We’re now in the strongest time of the year for the stock market. We are also in the midst of what should be a better earnings announcement season than we’ve seen in a while, and to top it all off, the Fed is going to continue to with its $85 billion per month in quantitative easing for the foreseeable future. So we should be happy, right?
Yes, we definitely should. But up until this week, the problem has been that anytime you turned on CNBC or any other news source, the fight over the federal government shutdown and the debt ceiling was all anybody talked about. I understand why, but from an investing perspective, the good news was buried by the chaos in Washington.
Thankfully, that’s about to change. With the debt ceiling/shutdown mess behind us, at least until after the first of the year, I am more convinced than ever that the market is heading for a strong finish to 2013. Even better, our Blue Chip Growth stocks remain in great position to benefit.
I’m always on the lookout for new opportunities, and try to invest in only the strongest stocks, so let’s turn now to three New Buy opportunities I want us to take advantage of in November.
Alliance Data Systems
Alliance Data Systems (ADS) is in the business of helping other companies build customer loyalty. The company operates three main segments: LoyaltyOne, Epsilon and Private Label Services.
LoyaltyOne owns and operates the AIR MILES Rewards program, which allows consumers to accumulate points for their everyday purchases and redeem them for rewards like kitchen gadgets, electronics and vacations. While AIR MILES got its start in Canada back in 1992, similar LoyaltyOne programs have since spread to the U.K., the Netherlands, Spain, India, and recently Brazil. The company also offers consulting and analytics services.
Epsilon’s expertise is in direct marketing and advertising solutions, specializing in brand building, customer intelligence and predictive modeling. Finally, the company’s Private Label Services and Credit division offers credit card processing, billing and payment processing as well as collection services for private label retailers. Through these three units, the company serves clients in financial services, specialty retail, petroleum retail, automotive, hospitality, pharmaceuticals and a wide range of other markets. Its top clients include Merck (MRK), Ford (F), L Brands (LTD), FedEx (FDX) and Shell Oil (RDS.A, RDS.B).
And with consumer confidence once again declining due to what’s been happening in Washington, companies will need Alliance Data’s services to keep in sync with their customers. For this reason, I consider ADS a recession-proof stock: Alliance Data Systems has managed to grow sales and earnings each and every year since it went public in 2001. Given that this period included two major recessions, Alliance Data Systems has shown that it not only survives no matter the market environment, it thrives!
I expect this trend to hold true over the coming months. Consider the company’s recent third-quarter earnings announcement. The company reported 21% annual sales growth and 10% earnings growth, topping earnings estimates by 2 cents per share and sales estimates by $30 million. Looking ahead to 2014, the company expects core earnings of $12.00 per share on revenue of $4.27 billion, in line with analyst estimates. ADS is a stock we can feel good about holding for the long haul. This Conservative stock is an excellent buy below $247 per share.
Oil companies are finding it increasingly difficult to extract gas from traditional deposits and are now being forced to look to alternative sources and methods of extraction. And Core Laboratories (CLB) is a Netherlands-based company that provides the technology that oil producers use to develop their oil and gas properties—including reservoir description, production enhancement and reservoir management services. Here’s a quick rundown of those services:
- The company’s reservoir description services comprise the characterization of petroleum reservoir rock, fluid and gas samples; and provision of analytical and field services to characterize properties of crude oil and petroleum products.
- Its production enhancement products and services relate to reservoir well completions, perforations, stimulations and production, as well as include integrated services to evaluate the effectiveness of well completions and to develop solutions to increase the effectiveness of enhanced oil recovery projects.
- Core Laboratories’ reservoir management services consist of the combination and integration of information from reservoir description and production enhancement services to increase production and enhance recovery of oil and gas from clients’ reservoirs.
In the third quarter, Core Laboratories’ sales rose 11% to $273.2 million compared with the same quarter a year ago. During the same period, the company’s earnings rose 15% to $62.3 million or $1.36 per share. This topped the $1.34 consensus earnings estimate by 2%. The company also issued a strong fourth-quarter sales guidance to $278 million to $271 million, which was very well received.
Judging from these results, it’s clear that CLB is a solid play on the energy market. And given that this company’s services are in such demand, I expect this momentum to continue. So in the wake of this strong earnings announcement, I recommend you add shares of this Moderately Aggressive stock below $213.
I know I picked on Tesla (TSLA) earlier, but that doesn’t mean all auto stocks are ridiculously overvalued. Magna International (MGA) is looking great right now and joining this auto parts supplier on the Buy List is Toyota (TM), my third and final buy recommendation for the month of November.
As you probably know, Japan’s Toyota Corp. is the world’s third largest carmaker, just behind General Motors (GM) and Volkswagen AG (VLKAY). Toyota’s most popular models include Camry, Highlander, Corolla and Prius. The company is the hybrid technology leader and now develops plug-in cars with much more efficient lithium batteries. Toyota is also a pioneer in anti-collision and self-driving cars that are expected to be introduced in the upcoming years.
In its 75 year history, the company has manufactured over 200 million cars and has expanded its operations to include upwards of 325,900 employees across 170 countries. In fact, Toyota Motors has gotten so good at what it does that it has become the gold standard in lean manufacturing. The Toyota Production System, which is known for just-in-time production and minimizing waste, is adapted by companies around the world.
And with about a third of Toyota’s sales going to North America, this company profits from the resurgence in auto sales in the U.S. While October will probably be a lean month due to the U.S. shutdown, the fourth quarter as a whole tends to be a strong sales period for the industry.
As with the other new recommendations, I’m looking forward to Toyota’s next earnings announcement, which is scheduled for November 6. A weak Japanese yen has boosted the competiveness and profitability of Toyota, and we should see this reflected in the upcoming report. Toyota has a tendency to blow analyst estimates out of the water—it posted double-digit earnings surprises for three of the past four quarters.
With strong sales in China, Europe, Japan, Latin America and North America, Toyota is expected to report record sales and earnings for the foreseeable future. “Let’s go places” with Toyota shares. Add shares of this Conservative stock below $139.