thestreet’€¦ · thestreet quant rating grade: a+ (buy) what they do: starbucks is a global...

TheStreet’s Divided Dozen: Six Buys and Six Sells for the Market Right Now

Number 1 Number 2 Number 3


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When investors turn their attention to the most actively traded and popular stocks, they expect to find the best of the best. Why else would these stocks be considered some of the most popular on the market? And in some cases, they’re right. But when it comes to comparing apples to apples for a dozen of the most popular stocks traded on the market right now, nothing could be further from the truth. TheStreet Quant Rating stock algorithm reveals a great divide between 12 of the most actively traded U.S. shares. One group of buy-rated stocks are the kind of highly-caffeinated, high-flying runners around which to build a portfolio. The other half-dozen are lackluster and our ratings algorithm indicates they may be losers over the next year.

As the old saying goes, “Let your winners run and cut your losers short.” If you do not yet own these buy-rated stocks, it is not too late to add them to your portfolio. On the other hand, if you own any of these sell-rated stocks, consider nixing them from your holdings today.

Overview of the Sell-Rated Stocks

Ticker Symbol

LNKD

TSLA

NEM

P

ABX

JCP

Growth Points

4.5

1.5

0.5

1

0.5

0.5

Total Return Points

3.5

5

0.5

3.5

0.5

0.5

Efficiency Points

2.5

0.5

1.5

0.5

1

1

Price Volatility Points

4

4

0.5

3

0.5

0.5

Solvency Points

4.5

2

4

1.5

2

1.5

Income Points

0.5

0.5

5

0.5

5

0.5

Total Points

19.5

13.5

12

10

9.5

4.5

Overall Ratings Grade

D+

D

D+

D

D

D

Overview of the Buy-Rated Stocks

Ticker Symbol

SBUX

MA

QCOM

NKE

BA

LOW

Growth Points

5

5

5

4.5

4.5

5

Total Return Points

5

5

4.5

5

4.5

4.5

Efficiency Points

5

5

5

4.5

5

4

Price Volatility Points

5

5

4.5

5

4.5

4

Solvency Points

5

5

5

5

5

4.5

Income Points

3.5

3

4

3.5

3.5

3.5

Total Points

28.5

28

28

27.5

27

25.5

Overall Ratings Grade

A+

A+

A+

A+

A+

A+

The Buy-Rated Stocks






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The Company: Starbucks Corporation (SBUX)

TheStreet Quant Rating Grade: A+ (BUY)

What They Do:Starbucks is a global coffee company and coffeehouse chain, which engages in the purchase, roasting and sale of whole

bean coffee. Since its inception forty years ago, the company’s product range has diversified to include tea products,

bottled beverages, complementary food items and Starbucks-branded merchandise.

In addition, Starbucks produces and sells ready-to-drink beverages, including bottled beverages, espresso drinks, chilled

cup coffees, and ice creams. As of July 1, 2012, the company operates 17,651 stores worldwide. Starbucks was founded

in 1985 and is based in Seattle, Washington.

Our Quantitative Briefing: Starbucks has improved earnings per

share by 27.9% in the most recent quarter

compared to the same quarter a year

ago. The company has demonstrated a

pattern of positive earnings per share

growth over the past two years. We feel

this trend will continue. During the past

fiscal year, Starbucks increased its bottom

line, earning $1.79 vs. $1.62 in the

prior year. This year, the market expects

an improvement in earnings ($2.23 vs.

$1.79).

Net income growth over the year-ago

quarter has exceeded the S&P 500

and greatly outperformed the Hotels,

Restaurants & Leisure industry average.

Net income increased by 25.5%

compared with the same quarter one year

prior, rising to $417.8 million from $332.9 million.






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The Company: MasterCard Incorporated (MA)


What They Do:MasterCard is a multinational financial services institution. Its primary business is to act as an intermediary credit processor

between banks and the consumers using the MasterCard brand to make purchases. MasterCard manages and licenses

payment card brands, including MasterCard, MasterCard Electronic, Maestro, and Cirrus. The company’s payment

programs, which are facilitated through its brands, include consumer credit, debit and prepaid programs, and commercial

and contactless payment solutions. As of December 31, 2008, it served approximately 23,000 financial institutions. The

company was founded in 1966 and is headquartered in Purchase, New York.

Our Quantitative Briefing: MasterCard is a multinational financial

services institution. Its primary business is

to act as an intermediary credit processor

between banks and the consumers

using the MasterCard brand to make

purchases. MasterCard manages and

licenses payment card brands, including

MasterCard, MasterCard Electronic,

Maestro, and Cirrus. The company’s

payment programs, which are facilitated

through its brands, include consumer

credit, debit and prepaid programs, and

commercial and contactless payment

solutions. As of December 31, 2008, it

served approximately 23,000 financial

institutions. The company was founded in

1966 and is headquartered in Purchase,

New York.






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The Company: Qualcomm Incorporated (QCOM)


What They Do:Qualcomm, a global semiconductor business, engages in the development, design, manufacture, and marketing of digital

wireless telecommunications products and services. Its separate divisions work to develop and supply technologies to

support wireless voice and data communications and GPS products, and grant licenses for the use of its intellectual

property. Qualcomm primarily operates in China, South Korea, Taiwan, Japan, and the United States. The company was

founded in 1985 and is based in San Diego, California.

Our Quantitative Briefing: Qualcomm has improved earnings per

share by 30.4% in the most recent quarter

compared to the same quarter a year ago.

The company has demonstrated a pattern

of positive earnings per share growth

over the past two years. We feel this

trend will continue. During the past fiscal

year, Qualcomm increased its bottom

line, earning $3.06 vs. $2.71 in the


an improvement in earnings ($4.54 vs.

$3.06).

Net income growth from the same quarter

one year ago has greatly exceeded

the S&P 500, but is less than the

Communications Equipment industry

average. Net income increased 30.9% to

$1.6 billion from $1.2 billion in the year-

ago quarter.






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The Company: Nike Incorporated (NKE)


What They Do:Nike designs, develops, and markets footwear, apparel, equipment, and accessory products for men, women, and children.

The company offers footwear for outdoor recreation, sports-specific needs, and cosmetic use as well as sports apparel

and accessories, sports-inspired lifestyle apparel, and athletic bags and accessory items. Further, it offers performance

equipment, including bags, socks, sport balls, eyewear, timepieces, electronic devices, bats, gloves, protective equipment,

golf clubs, and other equipment designed for sports activities under the NIKE brand name. The company sells its products

primarily through retail stores and e-commerce, retail accounts, independent distributors, franchisees, and licensees. As

of May 31, 2010, it operated 346 retail stores in the United States and 343 retail stores internationally. The company was

founded in 1964 and is headquartered in Beaverton, Oregon.

Our Quantitative Briefing: Nike has improved earnings per share

by 35.4% in the most recent quarter



of positive earnings per share growth over

the past two years. We feel this trend will

continue. During the past fiscal year, Nike

increased its bottom line, earning $2.70

vs. $2.42 in the prior year. This year,

the market expects an improvement in

earnings ($3.05 vs. $2.70).

Net income growth from the year-ago

quarter has significantly exceeded the

S&P 500 and the Textiles, Apparel &

Luxury Goods industry average. Net

income increased 37.6% to $780 million

from $567 million in the year-ago quarter.






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The Company: Boeing (BA)


What They Do:Boeing, the world’s leading aerospace company, designs, develops, manufactures, sells, and supports commercial

jetliners, military aircraft, satellites, missile defense, human space flight, and launch systems and services worldwide. The

Commercial Airplanes segment develops, produces, and markets commercial jet aircraft, and provides related support

services to the commercial airline industry and government customers. The Boeing Military Aircraft segment engages in the

research, development, production, and modification of military aircraft and precision engagement, and mobility products

and services. The Network & Space Systems segment is involved in products and services to assist customers transform

their operations through network integration, intelligence and surveillance systems, communications, architectures, and

space exploration. Boeing’s Space Systems segment acts as the prime contractor for the International Space Station. The

company also engages in engineering, operations, and technology activities. Boeing was founded in 1916 and is based in

Chicago, Illinois.

Our Quantitative Briefing: Boeing has improved earnings per share by 11% in the most recent quarter compared to the same quarter a year ago. Though it has reported somewhat volatile earnings recently, we feel Boeing is poised for EPS growth in the coming year. During the past fiscal year, Boeing reported lower earnings of $5.12 vs. $5.32 in the prior year. This year, the market expects an improvement in earnings ($6.52 vs. $5.12).

Net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than the Aerospace & Defense industry average. Net income increased 12.5% to $1.09 billion from $967 million in the year-ago quarter. Boeing’s revenue growth has slightly outpaced the industry average of 8.6%, up

9% on the year-ago quarter. Growth in the company’s revenue appears to have helped boost earnings per share.






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The Company: Lowe’s Companies Incorporated (LOW)


What They Do:Lowe’s operates as a home improvement retailer in the United States and Canada. The company offers a range of products

for home decorating, maintenance, repair, remodeling, and property maintenance. The company also offers installation

services through independent contractors in various product categories. Lowe’s serves DIY homeowners and renters

and commercial business customers, who work in construction, repair/remodel, commercial and residential property

management, or business maintenance professions. Lowe’s operates more than 1,825 stores in the United States, Canada

and Mexico. The company also offers its products online through electronic product catalogs and Lowes.com. Lowe’s was

founded in 1952 and is based in Mooresville, North Carolina.

Our Quantitative Briefing: Powered by strong earnings growth of

37.5%, this stock has surged by 57.86%

over the past year, outperforming the

S&P 500 Index during the same period.

Looking ahead, the stock’s sharp rise over

the last year has already driven it to a level

relatively expensive compared to the rest

of its industry. We feel, however, that other

strengths this company displays justify

higher price levels.

Lowe’s has improved earnings per share

by 37.5% in the most recent quarter



of positive earnings per share growth over

the past two years. We feel this trend

will continue. During the past fiscal year,

Lowe’s increased its bottom line, earning

$1.68 vs. $1.42 in the prior year. This year, the market expects an improvement in earnings ($2.19 vs. $1.68).

The Sell-Rated Stocks






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The Company: LinkedIn Corporation (LNKD)

TheStreet Quant Rating Grade: D+ (SELL)

What They Do:LinkedIn operates an online professional network, which allows members to create, manage, and share their professional

identity online, build and engage with their professional networks, and find business opportunities. In addition, it offers

hiring solutions for enterprises and professional organizations to find, contact, and hire qualified candidates. The company

also provides marketing solutions, such as LinkedIn Ads, a self-service platform that enable advertisers to build and target

their advertisement to its members LinkedIn was founded in 2002 and is headquartered in Mountain View, California.

Our Quantitative Briefing: LinkedIn has experienced an impressive

jump in stock price over the past two

years. Despite positive price performance,

LinkedIn has demonstrated higher volatility

than other stocks in its industry. More

importantly, the stock’s downside risk is

slightly higher than that of the industry. The

beta of 1.73 indicates LinkedIn is quite

sensitive to the movements of the overall

market.

The higher P/E ratio for LinkedIn may

signify a more expensive stock or higher

growth expectations compared to its

peers.

The return on equity has improved slightly

compared to the year-ago quarter. This

can be construed as a modest strength

in the organization. In comparison to other companies in the Internet Software & Services industry and the overall market,

LinkedIn’s return on equity is significantly below the industry average and S&P 500.






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The Company: Tesla Motors Incorporated (TSLA)

TheStreet Quant Rating Grade: D (SELL)

What They Do:Tesla engages in the design, manufacture, and sale of electric vehicles and advanced electric vehicle power train

components. The company was incorporated in 2003 and is headquartered in Palo Alto, California with a showroom in

Copenhagen.

Our Quantitative Briefing: The gross profit margin for Tesla is

currently lower than desired, coming in

at 30.28%, lower than the same quarter

a year ago. Additionally, the net profit

margin of -7.52% is significantly below

the industry average.

Tesla’s higher price-to-book ratio makes

it less attractive to investors seeking

stocks with lower market values per dollar

of equity on the balance sheet. TSLA

is trading at a significant premium to its

peers.






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The Company: Newmont Mining Corporation (NEM)

TheStreet Quant Rating Grade: D+ (SELL)

What They Do:Newmont Mining engages in the acquisition, exploration, and production of gold and copper properties. It operates in the

United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand, and Mexico. As of December 31, 2012, Newmont

had gold reserves of approximately 99.2 million equity ounces and an aggregate land position of 29,400 square miles. The

company was founded in 1916 and is headquartered in Greenwood Village, Colorado.

Our Quantitative Briefing: Newmont Mining has experienced a steep

decline in earnings per share in the most

recent quarter. The company has reported

somewhat volatile earnings recently and

we feel it is likely to report a decline

in earnings in the coming year. During

the past fiscal year, Newmont Mining

increased its bottom line, earning $3.78

vs. $1.03 in the prior year. For the next

year, the market is expecting earnings to

contract 52.8% ($1.79 vs. $3.78).

The company, on the basis of change in

net income from the year-ago quarter, has

significantly underperformed compared

with the S&P 500 and Metals & Mining

industry. The net income has significantly

decreased, down 823.6% to -$2 billion

from $279 million in the same quarter a

year ago.






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The Company: Pandora Media Incorporated (P)


What They Do:Pandora provides Internet radio services in the United States. The company allows listeners access to unlimited hours of

free music and comedy free-of-charge or through its paid subscription service, Pandora One. As of January 31, 2013, the

company had approximately 175 million registered users and 65.6 million active users. Pandora was founded in 2000 and

is headquartered in Oakland, California.

Our Quantitative Briefing: Pandora’s earnings per share declined

33.3% in the most recent quarter

compared to the same quarter a year

ago. The company has reported a trend

of declining earnings per share over the

past two years. However, the consensus

estimate suggests this trend should

reverse in the coming year. During the

past fiscal year, Pandora reported poor

results of -23 cents vs. -10 cents in the


an improvement in earnings (3 cents vs.

-23 cents).

On the basis of change in net income

from the same quarter a year ago, the

company has significantly underperformed

compared with the S&P 500 and Internet

Software & Services industry. Net loss

has significantly increased when compared with the same quarter one year ago, rising to -$7.8 million from -$5.4 million.






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The Company: Barrick Gold Corporation (ABX)


What They Do:Barrick Gold Corporation engages primarily in the production and sale of gold and related activities such as international

exploration and mine development. The company has a portfolio of 26 operating mines and a pipeline of projects located

across North America, South America, Australia, and Africa. It also produces copper and holds interests in oil and gas

properties located in Canada. In addition, its products include copper cathode, silver, nickel, and platinum. The company

was founded in 1983 and is based in Toronto, Canada.

Our Quantitative Briefing: Barrick Gold has experienced a steep

decline in earnings per share in the

most recent quarter compared to its

performance in the year-ago quarter.

The company has reported a trend of

declining earnings per share over the

past two years. During the past fiscal

year, Barrick Gold swung to a loss,

reporting -60 cents vs. $4.48 in the prior

year.

On the basis of change in net

income from the same quarter a year

ago, the company has significantly

underperformed compared with the

S&P 500 and Metals & Mining industry.

Net income has significantly decreased

compared with the same quarter a year

ago, falling to -$8.6 billion to $787

million.






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The Company: J.C. Penney Company (JCP)


What They Do:J. C. Penney Company, Inc. operates a network of department stores in the United States and Puerto Rico. It sells apparel

and footwear, accessories, jewelry, beauty products, and home furnishings. The company also provides various services,

including optical, portrait photography, and custom decorating. It sells products through its 1,100 department stores, as

well as online at jcp.com. The company was founded in 1902 and is based in Plano, Texas.

Our Quantitative Briefing: J.C. Penney has experienced a steep

decline in earnings per share in the

most recent quarter compared to its

performance in the same quarter a year

ago. Earnings per share have declined

over the last two years. We anticipate this

will continue in the coming year. During

the past fiscal year, J.C. Penney reported

poor results of -$4.49 vs. -$0.73 in the

prior year. For the next year, the market is

expecting a 33.3% contraction in earnings

(-$5.99 vs. -$4.49).

On the basis of change in net income

from the same quarter a year ago, the

company has significantly underperformed

compared with the S&P 500 and

Multiline Retail industry. Net income has

significantly decreased compared to the

same quarter one year ago, falling to -$586 million from -$147 million.

thestreet’€¦ · thestreet quant rating grade: a+ (buy) what they do: starbucks is a global...

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