Analysis

Dunks

$SBUX – Starbucks

ASM Indicator: The key indicator for SBUX is showing a stairstep rise, but it remains below peak levels and has the potential to increase further. The bars for SBUX are consistently green and showing gradual growth. These factors combined suggest that the company has a strong potential for outperformance in the coming quarters.

Brian’s Take: SBUX has performed well in the challenging equity environment since December, when it was added back to the Dunk’s List. The combination of key indicators still supports a positive outlook for the company through the end of the year.

Commentary: SBUX is one of the most geographically diversified Consumer Discretionary stocks, and its deep penetration and considerable pricing power should boost its operating results as economies begin to reopen and move towards normalization during 2022.

MNST-1.46%  – Monster Beverage Corp. ( PLAY )

ASM Indicator: The key indicator for MNST has shown a temporary dip in its ongoing uptrend, but the bars remain consistently green and stable. Therefore, the core setup for a positive relative outlook is still intact.

Brian’s Take: MNST still has a positive set of indicators that will continue to support the stock through the end of the year. Since it was added to the Dunk’s List, it has maintained its position well and should not be significantly affected if the domestic economy begins to slow down.

Commentary: Monster Beverage Corp. is a holding company, which engages in the development, marketing, sale, and distribution of energy drink beverages and concentrates. It operates through the following segments: Monster Energy Drinks, Strategic Brands, and Other.

FANG-0.77%  – Diamondback Energy ( PLAY )

ASM Indicator: FANG’s key indicator has not yet flipped back to a clear positive trend, but it has shifted to an early phase P+, which could be a potential sign of improvement. Based on our metrics, it seems that a definitive uptick is likely to occur soon.

Brian’s Take: The sector as a whole has been struggling since early November, which has also affected FANG. My analysis suggests that there may be some additional underperformance in the near term, but it is getting late. Overall, taking into account both the sector outlook and FANG’s indicators, it is advisable to stay the course as the company is likely to perform well in the next 6-12 months.

Commentary: This is a well-managed Energy name that should be able to outperform markets and peers and has a tailwind of being in an attractively valued sector.

RTX-0.04%  – Raytheon ( PLAY )

ASM Indicator: It continues its attempt to begin a new up cycle by being “less bad”, and the bars for RTX are also ready to begin shrinking during the coming months.  If these expectations unfold, the stock would have strong tailwinds for outperformance during 1H23. 

Brian’s Take: RTX came into the year relatively overbought and it was overdue for a consolidation, which occurred during January.  On an absolute basis, the stock has been flat and looks poised for its next up leg.  Its key metrics continue to portend a favorable reward risk set up for RTX for relative gains for the next 12-18 months.    

Commentary: Raytheon operates as an aircraft manufacturing company as well as a leading defense contractor. Thus, RTX has a diversified mix of commercial aerospace and military exposure and has been increasing its global exposure as well.

CPB0.92%  – Campbell Soup ( PLAY )

ASM Indicator: CPB’s key metric has shown a slight dip in its ongoing uptrend, but the green bars remain strong and support a positive outlook for the company.

Brian’s Take: I continue to see CPB is a solid relative performer with a favorable dividend yield, making it a valuable addition to the Dunk’s List during the risky and volatile equity environment , which I forecast to continue and help CPB outperform.

Commentary: The company manufactures and markets food products and has two major segments — Americas Simple Meals & Beverages, which includes its retail/food service business as well as its flagship brands like Campbell’s condensed soups, Swanson stocks and broth, Prego Pasta sauce and V8 juices. The second major segment is Global Biscuits & Snacks, which includes flagship brands like Goldfish crackers and Milano cookies.

RTX-0.04%  – Raytheon ( PLAY )

ASM Indicator: RTX’s key indicator shows a continued rise and remains below zero, indicating that things are improving and supporting a favorable outlook. The decreasing size of its red bars further supports this positive trend, suggesting that outperformance is likely through the end of the year.

Brian’s Take: The stock has held up relatively well in the choppy equity market. It has a set of attractive indicators that typically lead to performance gains in the next 6-12 months. Therefore, I continue to see RTX as an appealing opportunity. 

Commentary: Raytheon operates as an aircraft manufacturing company and leading defense contractor. Thus, RTX has a diversified mix of commercial aerospace and military exposure and has been increasing its global exposure as well.

Mid-Range Jumpers

TPX0.51%  – Tempur Sealy International ( PLAY )

ASM Indicator:  TPX’s key metric shows a continued grind higher and is not yet extreme, while its green bars remain stable. Therefore, there is little change to the stock’s favorable outlook based on its indicators.

Brian’s Take: The stock was tactically overbought and needed a small consolidation or pullback, which has been occurring since early March. This development is welcome for investors looking to increase exposure to this attractive stock during tactical weakness.

Commentary: Tempur Sealy International is a leading designer, manufacturer, distributor, and retailer of bedding products comprised of both traditional innerspring mattresses and non-innerspring mattresses. Its Tempur, Tempur-Pedic, Sealy, and Stearns & Foster brands are sold in 100-plus countries through retailers such as furniture and department stores, online, wholesale clubs, and through third-party distributors. The US accounts for about 75% of Tempur Sealy’s revenue.

COST-0.55%  – Costco Wholesale ( PLAY )

ASM Indicator: The stock’s key metric has positively inflected and is currently rising, which is a bullish signal in my methodology. Although the bars are still red, they are small and shrinking, consistent with the ASM rise. Once the bars flip to green, COST will have an even stronger tailwind supporting my expectations of outperformance through year-end. 

Brian’s Take: The stock has been consolidating its overbought condition since its inclusion on the Dunk’s List. However, I see this as an opportunity for investors to increase their exposure. With its new earnings cycle commencing, COST has an attractive set up for forward outperformance.

Commentary: Costco Wholesale Corporation is a membership warehouse club and sells all kinds of food, automotive supplies, toys, hardware, sporting goods, jewelry, electronics, apparel, health, and beauty aids, as well as other goods. COST serves customers worldwide as they have over 800 membership warehouse stores, the company is the nation’s largest wholesale club operator. Primarily under the Costco Wholesale banner, it serves more than 111 million cardholders in some 45 US states, Washington, DC, and Puerto Rico, and about 10 other countries. The company carries an average of approximately 4,000 active stock keeping units (SKUs) per warehouse in its core warehouse business, significantly less than other broadline retailers (many in bulk packaging), ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Certain club memberships also offer products and services, such as car and home insurance, real estate services, and travel packages. Costco generates most of its sales in the US.

ISRG1.56%  – Intuitive Surgical ( PLAY )

ASM Indicator: As mentioned in my last update, ISRG’s key metric continues to rise steadily while its bars are decreasing in size and are on the verge of turning green again. This is a positive sign and historically suggests strong relative performance for the stock. 

Brian’s Take: At the beginning of 2023, the company was overbought, but it has since spent time consolidating during the volatile market environment. Although there was some disappointment regarding product releases in January, I expect the company to announce the launch of new products during the second half of 2023. This, combined with the supportive indicator backdrop, means that any dips in the stock price are opportunities to increase exposure. Patience will likely to be rewarded with this one.

Commentary: The Health Care sector is experiencing healthy disruptions and changes, and ISRG is one of the leading innovators in the space. The firm has products that utilize both robotics and augmented reality to positively impact the industry and get improved results for patients.

PM0.68%  – Phillip Morris ( PLAY )

ASM Indicator: PM’s key metric continues to rise and its bars remain green and healthy, indicating a favorable outlook. As a result, I see no reason to change my view that PM is an attractive investment.

Brian’s Take: While PM was relatively overbought at the start of the year, it has since undergone a healthy pullback during Q1 2023. Its indicator backdrop is still supportive, and the stock is now tactically oversold. The recent relative weakness presents an excellent opportunity for investors to increase their exposure to this attractive name. 

Commentary: Phillip-Morris is the third-leading producer of tobacco products. The company has an 11.4% global market share and owns flagship brands such as Marlboro. In addition, PM is also launching an effort into less-harmful, heated tobacco products. This push has been largely unaffected by COVID and is expected to compensate for the declining global sales of cigarettes and tobacco bans.

AMT-0.59%  – American Tower ( PLAY )

ASM Indicator: Its ASM indicator has stalled near the zero line while its red bars are getting smaller, which is a favorable signal.  I will give AMT the benefit of the doubt for now, but will put it on my watch list for a possible downgrade.

Brian’s Take: The stock continues to struggle on both an absolute and relative basis, but because of its nearly 3% dividend yield and my ongoing concerns about the overall equity market, I am going to stick with the stock for now and start looking for a suitable replacement in the coming months. 

Commentary: American Tower (AMT-0.59% ) is now the largest REIT in the S&P 500 and specializes in leasing multi-tenant properties for wireless providers. It has a real estate portfolio of over 200,000 communications properties. It is heavily exposed to fast-growing 5G in domestic and foreign markets. It has steady dividends and has proven itself to be a quality compounder over time with secure revenue and above-average pricing.

Holds

AMT-0.59%  CCJ-0.50%  GM-0.05%  AMZN-0.99%  (HOLD)

I am downgrading AMT from the Buy bucket to the Hold bucket due to its weakening ASM indicator. I prefer to swap it with a stock that has a better relative earnings revision outlook.

AMZN, CCJ, and GM will remain in the Hold bucket for now.

The “HOLD” bucket is one where a name is not completely kicked out.  Longer-term investors with enough funds to keep holding these names and still able to buy our replacement picks may be well served to do so.