Price The Market Part 18
Glen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Hi, my name is Glen Bradford. I set out near the end of last year with the objective of pricing the market starting with the S&P500. Here we go!
96. ConAgra Foods (NYSE: CAG) is trading at the low end of my valuation range. Making a long-term commitment to sell at higher prices is probably a sustainable trading strategy if it involves buying the dips and selling the rips. This apprears to be momentum driven and range bound. They are growing and their price doesn't fully reflect their future growth rate at present. They've done an excellent job increasing their net margin faster than their revenues but I don't see this being a sustainable way to increase EPS. Eventually profits must come from the top. Target: $25-$30.
97. Constellation Brands (NYSE: STZ) is one that I really like. No matter what the economy does, people are going to drink. With STZ projecting their EPS to be between $1.92 and $2.02 I like this at the present price even though it is skipping higher. They have not had the greatest few years financially but I think that their discount to fair value reflects a more humbling future than will be realized. Pop the wine cork out of that bottle and consider buying this one. With their current price being just under $21, I believe this to be a great time to buy. From there, sell the rips and buy the dips. I have set my target price at $21-$25.
98. Costco (NASDAQ: COST) is not cheap at all compared to where I'd have expected it to be. I'd be a short seller over $90. I'm actually surprised to see that Warren Buffett owns Costco. I'm disappointed that they are running a stock buyback at this multiple. I guess that makes me wonder at what price I'd be willing to buy. $70. Target: $70-$80. Thus, with this target, I am saying that Costco has a better growth profile than Wal-Mart (NYSE: WMT). Perhaps Buffett's growth forecast for Costco has it growing up into a Wal-Mart? Costco's present size is less than 20% of that of Wal-Mart on a Market Capitalization basis. The main difference that I can find is that Costco takes better care of their employees than Wal-Mart.
99. Procter & Gamble (NYSE: PG) is trading near the top of where I'd be willing to own it. I don't particularly see P&G as a spectacular growth company. It's more of a stalwart. The price is rich and yet analysts put up targets that are much higher. Good grief. Target: $60-$70. Above $70 I'd recommend shorting, but acknowledge the dividend as that will eat out of your short profits. Long term, this may at most triple during my lifetime from these prices. That's not enough upside for me to bite but I'll let you decide. I'm surprised the CAPS community is so favorable.
100. PepsiCo (NYSE: PEP) is right smack dab in the middle of where I'd slap its price tag: $60-$70. Their brand isn't as great as Coca-Cola's but Pepsi is better than Dr. Pepper Snapple. The best way to confirm this suspicion is that their earnings haven't risen as fast as their revenues. Simply put, the concept is margin erosion. If you are able to sell more product but you have to lower your price to do so or your costs go up, it doesn't really benefit you much to do so. And yet sometimes you have no choice. I'm willing to bet that Coca-Cola's competitive edge is so fierce that Pepsi has simply had a lot of difficulty converting touchdowns to their bottom line.
Just broke 100. Welcome to the triple digits. This calls for a time-out. I want to scream at the top of my lungs about the most undervalued company that I can't even talk about because no one is going to take me seriously. For that reason alone, you should hear me out. The analysts have given up on it. Around 10% of the float is short. The preferred shares are an arbitrage play (risk free returns). It's in a dying industry. What on earth could possibly excite me about this company called Yellow Media? It's trading at less than 20 cents and analysts are forecasting that it will make 40 cents in adjusted non-gaap earnings this upcoming year that started a few days ago. For those that are interested, the ticker is on the Toronto: YLO. I'm thinking something in the realm of 1000% upside is possible, especially in the Preferred A shares. The best online community to research this is StockHouse.com.
That's it for now, I have received several picks on the side that I'll be including in the concluding notes for following articles. Please submit companies that you want me to value to globalspeculation at gmail.com.
Glen and his investors hold no positions in any of the companies mentioned that are tickered. Glen and his investors hold long positions in Yellow Media Commons and Preferreds.