Price The Market Part 51
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. Join me on my jouney as I price the S&P500 one company at a time.
319. Northrop Grumman Corp (NYSE: NOC) is fairly inexpensive but there isn't much growth. Target: $55-$65. I'd say that this is the hallmark of fair valuation. Their FCF to PE is higher than what I would have expected so this is a perk. Analyst targets are $70+ which is in line with my expectations of where they should be. There is headline risk of defense spending cuts somewhere in the pipeline but I don't think that those risks will materialize. In fact, I think that defense spending can grow from here, especially once the US Government realizes that they don't need to balance their budget as the world's reserve currency during a time when the entire EU is currency constrained.
320. Lockheed Martin Corp (NYSE: LMT) is actually not expensive and it comes with close to a 5% yield. I actually think that there is a moderate amount of upside at Lockheed. The growth will be slow but there is growth and the price is lower than what I'd expect for stalwart level growth. Target: $80-$90. I wouldn't expect this to outperform the S&P500 across the next 5 years but I would expect Lockheed to keep pace while you collect a dividend larger than what you'd get if you were sitting in bonds. So, overall you should win in terms of total return. I'd be sold out above $95 no questions asked. Their earnings are actually less than their operating cash flow which is a win for me!
321. Masco Corp (NYSE: MAS) has been raging higher the last month. If you're a fan of the thesis that housing prices are broadly bottoming across the US as employment at least stops deteriorating, like I am, then Masco might make sense as a part of your portfolio. I think Masco is worth somewhere between $10 and $15. This one is hard to price because the last several years were brutal and they still aren't earning what I would consider to be normalized earnings. I'd say that I'm surprised they have kept a dividend. In times of crisis I prefer dividend cuts and share buybacks myself. A PR like, "We have decided to cut the dividend for the time being and plan to take that money and use it instead for share repurchases while we are trading at what we perceive to be an attractive valuation due to increased uncertainty."
322. Monster Worldwide (NYSE: MWW) looks cheap based on their expectations but I have to wonder if their expectations make any sense. Why are they forecasted to grow so fast? Regardless, no matter how you look at this one, $8 appears to be a solid bottom to start climbing the price mountain. I like that the company referenced keeping their powder dry for lower prices before initiating a buyback and that type of discussion is all I need to set a higher price target for Monster. Target: $10-$15. I'm betting CAPS points on this one, seems easy enough.
Extra: Goodyear (NASDAQ: GT) is pretty close to the price where I see at least 1 insider purchase recently, $12.27. Target: $11-$16. There is a lot of pressure here and the company hasn't been consistently profitable. This is one that I priced earlier. I'm curious to see if they are able to get back to consistent profitability. When analyzing the cost side of this company and balancing it against their top line, you need to make sure that you understand that their plan is to manufacture better tires on a forward basis. Is it working? I don't know yet, but at least it is a start.
That's all for now, please send me companies you'd like me to price: globalspeculation at gmail.com.
The Motley Fool owns shares of Lockheed Martin and Northrop Grumman. bradford86 has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.