Zacks Bull and Bear of the Day Highlights: Thoratec, TECO Energy, Philip Morris, Amazon and Chipotle
CHICAGO, Oct. 10, 2012 /PRNewswire/ -- Zacks Equity Research highlights Thoratec Corporation (Nasdaq: THOR) as the Bull of the Day and TECO Energy, Inc. (NYSE: TE) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Philip Morris (NYSE: PM), Amazon (Nasdaq: AMZN) and Chipotle (NYSE: CMG).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We upgrade our recommendation for Thoratec Corporation (Nasdaq: THOR) to Outperform. HeartMate II units rose 22% in the six months ending June 30, 2012 wrapping up a robust half-year. Its competitor, HeartWare, has filed a PMA for a similar device which is not expected to be launched until 2015.
We believe that products such as HeartMate II will account for the major part of growth in the Ventricular Assist Device (VAD) market. Also, the company continues to do well in overseas markets despite economic turmoil in Europe.
The company recently raised guidance for 2012 following its results in the second quarter. We upgrade our recommendation on the stock with a price target of $44.00, based on a P/E of 29.3x our 2012 EPS estimate.
We have downgraded our recommendation on TECO Energy, Inc. (NYSE: TE) to Underperform from Neutral, primarily due to stringent federal regulations related to underground mining operations and waste management, over-reliance on weather patterns, volatile commodity prices and unsold tons of coal at TECO Coal.
In addition, chances of elimination of the provision for tax deductions of coal mines and other hard minerals are expected to negatively affect the company's forthcoming financial performance in the future. In the state of Florida, regulators are going to implement new Green House Gas (GHG) emissions rules. Tampa Electric's conventional coal-fired Big Bend units do not have the required technology to remove carbon dioxide.
TECO Energy's current trailing 12-month earnings multiple is 14.2x, compared with the 20.8x average for the peer group and 14.8x for the S&P 500. Our target price of $16.00 reflects a P/E multiple of 13.6x based on 2012 earnings per share.
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Are You Stuck with Your Investing Style?
Idefinitely consider myself to be a value investor. I shun growth stocks and instead zero-in on those with decent yields, low amounts of debt, and reasonable key ratios such as Price-to-Earnings, Price-to-Book, and Price-to-Cash Flow.
My investing screens rarely allow for stocks that have PEs above 20, those with high debt, or upstart firms that aren't currently profitable. Of course there are some exceptions to this rule with a small portion of my portfolio, far and wide my investment lineup consists of 'boring' stocks like Philip Morris (NYSE: PM), for example.
Yet, deep down I know that I am certainly missing out on high flyers with this strategy. Although I definitely like Amazon (Nasdaq: AMZN) and have thought about Chipotle (NYSE: CMG)in years past, I simply cannot justify paying for the growth that is supposedly baked into these securities.
Currently, the forward PE that we are showing on Zacks.com for AMZN is over 370. Despite the many growth avenues that are open to the firm—in the form of increased international expansion and more media sales via the Kindle and Kindle Fire—I cannot rationalize buying up shares in a $110 billion company that has such an absurd forward price-to-earnings ratio (read Try Value Investing with These Large Cap ETFs).
Meanwhile, in the case of EXC, although it doesn't have—if we are going to be honest—any real growth prospects, its reasonable PE and a yield over 5.75% make it too enticing to pass up, at least to me. Furthermore, the safety of the utility structure is also very appealing, unlike the riskiness of Amazon and its fight to not only be a retail king, but a force in the tablet market as well.
As you can tell from the paragraphs above, I am very biased in my investing strategy towards value, but I have also seen a similar trend among more 'growth' oriented investors as well. I know of at least a few people who shun any stock that pays a dividend, or those who demand an outsized growth rate in order to even consider investing in a stock, suggesting that the trend goes both ways (see Three Best Performing Small Cap Growth ETFs).
Perhaps, value investors are just hard-wired to avoid growth, and those who dabble in riskier stocks are unable to bring themselves to purchase the more mundane companies?
At first I thought this might be a bad thing as it eliminates a huge chunk of the investing landscape, but now I am wondering if, instead, it allows investors to focus in on whatever they believe works and forgo trying to develop dual strategies, which seems likely to result a subpar mixture of the two distinct styles.
Personally, I cannot think of anyone that has a true 'blend' investing style—and does it effectively—but what about you?
Do you also find yourself stuck in a particular investment style or have you developed any effective strategies for opening up your portfolio to growth if you are a value investor (or vice versa if you are growth investor)?
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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