Zacks Investment Ideas feature highlights: Apple, Coca-Cola, Greenbrier, Covenant Transportation Group and Fox Factory Holding

News provided by

Sep 11, 2014, 09:30 ET

CHICAGO, Sept. 11, 2014 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Apple (Nasdaq:AAPL-Free Report), Coca-Cola (NYSE:KO-Free Report), Greenbrier Companies (NYSE:GBX-Free Report), Covenant Transportation Group (Nasdaq:CVTI-Free Report) and Fox Factory Holding Corp. (Nasdaq:FOXF-Free Report).

3 Companies Investing in the Future

Apple (Nasdaq:AAPL-Free Report) unveiled several new products and services in Cupertino on Tuesday. These slick events are the culmination of billions of dollars in research and development for the tech giant. In fact, over the last 12 months, Apple spent more than $5.5 billion on R&D.

Think Long-Term

Typically, expenses that are expected to generate future benefits over multiple periods are capitalized by firms and depreciated over their useful lives, such as new factories or expensive equipment. This is based on the matching principle of accrual accounting.

Research and development expenses generally fit this description. However, since 1975, accounting standards have required R&D costs to be expensed in the period incurred. One reason for this is the uncertainty of the future economic benefits.

Because R&D are expensed rather than capitalized, companies can skimp on these expenses in order to hit short-term profitability targets. However, this often comes at the expense of long-term profitability.

Advertising is another cost that is expensed as incurred even though it is expected to provide a future economic benefit. Similar to R&D, companies can slash these expenses, but that is usually short-sighted.

Advertising is a necessary investment for most companies. Even a well-known brand like Coca-Cola (NYSE:KO-Free Report) spent a whopping $3.3 billion on advertising in 2013, or about 7% of revenues.

Investing for the Future

If you're a long-term investor, then you should pay close attention to how a company is investing for the future. Companies that pay up now for R&D and advertising may depress current earnings, but it should boost future growth.

The right amount of capex, R&D and advertising is heavily dependant on the industry it's in. It wouldn't be very useful to compare a tech company's R&D expenses to a utility's, for example.

So what are some companies that are investing for the future?

I ran a screen in Research Wizard that looked for companies with R&D, capex and advertising expenditures as a percentage of total assets that were greater than their industry median.

I also screened for companies earning cash returns on assets above their industry median, indicating that they are generating strong returns on these investments. I further screened for companies with a Zacks Rank of 1 or 2, which indicates positive earnings momentum.

Here are the 3 names from the list:

1. The Greenbrier Companies (NYSE:GBX-Free Report)

The Greenbrier Companies primarily manufactures railroad freight car equipment. It also provides servicing as well as railcar leasing.

2. Covenant Transportation Group (Nasdaq:CVTI-Free Report)

Covenant Transportation Group is a freight transportation and logistics services company headquartered in Chattanooga, Tennessee.

3. Fox Factory Holding Corp. (Nasdaq:FOXF-Free Report)

Fox Factory designs and manufactures high-performance suspension products primarily for mountain bikes, side-by-side vehicles, on-road and off-road vehicles and trucks, all-terrain vehicles, snowmobiles, specialty vehicles and applications, and motorcycles.

The Bottom Line

If companies want to thrive in the competitive market landscape, then they must invest for the future. And that means paying up for things like research and development, advertising and capital expenditures (capex). These three companies are spending a large amount on these three items relative to others in the industry.

Todd Bunton, CFA is a Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor and Surprise Trader services.

The author owns shares of Apple (AAPL).

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Click here for your free subscription to Profit from the Pros.

Get the full Report on AAPL - FREE
Get the full Report on KO - FREE
Get the full Report on GBX - FREE
Get the full Report on CVTI - FREE
Get the full Report on FOXF - FREE

Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Photo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.