Throughout your investing career, it’s important to try to stick with the following mix — 60% of your portfolio allocated to conservative-ranked stocks, 30% to moderately aggressive stocks and 10% to aggressive stocks.
Over the long run, this diversification strategy will help protect your portfolio from market volatility, while also leaving plenty of room for growth.
Here are two new stocks to add to your portfolio this month:
NetEase (NTES)
NetEase (NTES) is an operator of an interactive online community in China. Operating out of three main divisions: Online Game Services, Advertising Services and Email, Wireless Value-Added Services, NetEase offers massively multi-player online role-playing games, a network of Chinese language online services (news and entertainment), blogging, photo albums, email, banner advertising and much more.
However, NetEase is mostly known for its popular online role-playing games. It offers games that were developed in-house, including Fantasy Westward Journey, Heroes of Tang Dynasty, Datang and Ghost, as well as the licensed Blizzard Entertainment games of World of Warcraft and StarCraft II.
NetEase’s mobile and PC gaming business helped NTES surpass expectations for the first quarter. Compared with the year ago quarter, net revenues climbed 55% to 3.66 billion yuan, or $590.5 million in revenue. Analysts were looking for 3.20 billion yuan in revenue. So, NetEase posted a 14% sales surprise.
Breaking it down — online games revenue jumped 44%, while advertising revenue climbed 36%. Revenue from email, e-commerce and other services nearly tripled. Over the same period, profit jumped 18% to 1.3 billion yuan. Adjusted earnings were 9.04 yuan per ADS, above analysts’ expectations of 8.69 per ADS. So, NetEase posted a 10.5% earnings surprise.
NetEase also approved a dividend of 39 cents per ADS. Shareholders of record on May 27 received the dividend on June 5. At current prices, NTES has a 1% annual dividend yield. I recommend that you buy shares of this moderately aggressive stock.
TransDigm (TDG)
TransDigm (TDG) is an aerospace and defense company with the highest margins in its industry. TransDigm’s operating margins of 41% are massively higher than its competitors — both Honeywell (HON) and United Technologies (UTX) have margins of just 15%.
This is because TransDigm derives 90% of its sales from proprietary products, and TDG is the sole source provider for nearly 75% of its sales. So, TransDigm has cornered the market on many kinds of aircraft components, from door security systems to specialized pumps to ignition systems.
More than half of its revenue comes from the higher-margin and more stable aftermarket. TDG’s aftermarket products are its biggest strength right now, as major airlines are refurbishing and expanding their fleets. In addition, TransDigm has been aggressively growing in recent years through acquisitions.
Recently, TransDigm Group completed its acquisition of Pexco Aerospace for $496 million. Pexco Aerospace manufactures extruded plastic interior parts for commercial use in the aerospace industry. It also has a flourishing commercial aftermarket presence, plus a strong familiarity with all Boeing (BA) platforms.
This acquisition builds upon an already strong base for sales and earnings. Last quarter, TransDigm’s sales rose 4.9% to $619 million. Over the same period, TransDigm’s earnings rose 31.5% to $110.9 million, or $1.96 per share.
Excluding extraordinary items, TDG’s operating earnings were $2.11 per share. The analyst community was expecting operating earnings of $2.01 per share. So, TransDigm Group posted a 5% earnings surprise.
Looking ahead to fiscal year 2015, the analyst community is calling for earnings of $8.69 per share on $2.69 billion in revenue. Compared with the year ago quarter, this works out to 13.2% annual sales growth and 12% earnings growth. In the meantime, I consider this conservative stock an excellent “buy.”
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
