Winner and loser stocks July 2019

Searching long-term winner stocks

Not every winner stock of the month is necessarily a good investment. After a price drop, a technical rebound or positively received news is enough to turn a stock into a short-term winner. However, this is not enough to benefit from sustainable capital gains. These require long-term profit growth, which is the essence of capital gains and growing dividends.

“Quite a few Brits” was my first thought when I looked at the winners of the month. “Toys and weapons” was my second. Because Mattel and Hasbro are toy manufacturers, while Cobham and L3Harris Technologies are in the weapon, communication and security industry.

Dangerous “toy” for adults – courtesy of Cobham

Cobham is bought for 4 billion British pounds by a private US buy-out company and is expected to be delisted. The recent price jump was therefore probably a one-off event. Investors can be pleased nevertheless only in moderate measure, because after 5-year period capital losses are still at 23%.

Cobham: the diversification strategy causes problems

The reason for the fundamental degradation is due to the diversification strategy with which Cobham tries to become more independent of the defense industry. Somehow reminiscent of the “integrated technology concern” of Daimler. A project that, as is well known, went down the pants.

At L3Harris Technologies, on the other hand, things look different. The company is barely older than a month(!) and was formed by the merger of L3 Technologies and Harris Corporation.

“Fun and excitement” is also the game of the name at L3Harris Technologies

Looking at the fundamental past of the merged companies, the situation is much better than at Cobham. The chart shows the earnings and dividend growth of Harris Corporation, with estimates already reflecting the merged company:

A little bumpy, but overall long-term profit growth at Harris Corporation, today L3Harris Technologies – Copy

Mattel and Hasbro make toys for the little ones. Mattel has been struggling for years with declining revenues and margins, which has led to a disastrous slump in profits, which in turn has wiped out dividends:

Dwindling revenues with reduced margins are a buzz kill for every investor

With a smaller than expected loss and even a slight increase in revenues, the sorely afflicted investors were “pleased” with the latest quarterly results. It is not known whether Ken and Barbie also let the champagne corks pop.

At Hasbro, the situation looks much better, which is why the stock, at USD 115, close to its recent all-time high of USD 126:

Hasbro: Long-term increase in revenues with stable margins propelled the stock price

Nevertheless, Hasbro is also struggling with the digitalization of the children’s world and ever faster changing trends among the kids.

Long-term winner stocks among the monthly losers

With a loss of 18% in July, the TAL Education Group from China, a kind of digital educational company for Chinese pupils and students, might be interesting. Similar to other high flyers such as Alibaba or Tencent, the growth in profits is also jolting here at the moment, which is why the stock, at USD 33, has moved relatively far away from its high of just under USD 47:

TAL Education Group: impressive profit growth with education

iRobots could also be interesting. The producer of household robots is struggling with the trade dispute between the USA and China and the stock price has almost halved from a peak of 130 USD to currently 71 USD. However, the long-term growth of revenues and mostly margins speaks a different language:

iRobots trumps with growing revenues and stable margins

Conclusion

A look at the list of winner and loser stocks may some nice opportunities you can check in the screener of DividendStocks.Cash for long-term profit growth, dividends and valuation.

In the screener you can also see the capital gains of all analysed stocks from one day to 15 years. The screenshot also a personal stock ranking. In this case, the more stable the growth of earnings and operating cash flows the higher the ranking:

Your own stock rankings make it easier to find the right winner stocks for you

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