7 Stock Picks

Are you looking for a few hidden stock gems as the market climbs higher? You’re probably familiar with big cap names like Facebook, Apple, Amazon, and so on, but what about smaller companies? Here are seven stocks that may justify a look.

Altra Industrial Motion (AIMC). Altra Industrial Motion Corp is a United States-based company that designs, manufactures, and markets mechanical power transmission components. The company’s reportable segments are Power Transmission Technologies, which includes Couplings, Clutches and Brakes, Electromagnetic Clutches and Brakes, and Gearings; and Automation and Specialty segment consist of Kollmorgen, Portescap, Thomson, and Jacobs Vehicle Systems. It generates a majority of its revenue from the Power Transmission Technologies segment.

Bloom Energy (BE). Bloom Energy Corp is engaged in providing electric power solutions. The solution of the company includes Bloom Energy server, which is a stationary power generation platform to provide uninterrupted power. It earns revenue from the sale and installation of its energy servers to direct and lease customers, provides services under its operations and maintenance contracts, and by selling electricity to customers under PPA agreements.

Clarus (CLAR). Clarus Corp engages in the design, manufacture, and marketing of outdoor equipment and apparel for climbing, mountaineering, backpacking, skiing, and other outdoor recreation activities. The company’s products are principally sold under the Black Diamond, Sierra, and PIEPS names through specialty and online retailers, distributors, and original equipment manufacturers throughout the U.S. and internationally. The operating segments of the company are Black Diamond, which is the core revenue generator, and Sierra. Black Diamond segment offers products including high-performance activity-based apparel, rock-climbing footwear and equipment; technical backpacks and high-end day packs; trekking poles; headlamps, and lanterns; gloves and mittens; and skincare and other sport-enhancing products.

iRadimed (IRMD). iRadimed Corp is a US-based company that mainly develops, manufactures, markets, and distributes a Magnetic Resonance Imaging (MRI) compatible intravenous (IV) infusion pump system, and MRI compatible patient vital signs monitoring system, and accessories and services relating to them. The company provides a non-magnetic IV infusion pump system which is designed to be safe for use during MRI procedures. The MRI products of the company are sold primarily to hospitals and acute care facilities in the United States and internationally.

Malibu Boats (MBUU). Malibu Boats Inc designs, manufacture, and sells performance sports boats. The boats are used for water sports, such as water-skiing, wakeboarding, and wake surfing. The performance boats are sold under the Malibu and Axis Wake Research brands. The company uses an independent dealer network to sell its products, primarily in the United States and other countries. It operates under the segments of US, Australia, and Cobalt. The U.S. operating segment primarily serves markets in North America, South America, Europe, and Asia while the Australia operating segment principally serves the Australian and New Zealand markets.

PaySign (PAYS). PaySign Inc is a prepaid debit card payment solutions provider as well as an integrated payment processor that has many prepaid debit cards in its portfolio. It designs and develops payment solutions, prepaid card programs, and customized payment services. Through the platform, it provides services, including transaction processing, cardholder enrollment, value loading, cardholder account management, reporting, and customer service. It manages programs for many of the pharmaceutical manufacturers with co-pay assistance products designed to maximize new patient acquisition, retention, and adherence.

The Meet Group (MEET). MEET s a leading provider of interactive live streaming solutions designed to meet the universal need for human connection. The company’s ecosystem of live-streaming apps enables users to interact through one-to-many live streaming broadcasts and text-based conversations. The apps, MeetMe, LOVOO, Skout, Tagged, and Growlr deliver live interactions and meaningful connections to millions of users daily.

All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” – Peter Lynch

June 18, 2020

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Disclaimer: Names, data, and descriptions are from Ycharts. PWM does not own any individual positions in the seven securities. The post is not an offer to buy or sell securities.

 

A Stock Picker’s Market

The panelist on CNBC’s Halftime Report today mentioned we’re currently in a stock picker’s market. A stock picker’s market is one where money managers actively pursue strategies that will outperform the indices. They’ll try to cherry pick winners and avoid losers by employing several techniques such as charting and timing.

After the show ended, I searched Morningstar’s database looking for funds with a high turnover and a 5-year track record. What does turnover mean? A fund with a turnover of 100% will replace its entire portfolio over a 12-month period.[1] The average mutual fund has a turnover of 130%.[2] The three funds I found have an average turnover of 3,775% – that’s a lot of stock picking!

Rydex S&P 600 Pure Value Fund (RYSVX) has an annual turnover of 1,832%. The initial fee to purchase this fund is 4.75% and the ongoing expense is 1.53%. A few of the holdings are Finish Line, Barnes & Noble, and Zumiez. This fund has underperformed the S&P 500 on a 3, 5, and 10-year basis. In 2008 it dropped 43.64%. A $10,000 investment in this fund five years ago is now worth $13,662. The average annual return has been 6.43%.[3]

Salient Tactical Plus Fund (SBTAX) has an annual turnover of 3,584%. The initial fee to purchase this fund is 5.5% and the ongoing expense is 1.98%. It currently owns four investments. It has underperformed the S&P 500 on a 1, 3, and 5-year basis and it’s trailing the market in 2018. A $10,000 investment in this fund five years ago is now worth $12,016. The average annual return has been 3.74%.[4]

PSI Strategic Growth Fund (FXSAX) has an annual turnover of 5,910%. The initial fee to purchase this fund is 5.75% and the ongoing fee is 2.31%. It owns 8 investments or twice as many as Salient. It has underperformed the S&P 500 on a 1, 3, and 5-year basis. This year it’s down almost 15%. A $10,000 investment in this fund five years ago is now worth $9,225. The average annual return has been a negative 1.6% per year.[5]

By comparison, the Vanguard 500 Index Fund (VFINX) has an annual turnover of just 3%. It doesn’t have a sales charge and the ongoing fee is .14%. It has generated market returns since 1976, minus its miniscule fee. A $10,000 investment in this fund five years ago is now worth $18,274. It has generated an average annual return of 12.82% per year.[6]

I hope we’re not in a stock picker’s market if these funds are an indication of one. Funds with high turnover and excessive fees should be avoided at all costs. Instead, look for mutual funds that generate market returns such as the Vanguard 500 Index Fund.

Investors regularly try to outperform the market by utilizing tools, tricks, and trading only to fall short time and time again. Rather than trying to find a market beating strategy focus on your financial plan and invest in low-cost mutual funds. It’s okay to grow rich slowly.

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson

June 22, 2018

Bill Parrott is the President and CEO of Parrott Wealth Management firm located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process.

Note: Investments are not guaranteed and do involve risk. Your returns may differ than those posted in this blog.

[1] https://www.investopedia.com/articles/mutualfund/09/mutual-fund-turnover-rate.asp, Stephan Abraham, April 23,2018.

[2] Ibid

[3] Morningstar Office Hypothetical Tool

[4] Ibid

[5] Ibid

[6] Ibid

2018 Stock Picks.

The parade of 2018 stocks picks are appearing on popular social media sites and in traditional financial magazines.  Brokerage firms, money managers and financial journalists are touting their best ideas for legions of investors. These sage stock pickers dispense names that are expected to outperform the general population of publicly traded companies.

Last year I published a list of 15,000 stocks to buy and, as a group, they did well.  The companies were owned in six different mutual funds managed by Dimensional Fund Advisors:  Core Equity I (DFEOX), US Micro Cap (DFSCX), US Small Cap (DFSTX), Real Estate (DFREX), International Core (DFIEX) and Emerging Markets (DFCEX).   The portfolio has generated a YTD return of 17.5%.  The best performing fund has been the emerging markets fund up 31.67%!

The S&P 500 is having a stellar year, up 20.13%.   It has been led by Align Technology, Boeing, and Nvidia as all three have posted gains greater than 75%.  However, not every stock in the index has done well.  About 100 companies have a negative return and half the stocks, including the 100, are underperforming the index.

Hendrik Bessembinder, finance professor at Arizona State University, published a paper Do Stocks Outperform Treasury Bills?[1]   He examined the performance of 25,782 stocks from 1926 to 2015.  The stocks produced monthly gains 42% of the time and the top 4% of stocks (1,031) accounted for the entire dollar gain in the market.  T-Bills never lost money in his study.  Despite this, stocks crushed T-Bills over the long term by a multiple of 256 to 1.  A $1 investment in T-Bills was worth $21 at the end of 2015 and $1 invested in the S&P 500 grew to $5,386.[2]

The best way to make money in the stock market is to own all the winners and avoid all the losers but this isn’t possible.  Blue chip franchises like GE, Alaska Air, Campbell Soup, Kroger’s, Walgreen’s, Harley Davidson and AutoZone are all down double digits this year.  Riot Blockchain, on the other hand, is up 870% because of its name.  Riot Blockchain was called Bioptix prior to its name change, a failed medical business.[3]  I’d be surprised if Riot Blockchain was on any list of stocks to buy in 2017.

As you research ideas for your portfolio focus on your financial plan and long-term goals.  Your plan will determine your investment selection and asset allocation.  It will also help you avoid getting get caught up in market hysteria or from being whipsawed by short-term trading moves.

Money is made by sitting, not trading.  ~ Jesse Livermore

Bill Parrott is the President and CEO of Parrott Wealth Management an independent, fee-only, fiduciary financial planning and investment management firm in Austin, TX.  For more information please visit www.parrottwealth.com.

December 18, 2017

Note:  Past performance is not a guarantee of future returns.  Your returns may differ than those posted in this blog.  Investments are not guaranteed.  Options involve risk and are not suitable for all investors.  Photo Credit: Marie Appert, Rose Parade, 2012

[1] https://www.marketwatch.com/story/why-picking-stocks-is-only-slightly-better-than-playing-the-lottery-2017-06-28, 9/19/2017, Paul A. Merriman

[2] Dimensional Fund Advisors 2016 Matrix Book.

[3] https://www.fool.com/investing/2017/12/18/why-riot-blockchain-stock-is-soaring-on-monday.aspx, Jordan Wathen, December 18, 2017.