Happy New Year and welcome to the first update of the new decade. Stocks have been strong in the past weeks lifting indexes to a new high. With the recent rally, the population of extended-share-price stocks has increased. But what will perform going forward? We will explain why you should look for firms with a strong cash return on total capital.
2020 Outlook
We see corporate growth falling at a faster rate in the third quarter financial statements of US companies. This lower-sales-growth, lower-gross-profit-margin combination has been very reliable in predicting lower share prices relative to long term bonds. Sell extended-share price companies with falling growth and maintain 30-50% in cash in conservative to aggressive portfolio strategies.
Q4 2019 hedge fund letters, conferences and more
Locate portfolios in shares of companies with stable and rising growth. Otos will help you find them as the new financial statements (annual for 2019) are reported in the coming weeks.
Teradyne Inc (TER) $68.230 SELL this poor company getting worse cash return on total capital
Machinery Basic Industry
Teradyne Inc has been an unprofitable company with frequently low cash return on total capital of 7.7% on average over the past 21 years. Over the long term the shares of Teradyne Inc have advanced by 132% relative to the broad market index.
The shares have been very highly correlated with trends in Growth Factors. The dominant factor in the Growth group is Net Shareholder Wealth which has been 83% correlated with the share price with a five-quarter lead.
The current indicated annual dividend produces a yield of 0.6%. Five-year average dividend growth is 7.3%. Current trailing operating cash-flow coverage of the dividend is 10.5 times.
The more stable the pot appears, the better the attributes. Green and gold are good. Red is bad and the more intense the red the more urgent the call to action.
Qualcomm Inc (QCOM) $87.020 BUY this rich company getting better with cash return on total capital
Electrical Equipment Technology
Qualcomm Inc has been an exceptionally profitable company with persistently high cash return on total capital of 21.4% on average over the past 21 years. Over the long term, the shares of Qualcomm Inc have declined by 9% relative to the broad market index.
The shares have been influenced by trends in Growth Factors. The dominant factor in the Growth group is asset turnover which has been 46% correlated with the share price with a one quarter lead.
The current indicated annual dividend produces a yield of 3.0%. Five-year average dividend growth is 9.2%. Current trailing operating cash-flow coverage of the dividend is 2.9 times.
The more stable the pot appears, the better the attributes. Green and gold are good. Red is bad and the more intense the red the more urgent the call to action.
Microsoft Corp (MSFT) $158.620 HOLD this rich company getting better
Computer Software Technology
Microsoft Corp has been an exceptionally profitable company with persistently high cash return on total capital of 44.9% on average over the past 21 years. Over the long term the shares of Microsoft Corp have advanced by 124% relative to the broad market index.
The shares have been very highly correlated with trends in Financial Condition Factors. The dominant factor in the Financial Condition group is shareholders capital(inverted) which has been 96% correlated with the share price with a five-quarter lead.
The current indicated annual dividend produces a yield of 1.2%. Five-year average dividend growth is 8.8%. Current trailing operating cash-flow coverage of the dividend is 4.1 times
The more stable the pot appears, the better the attributes. Green and gold are good. Red is bad and the more intense the red the more urgent the call to action.
