Argus Research has published its latest Portfolio Selector, which features its popular Focus List. Each month, Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company’s fundamental universe of approximately 460 stocks.
The Focus List typically includes 30 stocks: turnover is high, as Director of Research Kelleher typically adds three or four new stocks per month. Performance information on the Focus List picks is available in our bi-annual Argus Performance Review. Below are the latest additions, all of which are rated "buy".
Activision Blizzard (ATVI)
Activision creates software games played on game consoles, personal computers and mobile devices. Top game franchises include “Call of Duty” and massive multiplayer online (MMO) game “World of Warcraft.”
ATVI has rebounded from spring lows resulting from concern that the “Fortnite” shooter game would hurt Activision’s prospects. Activision management noted that Fortnite has attracted new players to the shooter videogame format, which Activision dominates with its “Call of Duty” franchise.
Activision is fighting the long-term secular decline in packaged games with increased online functionality. It is focusing on broadening its videogame audience, as demonstrated by its initiatives in downloadable content, e-sports tournament play, advertising, internet and television broadcasting, and consumer products.
The February 2016 acquisition of King Digital Entertainment catapulted Activision into mobile casual gaming, the fastest-growing segment of the videogame industry.
Adobe Systems (ADBE)
Adobe provides software for creative professionals, consumers and enterprises. Its products are organized into three segments: Digital Media Solutions products, including Creative Cloud and Creative Suite, Acrobat, Photoshop and Flash Player; the Digital Marketing Solutions segment, including LiveCycle and the legacy Omniture web analytics businesses; and the Publishing segment.
Adobe, which has positioned itself at the center of the exploding market for digital video content and advertising creation and management, has a unique collection of software assets.
Creative Cloud digital content creation tools enable both professional and amateur users to create and manage digital content. With its Experience Cloud, Adobe has expanded from the initial analytics suite acquired through the Omniture merger into digital video advertising marketing and management.
Allscripts Healthcare Solutions (MDRX)
Allscripts is a leading provider of electronic health record solutions for physicians, group practices, ambulatory facilities and hospitals. It is also a provider of practice management systems, clinical software, and connectivity solutions for physicians.
The company's products streamline diagnosis, treatment, and claims processing by allowing physicians to manage patient information efficiently. Allscripts continues to see strong demand for technology solutions in areas such as revenue cycle management, clinical care analytics, patient care coordination, population health management, and the overall management of IT systems.
We are also encouraged by the company’s recent acquisitions and development of new technology, notably its machine-learning electronic health records software, Avenel.
YUM! Brands (YUM)
Yum! owns three of the most popular fast-food brands in the world: KFC, Pizza Hut and Taco Bell. The company and its franchisees operate more than 41,000 restaurants in 125 countries and territories. It continues to transform its business through refranchising.
It also plans to lower capital spending to $100 million annually from $422 million in 2016, and to reduce annual G&A expense by $300 million. Management is targeting 2019 EPS of $3.75 and believes that it can deliver average annual returns of 15% over the next two years.
We expect the company to reach these goals through continued refranchising and cost-cutting, and look for at least mid-teens EPS growth in 2018 and 2019. At current prices, YUM shares yield about 1.6%.
