By Larry Gellar
We’ve identified 5 stocks that have their 20-day simple moving average crossed above their 50-day simple moving average. That means a bullish trend could be under way, making now a good time to buy. While US Airways and Comcast seek to take advantage of weak competition, Wells Fargo is finally getting recognition as one of the best financial institutions in the world. Meanwhile, Xerox and Bristol-Myers Squibbs are two old favorites that investors should certainly consider. Let’s see what’s been happening with these 5 stocks:
Wells Fargo & Company (WFC) has been up and down in recent months, but many investors now see Wells Fargo as the king of Wall Street. Wells Fargo has overtaken JPMorgan Chase (JPM) in terms of market capitalization, and it now has the largest market cap out of banks and other financial institutions. Additionally, a poll from TheStreet.com shows that investors are putting their faith in Wells Fargo over JPMorgan. In fact, Wells Fargo CFO Tim Sloan recently said, “I think one of the reasons we're trading at a premium--and I don't want to bad mouth JPMorgan because I think it's a very well- run firm and a very effective competitor--but I think that one of the reasons we trade at a premium is we have a very diversified model, meaning that we've got a lot of businesses.” Furthermore, Sloan went on to say that this helps keep Wells Fargo’s earnings consistent. As for value metrics, Wells Fargo is trading at a 2.01 price to sales ratio, much higher than competitors like Citigroup (C), Bank of America (BAC), and JPMorgan. With quarterly revenue growth at only 2.2% however, it remains to be seen how long that valuation will keep up.
US Airways Group, Inc. (LCC) has been volatile over the past few months, and airline stocks as a whole were down significantly in 2011. A combination of weak demand and higher prices for fuel hurt the sector, and these types of challenges could continue into 2012. On the other hand, airlines have had some success with making more seats of the premium variety, which is a move that clearly improves margins. Meanwhile, it will be interesting to see how AMR’s (AMR) Chapter 11 filing affects the rest of the industry. If AMR has to lower its prices in order to keep customers interested, other companies like US Airways may have to follow suit. Meanwhile, fuel prices are likely to be affected by a couple of factors. With many oil refineries focusing more on gasoline and heating oil and Iran threatening to close the Strait of Hormuz, jet fuel certainly has the potential to become more expensive. Important competitors for US Airways include Delta Air Lines (DAL) and Southwest Airlines (LUV). Those stocks have significantly higher price to earnings and price to sales ratios, which makes sense in light of their stronger margins. Margins for US Airways are 18.43% gross and 3.53% operating.
Xerox Corp. (XRX) has climbed slowly but surely in the past few months, and the company was recently named a leader in Managed Print Services by a report from International Data Corporation. Here’s what Stephen Cronin, president of Xerox Global Document Outsourcing, had to say: “There are many ways to define and execute MPS – but only Xerox continues to earn industry recognition as the leader because we have a proven approach and an impressive history of delivering results.” Meanwhile, many investors are speculating that Xerox could be a takeover target. With Dell (DELL) and Hewlett-Packard (HPQ) making other acquisitions recently, IBM (IBM) seems like a more probable buyer. Regardless of whether Xerox is acquired though, the company still has a lot to prove in 2012. The company hopes to change its product mix a bit while fending off the effects of fiscal troubles in Europe. One important competitor for Xerox is Canon (CAJ), which has significantly higher price to earnings, price/earnings to growth, and price to sales ratios than Xerox. That can be partly explained by Canon’s superior margins – those numbers are 48.34% gross and 10.01% operating. Canon may be more desirable for dividend investors in particular, since CAJ’s dividend yield is over 1 percentage point higher than Xerox’s.
Bristol-Myers Squibb Company (BMY) stock has done quite well recently, although the company is losing one of its key executives. Jeremy Levin, the man behind Bristol-Myers Squibb’s “string of pearls” strategy for acquisitions will be taking over the reins at Teva Pharmaceuticals (TEVA). That means Lamberto Andreotti and Elliott Sigal, Bristol-Myers Squibb’s CEO and Chief Scientific Officer respectively, will take over the business development job for the time being. Andreotti and Sigal should be able to do a fine job, but investors are also worried about some patent expirations that Bristol-Myers Squibb is about to experience. Patents for Plavix, which is a blood-thinning drug, and Avapro, which fights high blood pressure, are both set to expire in 2012. As described here though, Bristol-Myers Squibb has some good ideas for combating the pending expirations. Acquisitions, licensing, and new drugs that are coming out soon should help tremendously. Important competitors for Bristol-Myers Squibb include AstraZeneca (AZN), Merck (MRK), and Roche (OTCQX:RHHBY). Bristol-Myers Squibb has fairly high price to earnings and price to sales ratios compared to those stocks, caused in part by its strong margins. Those numbers are 73.41% gross and 33.04% operating. Investors should note that BMY is a pretty defensive stock – its beta is 0.47.
Comcast Corporation (CMCSA) has been pretty flat over the past few months, but the company’s having a good deal of success with its sports broadcasting. The Versus channel is now the NBC Sports Channel, and the 2012 Olympics should get that network off to a great start. Additionally, the NFL game between the New York Giants and the Dallas Cowboys, which was broadcast on the regular NBC channel, got terrific ratings this past Sunday. In fact, it was the best ratings for Sunday Night Football in the six-year period that NBC has held those rights. Comcast has also decided to stream the Super Bowl to smartphones and tablets that download the free NFL Mobile app. With the Super Bowl being televised on NBC this year, Comcast had the power to make history with this decision, and it figures to be a wise one. After all, smartphone and tablet users will still have to watch the commercials that make the Super Bowl so lucrative for Comcast in the first place. Important competitors for Comcast include DIRECTV (DTV) and Dish Network (DISH). Those stocks have lower price to earnings, price/earnings to growth, and price to sales ratios, as many investors doubt satellite’s ability to compete with cable in the future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.