In light of the U.S. stock market reaching valuations near all-time highs, three stocks with the financial strength to withstand the stock market heat wave are Disco Corp. (DSCSY, Financial), Skyworks Solutions Inc. (SWKS, Financial) and Monster Beverage Corp. (MNST, Financial) according to All-in-One Screener data.
The Weather Channel, a weather-reporting platform owned by International Business Machines Corp. (IBM, Financial), said on Thursday that June 2019 was “the warmest June in 140 years of temperature records” according to analyses from the NOAA and NASA. Areas that registered above-average temperatures include Europe, Siberia, Arctic Canada and Alaska.
Although the temperatures were rather mild in parts of the U.S., the U.S. stock market reached new highs this week, with the Dow Jones Industrial Average closing at 27,359.16 and the Standard & Poor’s 500 index closing at 3,014.03 on Monday. Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 146.6% on Thursday, just 1.9% from the all-time high of 148.5% set in March 2000.
GuruFocus’ Profitable, Predictable Margin Expanders Screen, a Premium feature, screens for stocks with the following characteristics: financial strength rank of at least 8, profitability rank of at least 7, a business predictability rank of at least three stars, a five-year operating margin growth rate of at least 5% and a 10-year median net margin of at least 10%. According to backtesting results, the strategy has returned a combined return of 233.93% since January 2006, outperforming the S&P 500 benchmark’s return of 201.63% over the same period. As of Thursday, the stock listed three stocks with a financial strength rank close to the maximum rank of 10.
Disco
Disco, a Japanese semiconductor company, manufactures and distributes precision processing and other manufacturing equipment. GuruFocus lists several positive investing signs for Disco, including robust interest coverage and a strong Altman Z-score of 12.98. Even though the company has a poor Piotroski F-score of 4 and a three-year revenue growth rate that underperforms 82.33% of global competitors, its operating margin has increased approximately 10.10% per year on average over the past five years and is outperforming 88% of global semiconductor companies.
The T. Rowe Price Japan Fund (Trades, Portfolio) owns 21,000 Tokyo Stock Exchange shares of Disco (TSE:6146, Financial) as of the June quarter, with shares averaging 17,194.50 yen ($160.30).
Skyworks
Woburn, Massachusetts-based Skyworks produces semiconductors for wireless handsets that are used to enable wireless connectivity. The company’s products include power amplifiers, filters and integrated front-end modules that support wireless transmissions.
Skyworks’ financial strength ranks 9.8 out of 10 on several positive signs like no long-term debt and an Altman Z-score of a robust 15.41. Even though the company’s three-year revenue growth of 5.90% underperforms 66.02% of global competitors, its profitability ranks 9 out of 10 on the heels of profit margins outperforming over 94% of global competitors, with operating margins having increased approximately 11.60% on average over the past five years. Additionally, the company’s business predictability ranks 4.5 stars out of five on consistent revenue and earnings growth over the past 10 years.
Gurus with large holdings in Skyworks include Joel Greenblatt (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).
Monster Beverage
Corona, California-based Monster Beverage produces energy drinks through its subsidiaries. GuruFocus ranks the company’s financial strength 9.6 out of 10 on several positive indicators, which include no long-term debt, a robust Altman Z-score of 25.77 and a strong Piotroski F-score of 7. Additionally, Monster Beverage’s profitability ranks 9 out of 10: Even though the company’s five-year asset growth exceeds its five-year revenue growth, suggesting inefficient use of assets, its three-year revenue growth of 11.80% outperforms 66.07% of global competitors.
Monster Beverage has business predictability of 3.5 stars out of five and operating margins that have increased approximately 6.40% per year over the past five years, further justifying its high profitability rank.
Gurus with large positions in Monster Beverage include Jim Simons (Trades, Portfolio)' Renaissance Technologies and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates.
Disclosure: No positions.
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