From Cabot Wealth Advisory 12/16/14 Sign up for Cabot Wealth Advisory—it’s free!
My stock pick today is based on one great rule, which I learned during my first few weeks at Cabot. “The most bullish thing a stock can do is go up.” A stock that is advancing in spite of market weakness is a great find. After all, only the strongest swimmers can make progress against the current.
I wish I had a Chinese stock that answered that description, but the news there is too hot for most investors to handle. What you may not know is that in addition to my position as Chief Analyst for Cabot China & Emerging Markets Report, I also work on Cabot Top Ten Trader, Mike Cintolo’s weekly review of the 10 strongest stocks of the previous week. Writing about Top Ten stocks keeps me in touch with what’s working in U.S. growth markets as well as emerging markets around the world.
So I’m returning to one of my favorite stock screens, limiting my search to liquid stocks that trade above 10 and have shown price advances for the last five weeks in a row. I’m looking for a stock that’s rallying in spite of the punchy market, and one that’s relatively conservative.
And what pops up is Lowes Companies (LOW), one of the largest home-improvement, building supplies, do-it-yourself, do-it-for-me and appliances stores in North America. (Lowe’s hasn't been featured in Top Ten—yet—but it's the kind of strong package of story, numbers and chart that Mike looks for.)
Lowe’s has over 1,800 stores and grows revenues steadily (every year but 2010, when the Great Recession’s effects were still being felt). Earnings are forecast to grow 23% this year and 22% next year. The stock also offers a useful 1.4% annual dividend.
The company is getting a big boost from two sources. First, there’s the added earnings power created by low oil prices; what people don’t spend at the gas pump can be spent on the house! Second, a generally improving economy and housing market is creating higher demand for home improvement projects.
LOW went through a year-long basing process from November 2013, when it finished a long rally at 51. The stock dipped below 45 in May 2014, but was always under control. The breakout came after LOW pushed to new highs in August, then traded sideways in a tight range in September and October.
Lowe’s is a good defensive stock for a market with plenty of question marks. It’s stronger than the broad market and pays a dividend. If you’re looking for a safer place to be in this market, LOW is a good choice.
For details on stocks with strong stories, numbers and charts, consider taking a risk-free trial subscription to Cabot Top Ten Trader. Click here for details.
|Lowe's Companies (LOW)
1000 Lowe's Boulevard
Mooresville, North Carolina 28117
|Index Membership: N/A
Industry: Home Improvement Stores
Full Time Employees: 167,000