By this simple metric, stocks are a 'screaming buy'

To investors who fret about historically high market valuations, Jonathan Golub has a simple message: You're missing the point.

"When people say 'Oh, well stocks look cheap or expensive compared to history,' it doesn't mean anything," said Golub, chief U.S. market strategist at RBC Capital Markets.

The fact of the matter is, the value of stocks has to be compared to other options the investors may choose from. The less one can make in bonds, the less one needs to make in stocks—or, stated differently, the less money that companies need to earn and distribute in order to attract the same amount of investment.

"It's so simple: The value of a stock are its discounted cash flows. And when the discount rate [the rate at which future cash flows must be discounted] falls, the value of a stock goes up," Golub said Thursday in a "Trading Nation" interview.

"When you have a 10-year bond yield at 2.2 percent, you should have a valuation of stocks with a P/E over 20," he said.

The math here is strikingly simple. Golub values the market simply by dividing S&P 500 earnings by the average yield on Baa-rated corporate bonds—currently around 4.7 percent. By dividing 1 by 0.047, Golub arrives at his "justified" earnings multiplier of 21.

Golub's point is that rather than being rich, the current P/E ratio of 17 is actually below the 20+ ratio at which the S&P deserves to be trading.

"Stocks on that metric look like a screaming buy," he concludes.

On the other hand, Golub's measure might be a bit too simplistic. Andrew Burkly, head of institutional portfolio strategy at Oppenheimer, calls the approach "a good start," but adds that a risk premium has to be added to the Baa-rated bond yield to arrive at a more sensible discount rate.

Though there is some credit risk assumed in Baa yields, "the fact is, you'd still rather own a Baa-rated bond than a stock if they're going to return the same amount," which tells Burkly that the yield on its own makes for an inappropriate discount rate.

By Alex Rosenberg

Source: http://www.cnbc.com/id/102718012

Incyte, Puma may surge on drug news: Expert

Incyte stands to benefit from unveiling data on its cancer treatments at a key conference in the coming days, a biotechnology analyst said Friday.

Many big-name biotech and pharmaceutical companies will present drug developments at the American Society of Clinical Oncologyannual meeting, which runs until Tuesday. Many treatments will focus on immuno-oncology, which directs the natural immune system to fight cancer cells.

"A lot of innovation" has taken place in that category of cancer therapy, said Eric Schmidt, a biotech analyst at Cowen and Co. He noted that Incyte may play a huge role in the treatment.

The company makes a product that can combine with PD-1, or programmed cell death, treatments produced by larger companies likeBristol Myers Squibb, Merck and AstraZeneca, Schmidt noted.

"Of all the stocks we're following, Incyte's probably gonna be my top nominee to make it there with the PD-1s," he said in a CNBC "Power Lunch" interview.

Read MoreBiotech investors up big amid bubble talk

Incyte shares have jumped more than 50 percent higher this year.

He also outlined his expectations for Puma Biotechnology's "highly touted" breast cancer treatment. Puma shares plummeted this month when the company unveiled slightly disappointing Phase 3 results for its experimental drug.

Puma will present full data at the conference. Schmidt noted that the drug was "successful" based on early trials and "ought to be approved on that basis."

Jacob Pramuk

Source: http://www.cnbc.com/id/102718282

3 Medical Device Stocks to Buy Right Now

 

NEW YORK (TheStreet) -- With the Supreme Court set to decide the fate of Affordable Health Care Act in June 2015, we decided to look at the medical devices industry, which has been an above-trend growing sector generating substantial exports for the economy.

As a sector, it has been growing at 5% per year from 1997 to 2013, compared to 4% for the rest of the economy. The largest component, surgical appliance and supplies manufacturing, grew at 6%, and ophthalmic goods manufacturing grew at 8% per year in the same period. Moreover, the sector is considered recession-proof, as customers don't tend to buy fewer medical supplies during economic downturns.

So what are the best health care equipment companies investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which health care equipment companies made the list. And when you're done, be sure to read about which biotech companies to buy now. Year-to-date returns are based on May 22, 2015, closing prices. The highest-rated stock appears last.STJ data by YCharts
3. St. Jude Medical, Inc. (STJ - Get Report) 
Rating: A 
Market Cap: $21 billion 
Year-to-date return: 14.2% 

St. Jude Medical, Inc., together with its subsidiaries, develops, manufactures and distributes cardiovascular medical devices for cardiac rhythm management, cardiovascular, and atrial fibrillation therapy areas worldwide.

"We rate ST JUDE MEDICAL INC (STJ) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, notable return on equity, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
• ST JUDE MEDICAL INC has improved earnings per share by 5.8% 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 that this trend should continue. During the past fiscal year, ST JUDE MEDICAL INC increased its bottom line by earning $3.45 versus $2.50 in the prior year. This year, the market expects an improvement in earnings ($3.95 versus $3.45).
• Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Health Care Equipment & Supplies industry and the overall market, ST JUDE MEDICAL INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
• The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that STJ's debt-to-equity ratio is low, the quick ratio, which is currently 0.69, displays a potential problem in covering short-term cash needs.

• You can view the full analysis from the report here: STJ Ratings Report

Must Read: 3 Airline Stocks to Buy Right Now

MDT data by YCharts
2. Medtronic plc (MDT - Get Report) 
Rating: A 
Market Cap: $111 billion 
Year-to-date return: 7.8% 

Medtronic plc, a healthcare solutions company, provides medical technologies, services, and solutions worldwide. It operates through three segments: Cardiac and Vascular Group, Restorative Therapies Group, and Diabetes Group.

"We rate MEDTRONIC PLC (MDT) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• MDT's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 3.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
• Powered by its strong earnings growth of 30.66% and other important driving factors, this stock has surged by 25.73% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, MDT should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
• Net operating cash flow has slightly increased to $1,767.00 million or 9.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.82%.
• MEDTRONIC PLC has improved earnings per share by 30.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MEDTRONIC PLC reported lower earnings of $3.01 versus $3.38 in the prior year. This year, the market expects an improvement in earnings ($4.39 versus $3.01).

• You can view the full analysis from the report here: MDT Ratings Report

Must Read: 3 Best Biotech Stocks to Add to Your Portfolio

Forget Priceline: Grab These 3 Momentum Stocks Instead

Priceline (PCLN - Analyst Report) has charmed us for a long time, guiding conservatively and consistently beating estimates quarter upon quarter. As a result, investors piled on, sending prices higher and higher. In fact, in the month before its first-quarter earnings announcement, share prices rode up close to 9% -- not a mean feat for a stock that trades at over a thousand bucks.

The best way to do that would have been through strong growth in outbound travel from the U.S., which has gotten cheaper due to the currency effect. But this didn’t happen and the sluggish domestic business couldn’t be ignored any longer.      So what changed? At the risk of beating a dead horse, we have to say it was the stronger dollar. Quite honestly, Priceline did everything the way it always has (ex-FX international bookings growth of 29% is nothing to scoff at) and it also beat estimates for the quarter. But management could no longer explain away the fact that they didn’t hedge the FX risk.

So shares lost momentum right away, earning Priceline a Zacks Momentum Style Score of ‘F.’

So What's a Momentum Style Score?

As evident from the Priceline story, stocks can take a sudden turn for the good (or bad), making stock picking a risky game. Every good stock also has its bad day, which further adds to the risk. At the same time, this volatility can be exploited to make significant profits, which is where the Momentum Style Score enters the picture.

The Momentum Style Score is an indication of the time to buy a stock to benefit from rising share prices. The highest score is an A, so getting in on an A and out on a B or C could be a strategy for short term gains. For a more in-depth understanding, check out our Style Score System.

But investors should bear in mind that this is a speculative strategy and not meant for the weak-of-heart.

That said, we pair the momentum score with a Zacks Rank of #1 (Strong Buy) or #2 (Buy), which as you know indicates stocks with high chances of outperforming the market over the next 1-3 months. One of the main factors driving the Zacks Rank is estimate revisions, so stocks with high ranks as well as high momentum scores have even greater chances of short-term appreciation.   

Here, we’ve picked out a few stocks based primarily on these two factors-

Chinese travel company Ctrip offers hotel accommodations, airline tickets and package tours. The company’s brand value has increased in recent years as it tapped into the growing middle class to sell leisure travel. It also caters to business customers.Ctrip.com International Ltd. (CTRP -Snapshot Report)

Ctrip has a Zacks Rank #2 and a Momentum Style Score ‘A.’ The company has been topping expectations in recent history with the last four quarters averaging 19.3%. What’s more, estimates for 2015 and 2016 have jumped a respective 136.4% and 30.3% in the last seven days.

The shares jumped 13% over the past month (10%+ in the last five days following better-than-expected results).

Stamps.com (STMP - Snapshot Report)

The company operates an online mailing and shipping business across the U.S. It helps individuals, and small and medium businesses select carriers, print shipping labels, schedule pickup, track packages and manage and account for shipping costs.

Stamps.com has a Zacks Rank #2 and Momentum Style Score ‘A.’ The company has consistently topped estimates with the last four quarters averaging 35.2%. Moreover, 2015 and 2016 estimates are trending up.

Shares are up 23% in the last three months. The first driver was its acquisition of Newell Rubbermaid subsidiary Endicia, which offers high-volume shipping technologies for the U.S. Postal service at March-end. The second driver was strong earnings results in May.

Blue Nile Inc. (NILE - Snapshot Report)

Blue Nile is the leading seller of online diamonds and jewelry made out of precious metals, gems, diamonds and pearls. The company’s website includes independently certified diamonds and jewelry. 

Blue Nile also carries a Zacks Rank #2 and Momentum Style Score ‘A.’ Its estimate surprise history hasn’t been too great although in the last quarter it beat by a strong 25.0%. Earnings estimates are edging up.

Shares just started trading up (1.3% in the last week).

by Sejuti Banerjea 

Source: http://www.zacks.com/stock/news/175822/forget-priceline-grab-these-3-momentum-stocks-instead

Skyworks Solutions (SWKS) Stock Gains After New Switch Announcements

NEW YORK (TheStreet) -- Shares of Skyworks Solutions (SWKS - Get Report) were gaining 4.7% to $102.13 Monday after the analog semiconductor maker announced a new family of switches for Internet of Things applications.

Skyworks Solutions said it expanded its portfolio of RF switches with a suite of analog control IC for Internet of Things applications including the connected home and smart lighting. The new switches can support high data rates and broad frequency ranges, and can operate at elevated temperatures which make them suited for embedded smart energy and lighting applications.

"The introduction of our newest devices reflects Skyworks' commitment to delivering the broadest, highest volume RF switch portfolio in the industry with unmatched product quality, customer support and the best product development pipeline," David Stasey, vice president and general manager of Analog Solutions for Skyworks said. "Our solutions continue to enable some of the fastest growing Internet of Things applications as the world becomes more connected."

TheStreet Ratings team rates SKYWORKS SOLUTIONS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate SKYWORKS SOLUTIONS INC (SWKS) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, solid stock price performance and impressive record of earnings per share growth. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• SWKS's very impressive revenue growth greatly exceeded the industry average of 0.0%. Since the same quarter one year prior, revenues leaped by 58.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
• SWKS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.46, which clearly demonstrates the ability to cover short-term cash needs.
• Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, SKYWORKS SOLUTIONS INC's return on equity exceeds that of both the industry average and the S&P 500.
• Powered by its strong earnings growth of 112.50% and other important driving factors, this stock has surged by 134.92% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, SWKS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
• SKYWORKS SOLUTIONS INC reported significant earnings per share improvement 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 that this trend should continue. During the past fiscal year, SKYWORKS SOLUTIONS INC increased its bottom line by earning $2.37 versus $1.44 in the prior year. This year, the market expects an improvement in earnings ($5.12 versus $2.37).
• You can view the full analysis from the report here: SWKS Ratings Report
• By Shawn Ingram

4 Big Stocks Getting Big Attention -- and How to Trade Them

BALTIMORE (Stockpickr) -- Put down the 10-K filings and the stock screeners. It's time to take a break from the traditional methods of generating investment ideas. Instead, let the crowd do it for you.

From hedge funds to individual investors, scores of market participants are turning to social media to figure out which stocks are worth watching. It's a concept that's known as "crowdsourcing," and it uses the masses to identify emerging trends in the market.

Must Read: Warren Buffett's Top 10 Dividend Stocks

Crowdsourcing has long been a popular tool for the advertising industry, but it also makes a lot of sense as an investment tool. After all, the market is completely driven by the supply and demand, so it can be valuable to see what names are trending among the crowd.

While some fund managers are already trying to leverage social media resources like Twitter to find algorithmic trading opportunities, for most investors, crowdsourcing works best as a starting point for investors who want a starting point in their analysis.

Today, we'll leverage the power of the crowd to take a look at some of the most active stocks on the market today.

Must Read: 5 Stocks Insiders Love Right Now

DuPont

Nearest Resistance: $70.50
Nearest Support: $64
Catalyst: Activist Defeat

Chemical maker DuPont  (DD - Get Report) is down more than 6.5% following a shareholder vote that defeated a bid from activist investor Trian Fund Management to win a board seat. Trian's goal has been to break apart DuPont in an effort to cut approximately $4 billion in costs from the firm. Today's vote results mean that the rest of DuPont's investors don't agree with that strategy.

From a technical standpoint, DuPont has been looking toxic for a little while now, but today's big drop could be the trigger for a swift downside move. Shares are testing a breakdown below key support at $70.50 in today's session.

Must Read: 10 Stocks Carl Icahn Is Buying

Danaher

Nearest Resistance: $88
Nearest Support: $82
Catalyst: Pall Acquisition

Industrial conglomerate Danaher  (DHR - Get Report) is up 2% on big volume this afternoon, following news that the firm was buying filtration and purification stock Pall (PLL - Get Report) in a deal worth $13.8 billion. The deal is Danaher's biggest, and it will split DHR into two separate publicly traded firms. DHR is splitting apart in a move to unlock more value for shareholders.

Technically, shares are very close to breaking out above resistance at $88. While shares started Wednesday's trading session above that high water mark, they didn't stay at those highs. Look for a close above $88 resistance as a signal that DHR is heading higher this summer.

Must Read: 5 Rocket Stocks Ready for Blastoff

SunEdison

Nearest Resistance: $29
Nearest Support: $26
Catalyst: Technical Setup

$7.6 billion solar firm SunEdison  (SUNE - Get Report) may be one of Wall Street's most-hated large stocks, but the price action has been pretty hard to argue with lately. Shares are catching a big-volume move this afternoon, spurred higher by a test of multi-year highs up at $29.

The uptrend in SUNE has been very orderly all year long, and that's unlikely to change here. Buy the dips in SunEdison.

Must Read: 5 Stocks Set to Soar on Bullish Earnings

Micron Technology

Nearest Resistance: $29.50
Nearest Support: $25
Catalyst: Market Growth

Flash memory maker Micron Technology  (MU - Get Report) is getting a small jolt this afternoon, after a report from Inotera Memories reported that it expects growth in demand for DRAM products to increase in the third quarter of 2015. Micron owns a large equity stake in Inotera, as well as access to the firm's manufacturing capacity.

Still, Micron hasn't been looking so hot lately. While today's bounce comes on a test of an important support level at $27, the downtrend is still very much intact in MU right now, and lower ground

By Jonas Elmerraji

Source: http://www.thestreet.com/story/13150336/1/4-big-stocks-getting-big-attention--and-how-to-trade-them.html?kval=dontmiss