Argus offers investors what is considered to be truly independent investment research. The firm solely researches companies without pursuing investment banking relationships for things such as mergers, initial public offerings, secondary offerings and bond offerings. That, plus the fact that the firm often brings unique insight, is why investors often pay attention to its analyst calls.
Now Argus is joining the myriad of firms with its 2014 model portfolio additions and deletions. The firm is making four big changes to the Argus Top 30 stock list for 2014. We have included the logic behind each call, as well as added in the price targets on each.
Blackhawk Network Holdings Inc. (NASDAQ: HAWK) was selected as a leading prepaid payment network. This one was originally under Safeway and the lockup expiration is ending in December. The firm said, “Safeway management reiterated that it has no intention to pursue a Blackhawk spinoff at this point. Revenues were up 25% year-over year in the third quarter of 2013 and the long-term story appears to be intact. We forecast continued 20%+ revenue and earnings growth for Blackhawk over the next several years.” Shares were recently around $23 and the price target is $28 for the stock.
General Dynamics Corp. (NYSE: GD) is another top pick, this one a defense contractor. Strong demand for jet engines is a driver here. The firm believes that its defense business revenue appears to be relatively secure in the near term and also said, “We believe that General Dynamics’ diverse portfolio of products and growing international sales place it in a stronger position than competitors that rely heavily on U.S. government spending.” Shares recently traded at $92, and Argus has a 12-month price objective of $100 on the stock.
Mattel Inc. (NASDAQ: MAT) was added to the Top 30 list, with a recent price of $46 compared to a price target of $50 for the stock. The toy-maker’s driver here seems to be the strength of the doll business. Argus said, “Mattel will continue to see growth in both sales and earnings, driven by solid operational efficiency, product innovation and growing end markets. Mattel is a solid cash generator characterized by high margins, minimal capital requirements and short cycle product lead times.”
Mylan Inc. (NASDAQ: MYL) was brought into the top 30 picks as a generic drug maker. The firm thinks it will win from cost controls under health care, as well as the firm’s EpiPen allergy treatment. Argus noted, “Mylan is the purest play on the industry, with more than 80% of sales coming from the manufacture and sale of generics. Management has established aggressive growth targets over the next six years and has achieved early milestones. The balance sheet has improved. Activist investors such as Paulson & Co. are significant shareholders. Valuations remain below or in line…” With shares recently around $44, the Argus price target is $52 on the stock.
Argus deleted the following companies from its Top 30 list for 2014: Apollo Global Management and Chipotle Mexican Grill, both for outperforming the S&P 500 since inclusion on the Argus Top 30, and Enterprise Product Partners and Itron after both underperformed the S&P 500 index since inclusion.