By Larry Gellar
With the situation in Europe improving, many investors are looking to jump back into stocks. While popular ETFs like SPDR S&P 500 (SPY) and PowerShares (QQQ) look ready to move up again, we’ve identified 5 stocks that will offer superior returns. These stocks are involved in a variety of industries ranging from oil to technology:
Frontier Communications Corporation (FTR) has been relatively flat lately, although the company has just released some exciting new cybersecurity tools. Executive Vice President Melinda White explained, “Frontier Secure offers leading-edge programs that give adults peace of mind about the well-being of their children while online and guarantees the security of important images, personal documents and financial records…Convenience is critical, and Frontier Secure’s unlimited back-up and file sharing allow access from any device connected to the Internet. Technical issues are addressed by Frontier RescueTechs, a 100% U.S.-based team available 24/7 to help with PC or Mac problems.” Frontier Communications is also notable for its hefty dividends. In fact, the stock is currently trading at a 12% dividend yield. That dwarfs other players in the telecom industry such as AT&T (T), CenturyLink (CTL), and Freepoint Communications (FRP). That dividend yield comes at a price though, with Frontier Communications currently trading at 39.08 times earnings. Price/earnings to growth ratio is also high at 4.31, although price to sales ratio of 1.15 is more reasonable. Gross margin for Frontier Communications is strong at 68.37%, while operating margin is about average at 20%. As for cash flows, Frontier Communications had $107.43 million flow out during 2010 and $18.59 million flow out during the first half of 2011. Capital expenditures and dividends have played a large role in these outflows.
News Corp. (NWSA) is another stock that’s been trading flat recently. With the notorious phone hacking scandal mostly behind the company, attention is now being turned to a marketing subsidiary called News America Marketing. As described here, News America Marketing may have used some anticompetitive strategies in order to gain ground in the supermarket coupon business. News America Marketing represents a substantially larger part of News Corp. than News of the World, the U.K. tabloid that was shut down, so investors are watching this carefully. Meanwhile, News Corp. could face trouble in the U.S. for possible bribes of U.K. officials. That too is under investigation, and some Wall Street insiders are even speculating that News Corp. might break up. Explained further here, the idea here is that some parts of News Corp. are great – specifically, the television networks with their lucrative sports deals. The company’s film and books divisions are okay, but everything else is really hurting News Corp.’s image. Important competitors for News Corp. include Time Warner (TWX), Viacom (VIA), and Walt Disney (DIS). News Corp. falls in the middle of those companies for measures like price to earnings, price to sales, and gross margin, although operating margin is notably weak at 14.89%.
Exxon Mobil Corporation (XOM) has crept up a bit lately. This has been caused by a new report from Citigroup that says Exxon Mobil can do well regardless of where oil prices are headed. Unlike other companies that have simply benefited from higher oil prices, Exxon Mobil is the best-of-breed pick for this industry. Other investors think XOM share price is too high though, driven up by those who are too scared to invest in anything else. News for this company has revolved around operations in the Mobile Bay part of the Gulf of Mexico. Specifically, there was a seepage that had that area out of commission for a little while. Exxon Mobil is also selling its U.K. assets in the North Sea to Apache (APA). Regardless, Exxon Mobil’s biggest competitors are BP (BP), Chevron (CVX), and Royal Dutch Shell (RDS.A) (RDS.B). Price to earnings ratio, price/earnings to growth ratio, and price to sales ratio for Exxon Mobil are 9.45, 1.24, and 0.86 respectively. Gross margin is 31.45% and operating margin is 12.74%. As for cash flows, $2.868 million left the company in 2010 while $462 million came in during the first half of 2011. The outflow during 2010 was largely caused by capital expenditures.
NVIDIA Corporation (NVDA) has been flat lately, although many investors are excited about its new processor “Kal-El,” which actually boasts 5 cores. This processor, made specifically for the mobile market, specializes in saving power, which is nifty considering how many operations do not require very much power. Increasing battery life could be another step in the right direction for this company. Meanwhile, Nvidia also stands to benefit from improving PC sales. Not too long ago, many analysts thought the PC market was drying up, but the situation appears to be reversing. Nvidia’s dominance in the arena of standalone graphics cards is hugely beneficial. Other important semiconductors include Advanced Micro Devices (AMD), Creative Technology (OTCPK:CREAF), and Intel (INTC). Creative Technology is currently suffering from negative trailing twelve-month earnings, although Nvidia’s price to earnings ratio is higher than AMD’s and Intel’s. Margins, price/earnings to growth, and price to sales for NVDA are closer to average. Cash flows for NVDA have been mixed, with $218.14 million streaming in for the fiscal year ending January 30th and $132.75 million streaming out in the 6 months after that. Dividend investors, be aware that Nvidia doesn’t offer dividends, while Intel currently has a meaty 3.9% dividend yield.
QUALCOMM Incorporated (QCOM) has been flat recently, although the company is experiencing some interesting issues in India. The full details can be found here, but essentially it all started when the company won some spectrum rights in that country. On the other hand, the Indian government is now claiming that Qualcomm’s application to use those rights for Internet was not received in time. Needless to say, this puts quite the wrench in Qualcomm’s plans, although the company may be able to get the situation worked out. Qualcomm was also thinking about spinning out its Indian mobile business, so that too will be affected by what ends up happening. Regardless, Oppenheimer likes this stock because of their prediction that Qualcomm will provide a strong enough outlook to jumpstart the share price. Important competitors for Qualcomm include Broadcom (BRCM), Nokia (NOK), and Texas Instruments (TXN). Those stocks are cheaper using measures such as price to earnings and price to sales, although Qualcomm is about average for price/earnings to growth. Margins for Qualcomm are quite strong – those numbers are 67.5% gross and 32.27% operating. Qualcomm’s cash flows have been good too, with $830 million coming in during fiscal year 2010 and $2.82 billion coming in during the 6 months after that.