Three Companies With Steady Year-to-Date Performance
Madhukar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It's easy to be skeptical about volatile stock movements. When a stock sees sudden growth, it's a risky bet, because it could just as easily fall in the future. To avoid taking that kind of risk, it is better to pick stocks with steady growth.
Here are three stocks which have grown steadily. Out of these three, two companies - Avon Products (NYSE: AVP) and Cheniere Energy (NYSEMKT: LNG) have gained more than 40% this year. The third, Microchip Technology (NASDAQ: MCHP) is no slouch. It's grown by 14% this year.
Source: Yahoo Finance
But do these companies provide good investment opportunities?
Sales representatives: key driver for revenue growth
Avon’s generates maximum revenue by direct selling through its sales representatives. It reported a total headcount of 6.3 billion sales representatives and total revenue of $10.5 billion in 2012. The total sales growth of the company depends on the growth of its number of representatives. These representatives buy Avon's products at a discounted price, and sell them at the printed price. The idea is to contact customers directly, through sales campaign, and brochure that contains products list. The company's website has become another platform for direct sales. The customers can choose their representatives name from the list available on the website, and the representative will get a credit for sales made. This brings customers closer, and the representatives serve as a 'store' for Avon's products.
To increase the sales representative base, Avon has introduced a new development program called Representative Value Proposition. This program focuses on discount structures, higher incentives, strategies to increase sales and e-business instruments that help increase representative's earnings. With this initiative, the total revenue of the company expected for this year is up to $10.62 billion and $10.95 billion for next year.
Avon is planning to shift its focus to the high revenue-generating market of North America. In order to execute this plan, it exited from under-performing markets and slashed approximately 1,500 jobs in 2012, and plans to cut more than 400 jobs in this year. This initiative will generate $400 million of savings. As the plan currently accounts for only 20% of the goal, the company will announce such measures over the next three years. Revenue from North America was reported at $406 million in the first quarter and $498 million is expected in the fourth quarter of this year.
World’s first bi-directional LNG terminal
Cheniere Energy's Sabine Pass Liquified Natural Gas (LNG) terminal in Louisiana is the first LNG project to get approval from the U.S. government to export LNG to non-FTA countries. Non-FTA countries are those countries that do not have a Free Trade Agreement with the U.S. Getting a non-FTA permit is a strategic advantage to Cheniere, because there’s only one big gas-importing country --South Korea, with a FTA agreement with the U.S.
To expand its liquefaction service, Cheniere Energy has started a new project through its Sabine Pass subsidiary to expand its liquefaction service. The site has a capacity to fit four LNG trains that can process approximately 2billion cubic feet per day, or Bcfpd, of natural gas. The construction of the first two LNG trains is 30% complete and the third and fourth train will be underway soon, as well. The first delivery of LNG is expected in late 2015.
In addition to this, Cheniere Energy has contracts with six major energy companies for the delivery of LNG. With this project, the total revenue of $272 million is expected for this year and $862 million in 2016. The LNG liquefaction revenue for 2016 is expected to be $589 million.
Cheniere Energy owns and operates the Creole Trail Pipeline in Louisiana. The pipeline is 94 miles long and connects multiple other pipelines across Louisiana, as well as the Sabine Pass LNG terminal, with the North American natural gas market. The company is planning to reconfigure the existing pipeline for bi-directional gas flow that will deliver 1.5 Bcfpd of LNG. This will be the world first bi-directional LNG terminal. This reconfiguration is expected to contribute additional $65 million to annual Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) as soon as the pipeline commercializes in 2014.
High demand for Micro-controllers
Microchip Technology is ramping up its production to meet increasing demand for micro-controllers. The rise in demand is because the governments of many countries have introduced strict regulations for power consumption to both protect the environment and manage resources.
Micro-controllers are capable of reducing the power consumption of various tools; hence they are used for power management. Anticipating high bookings, the company is improving its production activities and business environment, and has raised its guidance for fiscal year 2014. In 2012, the company's total revenue was $1.38 billion, which is expected to increase to $1.60 billion in this year and $1.87 billion by next year.
Microchip has launched a new family of “PIC32MX3/4” micro-controllers. These are available in 64/16 KB, 256/64 KB and 512/128 KB Flash/Ram configurations. The new micro-controller provides services in connectivity, graphics-display, digital audio, capacitive-touch, and in embedded system. The new solution provides complete solution to the application designers as it has high RAM memory options and higher combination of hardware at a lower cost. With this launch, the micro-controller segment revenue is expected to increase from $275.8 million in the first quarter to $313.2 million in the fourth quarter of this year.
As direct sales drive high revenue, Avon is focusing more on increasing its sales representatives. The initiative to expand in high revenue-generating markets will help the company in the long run.
Cheniere Energy has signed LNG delivery contracts with six major energy companies and is constructing the world's first bi-directional LNG terminal. This will help company to generate high revenue.
Increase in demand and the launch of new micro-controllers will enhance Microchip Technology’s growth and generate high revenue.
These three stocks are a "buy."
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!