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Strategies & Market Trends : Young and Older Folk Portfolio -- Ignore unavailable to you. Want to Upgrade?

To: chowder who wrote (842)	2/25/2022 11:37:40 PM
From: chowder	4 Recommendations Recommended By Menominee MinionMom&MarineWife red cardinal The Beard Read Replies (1) \| Respond to of 22054

Re: Valuations and Buy Candidates - Part II In this list I was looking for companies that are "A" Rated by Schwab and are expected to show double digit earnings growth in 2022. I want strong earnings growth because market conditions have weakened and in this environment I expect the cream to rise to the top while the others may not be able to keep pace. According to Schwab: A (Strongly Outperform): If an investor is looking to add a stock to his or her portfolio, "A" rated stocks may be the best candidates for consideration. I was also looking for "A" Rated companies with double digit earnings growth and are selling at a discount to intrinsic value using a discounted cash flow model. Every company listed below has an "A" rating and expected to show double digit earnings growth. Discounted Cash Flow and Intrinsic Value The discounted cash flow (DCF) model is a commonly used valuation method to determine a company's intrinsic value. The DCF model uses a company's free cash flow and the weighted average cost of capital (WACC). WACC accounts for the time value of money and then discounts all its future cash flow back to the present day. The weighted-average cost of capital is the expected rate of return that investors want to earn that's above the company's cost of capital. A company raises capital funding by issuing debt such as bonds and equity or stock shares. The DCF model also estimates the future revenue streams that might be received from a project or investment in a company. Ideally, the rate of return and intrinsic value should be above the company's cost of capital. The future cash flows are discounted meaning the risk-free rate of return that could be earned instead of pursuing the project or investment is factored into the equation. In other words, the return on the investment must be greater than the risk-free rate. Otherwise, the project wouldn't be worth pursuing since there might be a risk of a loss. A U.S. Treasury yield is typically used as the risk-free rate, which can also be called the discount rate. ---------------------------------- This first set of companies could be considered Strong Buys. Company .. FV Price .. Discount .. Analyst Ratings [1] ANTM .... $634.19 ..... <28%> D ... 36-6-0 AVGO .... $570.21 ...... 3% P ........ 46-10-0 GD ........ $201.88 ..... <11%> D ... 31-9-0 LOW ..... $221.31 ..... <1%> D ..... 38-8-1 MSFT ... $249.60 ..... <16%> D ... 75-1-0 UNH ..... $489.05 ..... <3%> D ..... 35-6-1 AVGO is selling at a 3% premium but given the strong analysts ratings, I placed it in group 1. Although ANTM and UNH look similar with regard to analyst ratings, ANTM has the better valuation but more importantly, the fundamentals favor ANTM. Per Jefferson Research: ANTM - Earnings Quality - Strongest Cash Flow Quality - Strong Operating Efficiency - Strongest Balance Sheet - Strong Valuation - "Least" Risk UNH - Earnings Quality - Weakest Cash Flow Quality - Weak Operating Efficiency - Strongest Balance Sheet - Weakest Valuation - "Low" Risk --------------------------------- The following companies meet the same requirements as those above ("A" rated and double digit earnings growth) except they are considered Moderate Buys as opposed to Strong Buys. It simply means there aren't enough Bullish analysts on board yet or the valuations are too high. Company .. FV Price .. Prem./Disc. .. Analyst Ratings ADP ......... $172.95 ..... 15% P ..... 5-18-4 LLY .......... $154.81 ..... 38% P ..... 24-14-0 MS ........... $163.79 ... <42%> D .. 26-18-0 PM ........... $120.16 ....<12%> D .. 13-15-0 YUM ........ $113.37 ...... 8% P ...... 19-23-1 TOL ......... $161.39 .... <67%> D .. 13-10-10 [1] Analyst Ratings: The first number represents Strong Buy or Buy, the second number represents Hold, and the third number represents Sell or Strong Sell.