Last week was a mixed one for stock markets, with the Dow Jones down 0.75%, the S&P 500 falling 0.07% and the NASDAQ gaining 1.22%. The MCSI Emerging Markets Index eked out a 0.65% rise.
Big gainers in your Bull Market Alert portfolio included B&G Foods Inc. (BGS), which shot up 8.89%, and The TJX Companies, Inc. (TJX), which gained 2.37%. Both of these positions also hit new 52-week highs.
As of Friday’s close, nine out of 10 positions are showing a profit.
This week’s Bull Market Alert recommendation is ABM Industries Incorporated (ABM) — yet another low-profile small-cap stock with steady performance and plenty of upside potential.
Founded in 1909 and headquartered in New York, New York, ABM Industries Incorporated (ABM) is in the distinctly unsexy business of providing carpet and floor cleaning and window washing for airports, commercial office buildings, health facilities, stadiums and arenas. It boasts revenues of approximately $4.9 billion and has over 100,000 employees in 300 offices throughout the world.
The stock has already had a solid run in 2016, and here’s why I expect that to continue in the months ahead.
First, ABM metrics have been popping up on a lot of value investors’ investment screens. The company’s price/sales ratio is only 0.39 compared to the industry average of 1.25. It is a similar story with the price/cash flow metric. Here, ABM comes in at 11.86 compared with an industry average of 25.80.
So no matter how you slice and dice it, ABM is a severely undervalued stock.
Second, ABM has a history of underpromising and overdelivering on its earnings. Two quarters ago, ABM was expected to earn 26 cents per share. It beat these estimates handily with earnings of 38 cents per share — a beat of 46.2%. Last quarter, ABM was expected to earn 28 cents per share. Actual earnings of 31 cents per share represented a 10.7% positive surprise.
Also, recent estimates have been moving higher for ABM Industries, suggesting that analysts have recently become more bullish on the company’s earnings prospects. The company is expected to announce next quarter’s earnings on Sept. 7.
Finally, ABM has emerged in no fewer than 10 value and low-volatility small-cap investment strategies that I track. This again shows that the stock is on the radar screens of a lot of small-cap investors as a leading choice.
So buy ABM Industries Incorporated (ABM) at market today, and place your stop at $33.50.
I am holding off on recommending options on this position for now.
Portfolio Update
The TJX Companies, Inc. (TJX) gained 2.37% last week as the broader indexes moved undecidedly sideways. Continuing a tremendous bull run, TJX moved higher for yet another week and pushed to a new 52-week high. TJX will report earnings on Aug. 16, and with 15 analysts currently positive on the stock, the report could be quite good. Estimates call for $0.81 in earnings per share (EPS) on $7.85 billion in revenue. TJX is a BUY.
Avista Corporation (AVA) dipped 1.54%. Reports show that Avista’s Oregon customer base could see an estimated 7.4% decrease in its natural gas rates in November. However, Avista does not mark up its natural gas costs and will, therefore, see no changes to its bottom line. Avista will report earnings this week on Aug. 3 before markets open. Analysts’ estimates for AVA show a consensus EPS of $0.43. AVA is a BUY.
Allete, Inc. (ALE) moved 1.37% lower. This energy company’s board of directors declared a quarterly dividend of $0.52 last week. This dividend is payable on Sept. 1 to shareholders of record at the close on Aug 15. ALE will also report earnings on Aug. 3 this week before markets open, and the consensus estimate calls for $0.51 EPS. ALE is a BUY.
Drew Industries Incorporated (DW) gained 1.22%, bringing total gains to date (from last Friday’s close) to nearly 17%. This stellar performer continued to reap gains in your portfolio for yet another week to hit a new 52-week high. DW is just one more position in your portfolio that will announce earnings this week, reporting on Aug. 4, before markets open. DW is a BUY.
Spire, Inc. (SR) closed the week nearly flat, dipping just 0.32%. In what will be a big earnings week for your portfolio, SR will also report earnings on Aug. 3 before markets open. Spire’s board of directors announced a quarterly dividend last Thursday of $0.49 per share, payable on Oct. 4, to shareholders of record on Sept. 12. The board’s collective remarks included the following insightful fact, “We have continuously paid a cash dividend since 1946, with 2016 marking the 13th consecutive year of increasing the dividend on an annualized basis.” SR is a BUY.
B&G Foods Inc. (BGS) shot up 8.89% for the week after reporting positive earning on July 28, resulting in a definitive new 52-week high. B&G Foods reported second quarter EPS of $0.57 vs. an estimated $0.46 on revenue of $306.4 million vs. a $316 million estimate. BGS is now well above its 50-day moving average, the Bull Market Alert’s primary buy/hold indicator, and is a BUY.
NorthWestern Corporation (NWE) dipped 1.44% for its opening week in the Bull Market Alert portfolio. Quarterly sales rose from $270.6 million to $293.1 million. NWE also reaffirmed its 2016 guidance of $3.20-$3.35 per diluted share. NWE is a BUY.
Sincerely,
Nicholas A. Vardy
