Five U.S. companies that should be on your radar.
Our research company only covers Canadian s t ocks. Nonetheless, we still actively encourage investors to diversify internationally. Canada represents only a small portion of world capital markets, and, as investors have painfully noted this year, our stock market is still burdened by an overexposure to resources.
So, while we focus on Canada, we still like to keep tabs on cool U.S. companies. Everyone knows of Alphabet, Nvidia, Facebook, Tesla and so, but there are hundreds of very interesting smaller companies in the U.S. that still might be great investments. Now, “smaller” in the U. S. does not mean the same as it does in Canada. Sometimes, you can get US$5-billion-plus companies that few Canadian investors have ever even heard of. Let’s take a look at five interesting U. S.-traded and international companies.
Cognex Inc. designs, develops, manufactures and markets machine vision systems, used in automation processes. It is an expensive stock at 44X earnings, with a tiny dividend of 0.37 per cent. But shares are up 118 per cent in the past year and up 45 per cent so far in 2017. Business is solid: Earnings growth looks good for the next two years. The company has no debt and close to US$500 million in cash. It looks like a nice play on the shift to automating factories.
CORESITE REALTY INC. ( COR ON NYSE )
Investors love technology, and investors love their REITs. Coresite Realty Inc. combines t he t wo themes, as it is a REIT that has specifically focused on the “data centre” industry. Of course, with the growth of the cloud and web- specific applications, business is very good at Coresite. The company, with a market cap of US$5.4 billion and a yield of 3.2 per cent, is up 41 per cent this year. It first caught our eye last year when the company raised its distribution by a whopping 50 per cent. It is projected to generate US$4.37 per share in cash flow this year, so is trading at 25 times cash flow. Certainly on the expensive side, but business is likely to stay very good with the continued growth of server farms.
SANDERSON FARMS ( SAFM ON NASDAQ)
Sanderson Farms is a different type — the traditional type — of farm. Most investing experts suggest you own something simple, something you understand. Sanderson certainly fits the bill: it farms, processes and distributes chickens, and is the second- largest chicken producer in the U.S. Market cap is US$2.9 billion, the yield is 0.8 per cent (but the dividend is growing) and the shares of the company are up 34 per cent this year. Cheap at 11X earnings, it has no debt, US$ 246 million cash, and generates very strong cash flow. Earnings growth in the 10-per-cent range is expected this year. Insiders own 5.5 per cent. Certainly not a very “exciting” company, but with a 55-per-cent one- year gain on the stock, boring certainly seems OK to us.
FLIR SYSTEMS ( FLIR ON NASDAQ)
FLIR Systems has a market cap of US$4.8 billion, a 1.7-per-cent (and growing) dividend, and shares are up 15 per cent in the past year. This year, with U. S. President Donald Trump’s move to increase defence spending, many large cap defence stocks, such as United Technologies and Lockheed Martin, have done very well. But among the smaller names, FLIR has a significant defence business, producing thermal imaging and other cameras to help catch the bad guys all over the world. FLIR is trading at 19 times earnings, and is expected to show very high earnings growth this year. Its balance sheet is fairly strong, and it is likely a takeover target.
You may know Garmin Ltd. a bit, or at least used some of the company’s GPS navigation products. Based in Switzerland, the company has a market cap of US$9.6 billion, a dividend of four per cent and a stock that is up 26 per cent in the past year. It has no debt and is sitting on US$2.3 billion in cash. The stock trades at 19X earnings, cheaper than many tech stocks, but it is a bit of a tech/consumer hybrid. It beats earnings estimates about 90 per cent of the time. Growth is not huge, but fairly steady. The main concern for the company is competition, especially from China, but its auto and marine businesses provide some good potential, and investors continue to like its stability and very strong balance sheet.
We can’t promise anything here, of course. But if the energy sector keeps melting in Canada you might be glad you own some solid companies in other sectors, and other countries.