Forbes
Forbes
NEWSLETTERS
12
Stocks
To Buy
2019
Through the first nine months of 2018, it looked like another year of double-
digit percentage gains for U.S. stocks, but October and November were brutal
months. By early December, nearly half of the stocks in the S&P 500 Index had
slipped into bear market territory with declines of 20% or more from their
peaks. Now there is serious doubt whether
this report.
While there can be some negative consequences to taking on too much business,
it’s usually worth the trouble—especially in the long run. I think that’ll prove to
be the case with leading global composite wind blade producer TPI Composites.
Thanks to the exceptionally strong order activity it’s enjoyed so far this year driven
by the ongoing shift towards cleaner energy sources and the steady but significant
reduction in the cost to produce wind energy, the company ended its most recent
agreements of $6.3 billion through 2023. This is 43% higher than what it ended
2017 with and more than six times greater than the sales it will likely achieve in
And while the consequence of this substantial influx in new orders—as well
as from customers moving to larger blade sizes at a faster pace than planned—
will be higher-than-expected line startup and transition costs over the next two
million and then jump another 36%-52% to $170-$190 million in 2020 while
earnings are expected to more than triple to $1.24-$1.35 per share next year
even with this pressure. As this begins to play out, I think it’ll send TPIC’s stock
meaningfully higher.
Shareholders don’t like it when a company raises funds through any means that
can potentially dilute the value of their holdings. So perhaps it’s not surprising
to see shares of leading pawn loan provider EZCorp still down about 40% since
announcing and then issuing enough convertible debt back in May to potentially
increase total shares outstanding by 20%. But I think this selloff is far too harsh
given that the embedded conversion price of $15.90 indicates the stock would
need to climb roughly 80% from current levels before any dilution would occur.
Furthermore, I believe these notes will be used to substantially pay off existing
year. Thus, EZPW’s dilutive and cost profile probably isn’t much different now than
strong cash generated from its domestic operations back into opening and
acquiring additional stores in its more promising Latin America Pawn business,
which was largely responsible for the 27% rise in earnings in fiscal 2018 (which
ended in September), EZPW is primed for another year of top- and bottom-line
growth that should be strong enough in my view to spark a sizable rebound in its
Oneok (OKE)
Market Cap: $24.3 billion Dividend Yield: 5.7%
Price To Book Value: 3.7
Based in Tulsa, OK, Oneok is a diversified energy company and one of the
largest midstream service providers in the U.S. It is also the general partner and
41.2% owner of Oneok Partners, LP (OKS), one of the largest MLPs. OKE owns
and operates a premier natural gas liquids (NGLs) system and is a leader in the
2018-2020, helped by rising volumes and added capacity. Expected solid earnings
growth over the next two years comes with higher leverage through 2019, as
income jumped 40% from a year earlier to $495.5 million. Net income was
distributions typically qualified and taxed at the 15%-20% rate. Buy up to $72.00
Kraft Heinz Company, which was created from the July 2015 merger of Kraft Foods
Group and H.J. Heinz Co., ranks as the fifth largest food and beverage company in
the world.
Among KHC’s brands are Kraft, Heinz, Jell-O, Kool-Aid, Maxwell House,
Oscar Mayer and Weight Watchers. The company’s investment grade ratings have
KHC has been on the lookout for an acquisition, having launched a $143
billion bid for Unilever in February 2017 that was rejected by Unilever’s board.
Despite its failed bid, KHC has made little secret of its desire to initiate a deal. It
owns roughly 26.5% of the company, and 3G Capital, with 22% ownership. KHC
reported third-quarter 2018 net income of $630.0 million or $0 .51 per share on
net sales of $6.39 billion. Adjusted net income for impairment charges and other
items was $0.78 per share, 3 cents short of analysts’ estimates. While KHC stock
has been under pressure this year, cash flow and dividend coverage remain solid.
Distributions are generally qualified and taxed at the 15%-20% rate. Buy up to
Global Blood Therapeutics is pursuing an “accelerated approval” with the FDA for
its drug Voxelotor, which is a treatment for the life-threatening disorder, Sickle
Cell Disease (SCD). There is no event more powerful to reprice a stock than an
FDA approval. On that note, the accelerated application to the FDA is a big deal,
because the bar for approval is significantly lowered for serious rare diseases
that have little-to-no treatment options. SCD fits the bill. The company is on
GBT is the third largest position in the $5 billion portfolio of the best
specialty biotech investor in the world, Joseph Edelman. He has publicly said
he thinks the company will be worth more than double its current value on an
FDA approval. And in the longer run, he thinks it could be worth four times its
current value.
Denver, Colo.-based Molson Coors Brewing was formed in the 2005 merger
of Coors Brewing Co. and Canada’s Molson. It also owns the Miller Brewing
Analysts expect 2018 revenue of $10.97 billion, down 0.3% from 2017.
Molson Coors has grown EBITDA 26.8% annually over the past five years, while
metric you can measure. Molson Coors and its predecessor organizations have
been paying dividends for more than 30 years. Annual dividends of $1.64 are not
a stretch. Molson Coors produced free cash flow per share of $8.07 over the past
12 months.
Parsippany, N.J.-based B&G Foods makes, sells and distributes shelf-stable and
frozen foods in the U.S., Canada and Puerto Rico, taking its moniker from Joseph
Bloch and Julius Guggenheimer, two pickle merchants in New York City from the
back to 1996. It owns more than 50 brands, including Cream of Wheat, Green
Earnings before interest, taxes, depreciation and amortization has been on the
rise for the past three quarters, and the company generated EBITDA of $3.91 per
share over the past year to support $1.90 in annual dividends. Meanwhile, shares of
BGS continue to trade at substantially lower valuations relative to the past five years.
Enbridge (ENB)
Market Cap: $57.7 billion Dividend Yield: 6.4%
P/E (ttm): 43.5
transports, generates and distributes energy, including crude oil, natural gas, Its
midstream network transports 28% and 20% of the continents oil and natural
gas, respectively. Ninety-six percent of its cash flow is under long-term, volume-
2020. It also is planning up to $27 billion in new projects for 2021-2025. ENB
has a strong balance sheet, and a BBB+ credit rating, tied for the highest in
the industry.
W.P. Carey is one of the largest owners of net lease properties and among the top
25 real estate investment trusts (REITs) in the MSCI U.S. REIT Index. As of the third
quarter, it owned 1,186 properties. Almost all the buildings Carey acquires have
contractual rent escalators and its weighted average lease term is 10.5 years. Carey
the U.S. and Northern and Western Europe. About 63% of the portfolio is comprised
of assets from North America (62% in the U.S.) and 35% in Europe (and 1.2% in
Australia and Japan). WPC has little exposure to U.S. retail, a sector that has been
struggling, and most rent checks come from industrial and office tenants.
from the prior-year period. Real estate net revenues were $173.4 million, up 1.3%
from $171.2 million for the 2017 third quarter. Its occupancy rate was 98.3% in
the third quarter. Year-to-date, shares are up 2.8% and I think there’s a lot more
upside to come.
Two years after its 2010 bankruptcy, Japan Airlines emerged with a clean
turnaround led by Kazuo Inamori, founder of Japan’s Kyocera Corp., who came
Newer, more efficient jets replaced the dated fleet, cargo operations were
folded into the passenger fleet, and the company changed its marketing and
While profits have averaged more than $1 billion, the stock remains weak. Trading
at only four times Ebitda, Japan Airlines shares could be ready to take off.
In business since the 1950s, KB Homes has a presence in Florida, Texas and
In recent quarters, KB Homes has produced steadily rising margins and profits per
unit. While the company has debt due in each of the upcoming years, it has plenty
of liquidity plus a recently upgraded BB- credit rating, which should allow the debt
Disney operates one of the largest diversified media companies in the U.S. and
modestly this year, as the company acquired and is integrating 21st Century
(DTC) streaming service. Disney has been a “monetization machine” (as coined by
an analyst) under the leadership of Bob Iger and I see little sign of that waning.
seems to be surviving the cord cutting wave, which saw more than 1.1 million
cable TV subscriber losses in the third quarter across the country. I’m pleased
Disney won the battle for the Fox assets and think the acquisition strengthens an
Disney should enjoy increased production and marketing scale, and the
potential. In addition, the Disney film studios have been able to churn out plenty
of winners that have dwarfed the inevitable losers, while the theme parks/resorts