wood Dale, Illinois.  But it serves customers in 110 countries from 60 locations around the world.

Stock Fundamentals

AAR Corporation (AIR) has turned in a middling performance over the previous business cycle (roughly seven to eight years). Its performance has not been bad, but it certainly has been the best. Its sales growth has been about average (around 4 percent). Its profits and cash flows have been lackluster, though not as weak as many other firms we cover.

One positive note, its free cash flow over the previous business cycle has been, on balance, positive. This is one good sign that the company is generating cash and not necessarily on the brink of bankruptcy.

It is not unusual for a rapidly growing firm to have negative free cash flows. In fact, this is about the only scenario we would tolerate a firm with negative free cash flows over an extended period. On the other, if a firm is not growing rapidly, it is a little worrisome if it isn’t generating positive free cash flows (at least over a period of 3 – 5 years). AIR at least seems to be generating positive free cash flows.

However, we feel AIR’s overall fundamentals are, at best, average. Its future growth prospects look subpar. Its balance sheet is not particularly strong and not characteristic of firm that is about to go on a buying spree. And its cash flows, most recently, have been negative. Overall, we rate its fundamentals as average, and we would not consider AIR one of the best stocks to buy now.

Stat Sheet – AAR Corporation     4/27/16

Ticker AIR
Industry Aerospace and Defense
Price $ 24.44
Market Cap  $ 841
Dividend Yield 1.23
Dividend/CFOp NM
Equity/Assets 0.562
Average Equity/Assets 0.484
Financial Strength Average
Growth Prospects Below Average
Beta 1.70
Price Volatility Above Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

We cover 2,000 companies. If you would like to see more research on all these companies, click the link below.

Best Stocks to Buy Now

If you would like to learn why we usually favor the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

In Focus – AIR

In Focus – AAON

Determining whether a company is one of the best stocks to buy now requires investors to focus in on the company of interest and to do detailed examination of that company. In this report, we will do focused analysis of AAON Incorporated.

Background

AAON Incorporated (AAON) designs, manufactures and sells air conditioning and heating equipment for commercial and residential use. The company has two operating subsidiaries: AAON, Inc. and AAON Coil products. AAON is headquartered in Tulsa, Oklahoma.

Stock Fundamentals

We like AAON in many ways. Its growth has been outstanding. The growth of its sales, profits, and many other financial metrics has been strong, steady and balanced. And more importantly, we feel they will continue to be strong in the future.

Its cash flows and free cash flows have been reliably positive. Because of this, it has consistently paid (and usually increased) its dividend since at least 2008. And it dividend appears very safe. It has a very low dividend-to-cash-flow-from-operations ratio (0.242).

Furthermore, AAON has a solid balance sheet. Its equity-to-asset ratio is low relative to other firms, and relative to this own firm’s history. And AAON has no long-term debt. If we had to rank AAON on quality alone, we would unhesitatingly rank AAON as one of the best stocks we cover.

Unfortunately, (as is usually the case) the market recognizes the outstanding features of AAON and has priced it accordingly. The price multiples on AAON are mostly on the high side. AAON is not cheap. We consider its overall fundamentals as only average. And we cannot classify AAON as one of the best stocks to buy now.

However, we like this firm. If its price should drift downward without deterioration in its fundamentals, we will upgrade this company without delay.

Stat Sheet – AAON Incorporated   4/27/16

Ticker AAON
Industry Miscellaneous Capital Goods
Price $ 27.21
Market Cap  $ 1,475
Dividend Yield 0.81
Dividend/CFOp 0.242
Equity/Assets 0.778
Average Equity/Assets 0.731
Financial Strength Above Average
Growth Prospects Above Average
Beta 1.52
Price Volatility Average
Stock Fundamentals C

(Our assessment of this firm’s fundamentals will be in effect for the rest of calendar year 2016.)

Though we do not consider AAON one of the best stocks to buy now, we cover almost 2,000 companies, many of which are some of the best stocks to buy now. To see this research, click the link below.

Best Stocks to Buy Now

To see why we have a bias in favor of the best dividend stocks, click the link below.

Best Dividend Stocks

Disclaimer – Information contained herein has been obtained from sources believed to be reliable. Neither the author nor the publisher guarantees the accuracy or completeness of the information and methods described. This information is offered as general commentary only. It is not intended as investment advice. Investment and trading of securities involves risk, including of loss of capital. Market conditions change over time, and no assurance can be given that a reader may apply the principles described to make a profit. The author and publisher expressly disclaim all and any liability to any person for any investment or trading decisions that the reader may make in reliance on this information.

In Focus – AAON