Reviewing The Magic Recipe Stocks #21-30

Jun. 29, 2016 7:41 AM ETGNTX, BBY, NLOK, GME, CSCO, DLX, SYNT, SWKS, WNR, TNH1 Comment
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Contributor Since 2008

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What are the best stocks in the Magic Recipe Spell?

There are a lot of stocks in there - 50 in total. Doing full reviews on all 50 would take a substantial amount of time, and by the time we were done, the list would be all different again!

So we're breaking them up into 10 at a time and doing a "Twitter" style, 160-character maximum review of each current Magic Recipe stock (140 was not enough)! In addition, I'll provide a quick "thumbs up", "thumbs down", or "neutral" OPINION of each stock's potential to outperform the market over the next 12-18 months, as well as a basic-as-possible description of the company's business.

You can find reviews of stocks #41-50 here, and #31-40 here Today, let's cover stocks #21-30. With no further ado...

#30: Gentex (GNTX)

Company Description: Self-dimming auto mirrors.

Outlook: Thumbs up.

"Tweet" Review: Solid growth history and outlook, strong ROIC (good management), great balance sheet. 90% market share. Good dividend (2.3%) and history of raises.

#29: Best Buy (BBY)

Company Description: Electronics retailer.

Outlook: Neutral.

"Tweet" Review: Difficult competitive dynamics vs. Amazon and other online retail. Declining sales. Margins, cash flow strong. Valuation upside but not a long-term winner.

#28: Symantec (SYMC)

Company Description: Cyber-security software and anti-virus.

Outlook: Thumbs up.

"Tweet" Review: Recurring revenue biz with strong cash flow, high ROIC. Cybersecurity is competitive but a growth market. Cheap - P/E near 5. Valuation and longer-term upside.

#27: GameStop (GME)

Company Description: Video game retailer.

Outlook: Thumbs up.

"Tweet" Review: Now yields almost 6%! P/E under 7. Constant threat of digital, but revenues steady. Prolific share repurchases. Smart management team. Strong value buy.

#26: Cisco (CSCO)

Company Description: Networking and IT equipment.

Outlook: Thumbs up.

"Tweet" Review: Not much sales growth anymore but still expanding margins. Pays 3.8% yield and rising. Cash flow powerhouse. Strong economic moat. Relatively "safe" value play.

#25: Deluxe (DLX)

Company Description: Database marketing and check printing.

Outlook: Thumbs up.

"Tweet" Review: Transformation from check printing to a marketing services company is working. Growing at 5%, 2% yield, margins steady, good cash flow. Valuation just "OK".

#24: Syntel (SYNT)

Company Description: Digital transformation / IT consulting and outsourcing.

Outlook: Thumbs up.

"Tweet" Review: Checks all the boxes: 8-10% growth, great ROIC and cash flows, debt-free, lower end of 52wk range. Valuation mediocre and some customer concentration are risks.

#23: Skyworks Solutions (SWKS)

Company Description: Wireless chips.

Outlook: Thumbs up.

"Tweet" Review: A lot to like. Good play on Internet of Things. Debt-free, dividend, rising margins, excellent leadership. Market concerned about smartphone slowdown.

#22: Western Refining (WNR)

Company Description: Refining (really!).

Outlook: Neutral.

"Tweet" Review: Favorable "crack spreads" of last 12 months coming to an end as oil rises. Refining is notoriously cyclical. WNR is good operator but tough industry.

#21: Terra Nitrogen (TNH)

Company Description: Nitrogen fertilizer products.

Outlook: Neutral.

"Tweet" Review: Another commodities play, profitability tied to natural gas and corn prices. Profit cut in half since 2012. Debt-free. Good co., unpredictable biz.

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