Survival of the Fittest
On Wall Street
There are lots of ways to describe the current economic environment, but the one that seems best to me is to say we are in an "ice
age" on Wall Street.
Just as slow-moving glaciers wear down hardened rock, once mighty companies have been worn down and threaten to break up completely.
Payrolls have been slashed, profits have thinned and the old ways of doing business have been washed away.
We are seeing Darwinism at work in the market right now as weak companies fall away and the strongest prosper. This “survival
of the fittest” is behind a recent spate of mergers and restructuring plans. This is why we’re seeing firms enter new ventures
to squeeze out weakened rivals or put a forgotten brand back on top of the heap.
It is a harsh environment, to be sure. But it’s certainly not the end of the world. In fact, there is a small, elite group of
companies that are showing that they not only can survive in this environment but use it as an opportunity to achieve dominance
in their industry.
Here are five stocks you can trust in 2009 no matter what the market throws your way… and 20 you can’t…
Stock #1: AutoZone (AZO)
AutoZone (AZO) operates approximately 4,100 stores in the U.S. and Puerto Rico,
and is clearly the #1 auto parts chain. As auto sales have plummeted dramatically, more people are relying on aging vehicles to
get around. The result is a huge increase in demand for parts and maintenance — and huge sales for AutoZone! In this do-it-yourself
economy, AZO is simply thriving as more and more consumers put off new car purchases and opt to handle a lot of auto repairs themselves.
As major car companies deal with bankruptcy, this trend will only continue. And AutoZone has the numbers to back it up! In its
latest quarter, the company reported earnings of $174 million, or $3.13 a share, compared with $159 million, or $2.49 a share,
in the same period a year ago. Sales also rose during the quarter to $1.66 billion from $1.52 billion. Growing year-over-year
earnings in this dismal environment is a tremendous feat! What’s more, analysts were expecting earnings of $2.89 a share on revenue
of $1.61 billion, so AutoZone posted an 8.3% earnings surprise and a 3% sales surprise.
The best part is that this company is poised to pick up a huge chunk of market share as Chrysler and General Motors head down
the drain. Since the dealer networks and parts businesses of these companies will likely suffer during the process, AZO will quickly
fill the void.
I rate AZO an A or Strong Buy.
Stock #2: Best Buy (BBY)
Best Buy (BBY) isn’t just profiting off of Circuit City’s demise. The company
operates about 1,300 stores in the U.S., Canada and China with an economy of scale that allows it to operate efficiently and very
profitably. This strategy has paid off handsomely in the last year despite the market turmoil.
I know some of you may be wary of retail stocks right
now, so let’s put this company to the test and look at the numbers: During the past four quarters, the company’s sales increased
9.7% to $14.72 billion. The analyst community was expecting operating earnings of $1.40 per share for the latest quarter, so Best
Buy’s earnings of $1.61 per share totaled a 15% earnings surprise.
Looking forward, the company is forecasting earnings for its current fiscal year to total $2.50 to $2.90 per share — considerably
above the consensus estimate of $2.47 per share. BBY is scheduled to release its next round of earnings soon, and in the past
three months, the analyst community has revised their consensus earnings estimate 22% higher!
I rate BBY a B or Buy.
Stock #3: McDonalds (MCD)
McDonald’s (MCD) is the world’s top fast-food company by sales, with more than
31,800 flagship restaurants serving burgers and fries in more than 100 countries.
The company reported strong first-quarter earnings on April 22, further fueling Mickey D’s current and continued success. Much
to Wall Street’s surprise, for the first three months of 2008, MCD earned 81 cents per share. That’s a big jump over the 62 cents
per share it made last year and significantly higher than Wall Street’s 70 cent expectation.
The reasons behind this fast-food pioneer’s first-quarter success: A weak dollar and strong global sales. In fact, the company’s
U.S. business has flat-lined, but abroad MCD, among other multi-nationals, is profiting from the weak dollar.
Although MCD isn’t unaffected by the slowing U.S. economy, this fast food giant’s global momentum is reflected in the company’s
international sales, solidifying its position as a big-league player in the international marketplace.
The fast food giant was recently upgraded by Deutsche Bank to “buy” from “hold” thanks to its healthy cash flow and bargain-level
valuation. The success of McDonald’s McCafe business will help to sustain same-store sales growth until the dollar’s weakness
shifts exchange rates to the company’s favor. MCD also has a high
dividend yield, which makes it an attractive investment to investors.
I rate MCD a B or Buy.
Stock #4: Amgen (AMGN)
Amgen (AMGN) is in the recession-proof health care sector and has seen strong
sales and earnings even during the recent turmoil on Wall Street.
Amgen is the largest biotechnology company in the world. The company helps patients fight cancer, kidney disease and arthritis.
I’m sure you’ve heard of the medications AMGN sells — its drugs Epogen and Aranesp, which treat anemia, account for more than
one-third of its sales. Enbrel, a leading arthritis drug, is one of the best-selling treatments in this multibillion-dollar market.
Amgen currently has five “blockbuster” drugs like this on the market. Amgen also has a promising drug pipeline and key marketing
Recently, the company announced that it expects to have three more drugs on the market over the next five years that are projected
to net $1 billion or more in annual sales each. Now that’s the prescription for continued profits.
I rate AMGN a B or Buy.
Stock #5: Apollo (APOL)
Apollo (APOL) is indeed down from our initial purchase price, but
I stand behind this stock just as strongly as ever.
The media’s recent optimism about the economy and fear of student loan defaults caused APOL to dip recently, but layoffs are
still continuing across the American economy and the jobless rate will stay high for many months to come.
This is a recipe for success at Apollo group, as it is one of the premier online education providers in the U.S. This pick is
a strong A in Portfolio Grader and is a clear favorite in this market. Invest in Apollo with confidence.
I rate APOL an A or Strong Buy.
Get Louis Navellier’s latest updates and Buy Below prices on the top five stocks mentioned here by accepting a six-month,
risk-free trial to Blue Chip Growth. Complete details.
Here now are 20 stocks you can’t trust. If you own these losers, sell them now. If you don’t — avoid them at all costs.
Top 20 Stocks to Sell Now
The following 20 stocks are rated F in my exclusive PortfolioGrader
stock rating tool. It’s a great way to rank your current or future investments, and completely free!
Sell these stocks immediately.
- Alcoa (AA)
- Applied Materials (AMAT)
- Cadence Financial (CADE)
- Compton Petroleum (CMZ)
- Capital Trust Inc. (CT)
- City Bank (Washington) (CTBK)
- Dover Saddlery (DOVR)
- Enterprise Financial Services (EFSC)
- Physicians Formula (FACE)
- FNB United Corp. (FNBN)
10 More Stocks to Sell Now
- Frontier Financial (FTBK)
- GeoMet Inc. (GMET)
- Horizon Financial (HRZB)
- Integra Bank Corp. (IBNK)
- Royal Bancshares of Pennsylvania (RBPAA)
- Rosetta Resources (ROSE)
- Stone Energy (SGY)
- Synovus Financial (SNV)
- Stoneridge Inc. (SRI)
- W&T Offshore (WTI)
If you own any of these stocks that flunk the PortfolioGrader test, do not wait for earnings. Do not wait for a turnaround.
Sell these 20 losers now!
How do the stocks in your portfolio measure up? Find