Quickel's Picks: Six to Watch

06/27/2016 10:00 am EST

Focus: STOCKS

Stephen Quickel

Editor, US Investment Report

With stocks behaving erratically, we’ve shied away from recommending aggressive portfolio purchases for almost a year, notes Stephen Quickel; nevertheless, the editor of US Investment Report highlights some on-going stock picks and ideas to watch.

Biotech leader Celgene (CELG) now sports a consensus estimate of 28.1% a year for 5-year annual earnings growth compared with 22.1% a month ago.

The consensus earnings per share forecast for its 2017 fiscal year has been increased from $7.25 to $9.05.

Emergent BioSolutions (EBS) is small cap that’s planning to split into two companies -- one to focus on bio-warfare defense products, the other on oncology and hematology therapeutics.

Earnings have been growing 35% a year with all four analysts covering it rating EBS a Strong Buy.

Apple (AAPL) needs no introduction. Like Warren Buffet, we see it as a $140 stock. But since dropping from $132 last summer to below $90 this year, it has recently been unable to crack above $100.

We believe analysts and investors are low-balling giant Apple’s growth potential and its generous profitability returns—focusing over-much on what could go wrong instead of on what will probably go right.

Some 21 of 29 analysts now say AAPL is a Strong Buy despite their paltry revenue and earnings estimates. In an up-market we see AAPL breaking out with a $125 near-term price target.

In addition, we see two retailers that offer also solid revenue and earnings growth at attractive prices.

Dollar General (DG), a giant discounter with sales over $20 billion, is growing like a smaller company and is rated a Strong Buy or Buy by 16 of 18 analysts. DG’s 1.08 PEG ratio is within the ideal range.

Five Below (FIVE) is a sprightly 14-year-old specialty retailer catering to teens and pre-teens at 444 stores in 27 states. Its five-year EPS growth is projected at 30%. Its PEG is 0.90.

And then there is ULTA Salon, Cosmetics & Fragrance (ULTA), the oddly named health and beauty aid retailer.

It operates 874 stores in 49 US states — but also has sky-high forward P/E and PEG valuations of 32.3 times earnings and 1.66, well above ideal norms.

Yet its stock keeps on rising, having zoomed from $50 to $240 virtually non-stop during the last five years.

Overpriced? Not to the 21 Street analysts who have recently raised their earnings estimates. Experience has shown that ULTA delivers consistently at the bottom line and has a habit of beating the Street’s numbers.

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By Stephen Quickel, Editor of US Investment Report

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