Now that the Los Angeles Lakers are in the NBA Finals, we’ve applied our Wall St. Cheat Sheet investing framework to a few popular companies:
1. News Corp. (NYSE: NWSA)
Inspiration fuels innovation. What better place to be for inspiration than Hollywood’s favorite playground for the LA Lakers tonight. 20th Century FOX (NYSE: NWSA) producers will have the creative excitement juices flowing during Game 1.
News Corp.’s stock is up 30%+ year-over-year and was up as high as 60% in April. Here are some of the most important elements of our Wall St. Cheat Sheet Investing Framework applicable to News Corp., the C-H-E-A-T:
Catalyst: The Summer lineup for movies is fast approaching. 20th Century FOX kicks off this weekend with MarmaDuke starring Owen Wilson. Remember The A-Team, well the weekend Liam Neeson and Jessica Biel bring back the old school favorite. On June 25th, Cameron Diaz and Tom Cruise star in an action comedy called Knight and Day. Following July 4th weekend, Adrien Brody, Topher Grace and Laurence Fishbourne team up for a potential 20th Century FOX blockbuster called Predators. And lastly, we’re still excited about the much anticipated Sept. 24th release of Wall Street 2: Money Never Sleeps.
High Quality Product Line: With a rich heritage of delivering box office shattering results, 20th Century FOX blew away every movie release in its history with the world wide 3-D phenomenon Avatar. Our sources told us Avatar was the primary reason for the Wall Street 2: Money Never Sleeps delay.
Equity/Debt: NWSA has over $8 Billion in cash and over $13 Billion in Debt, but generating $32 Billion in Revenue. So long as they continue to drive revenues, we do not see NWSA’s ability to pay off their debts as a major concern.
A-Level Management: Rupert Murdoch founded this company with a family recipe, and he has treated the business like his family with James Murdoch, Lachlan Murdoch and Roger Ailes. We love when family values are applied to the company’s organizational structure. News Corp.’s family has grown to include Wall St Journal, FOX, FOX Business, Marketwatch, Dow Jones and more.
Technicals: Below is a chart of NWSA. As you can see, even with the recent April pullback, the uptrend is still intact above the rising 200-day moving price average on a 1-year chart:
2. Johnson & Johnson (NYSE: JNJ)
Los Angeles is home to JNJ brand leader, Neutrogena. The glamorous side of Hollywood would not remain so pimple-free without the help of Neutrogena. In 1994, JNJ acquired Neutrogena for $924.1 million. Today, Neutrogena sales are in excess of the JNJ acquisition cost, over $1 Billion strong.
Support: Consumer staples continue to be a safe haven for investors and traders charting their ‘Titanic’ boats during the current choppy waters. During this phase of the economic recovery, dividend paying stocks are an attractive investment to institutions and mutual funds. JNJ pays a 3.7% annual dividend.
Honest Accounting: JNJ has not had any accounting fraud issues.
Earnings: JNJ has beat earnings the past four consecutive quarters by between $.02-$.07 per share. On a trailing 12 month basis, JNJ has yielded $4.66 per share with a 12.82 P/E ratio.
Ethics: Insider fraud is not evident at JNJ and the stature of JNJ’s corporate policies are of the highest ethics.
Trend: JNJ’s stock price is gradually ticking higher, despite the recent pullback. We would like to see JNJ recapture its 200-day moving price average as an extra dose of confidence for long-term support.
3. Disney (NYSE: DIS)
Catalysts: Disney recorded Hollywood history recently with Iron Man 2 via their recent Marvel acquisition. Also, Alice in Wonderland’s 3-D extravaganza was a huge success for DIS and will continue to generate strong revenue with dvd and merchandise sales going forward.
Technicals: DIS is trading above its 200-day moving price average and right below its 50-day moving price average. Look to the 50-day moving price average as a line of resistance or support:
Disclosure: No positions in the companies mentioned.
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