A quick glance at five more stocks – Comcast, Ares Capital, Domino's Pizza, Netflix, and Boston Scientific
In yesterday's e-mail, I took a quick glance at six beaten-down stocks: Charter Communications (CHTR), Western Union (WU), Accenture (ACN), Veeva Systems (VEEV), Zoetis (ZTS), and MercadoLibre (MELI).
I invited readers to let me know which ones should get a closer look. And I got quite the response – more than 100 readers replied!
Preferences were all over the board. But the most common response was along the lines of this one from Dan M.: "I'd like to see your thoughts on all six – they're written about frequently. I'd like your take!"
My marching orders are clear: I promise to take a "first look" at the historical financials and valuation of all six of these companies.
But before I do so, I'd like to share 10 more stocks that have recently hit my radar. I'll do a "quick glance" at five of them today and the other five tomorrow.
Again, I invite you to let me know which stocks you're most interested in – you can send me an e-mail by clicking here.
1) One of my readers wrote: "If you're going to look at Charter, you should also look at Comcast (CMCSA)... Same circumstances."
These two cable companies are indeed quite similar. As you can see, Comcast's stock hit a 13-year low yesterday:
Like Charter, Comcast has a mountain of net debt ($85.1 billion), but it generates a ton of free cash flow ($20.4 billion in the last 12 months) and pays a huge dividend (5.9%). Plus, the stock trades at a super-low multiple (6.4 times this year's estimates).
2) Another one of my readers suggested looking at Ares Capital (ARCC). As a business development company, it makes loans to other companies and focuses on paying fat dividends – Ares' is currently 10.8%.
As a result, the stock has been essentially flat for more than two decades. And it's down 24% from its 52-week high:
The amount Ares pays out in dividends each year roughly equals what it generates in net income. But there are a lot of moving pieces, as it also issues stock and debt.
3) This article in yesterday's Wall Street Journal caught my eye: Domino's Pizza (DPZ) is getting a new CEO – and this kind of transition can often spell opportunity.
After bottoming at $2.28 during the global financial crisis in November 2008, Domino's soared 236 times to a high of $538.35 on the last day of 2021.
But since then, the stock has been nearly cut in half. It fell 5.6% yesterday on the CEO news, hitting a six-year low:
The company's growth has stalled recently, but it generates healthy free cash flow, pays a decent 2.7% dividend, and buys back 1% to 2% of its stock annually. And at 15.4 times this year's estimates, it trades at its lowest price-to-earnings multiple in 15 years.
4) Netflix (NFLX) is another fantastic company whose stock has pulled back quite a bit...
I pitched Netflix at my Value Investing Congress and on CNBC the day it hit a multiyear low of $0.78 (split adjusted) on October 1, 2012 (I shared the full story here). From there, the stock rose nearly 172 times to hit an all-time high of $133.91 a year ago.
But it's down 46% since then, as you can see below:
There's nothing wrong with the company. It continues to grow rapidly, and free cash flow is exploding.
But its valuation got ahead of itself. A year ago, it was trading at more than 50 times forward earnings. Today, with the stock down and earnings up, it trades at only 20.3 times this year's estimates – a below-market multiple for a far-above-market-quality business.
5) Reader Dan M. also suggested that I look at medical-device maker Boston Scientific (BSX): "It's a customer of mine, and the stock has taken a significant hit, but its operating model is solid."
He's right that the stock has taken a beating – it's down 60% in the past 10 months and is at a three and a half year low:
Boston Scientific's growth, free cash flow, and balance sheet are strong.
But like Netflix, the stock got ahead of itself. Last year, it peaked at 37 times forward earnings. Today, it trades at only 13.2 times this year's estimates.
I think all of these stocks are worth a first look. Again, if you're particularly interested in one or more of them, please let me know in an e-mail by clicking here.
Tomorrow, I'll take a quick glance at five more stocks, so stay tuned!
Best regards,
Whitney