DECEMBER 2019 STOCK PICKS - BIGFOOT INVESTMENTS
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December 2019 Stock Picks
TOP 25 STOCKS December-19
RANK TICKER NAME SECTOR INDUSTRY
1 AAPL Apple Inc. 57 - Technology 57106020 - Phones & Handheld Devices
2 MSFT Microsoft Corporation 57 - Technology 57201020 - Software
3 ADBE Adobe Inc 57 - Technology 57201020 - Software
4 V Visa Inc 57 - Technology 57201030 - Online Services
5 AMZN Amazon.com, Inc. 53 - Consumer Cyclicals 53402010 - Retailers - Department Stores
6 MA Mastercard Inc 57 - Technology 57201030 - Online Services
7 GOOGL Alphabet Inc 57 - Technology 57201030 - Online Services
8 ISRG Intuitive Surgical, Inc. 56 - Healthcare 56101010 - Advanced Medical Equipment & Technology
9 NVDA NVIDIA Corporation 57 - Technology 57101010 - Semiconductors
10 SBUX Starbucks Corporation 53 - Consumer Cyclicals 53301020 - Restaurants & Bars
11 HON Honeywell International Inc. 52 - Industrials 52301010 - Industrial Conglomerates
12 ULTA Ulta Beauty Inc 53 - Consumer Cyclicals 53403090 - Retailers - Other Specialty
13 CAT Caterpillar Inc. 52 - Industrials 52102020 - Heavy Machinery & Vehicles
14 COST Costco Wholesale Corporation 53 - Consumer Cyclicals 53402020 - Retailers - Discount Stores
15 CNC Centene Corp 56 - Healthcare 56102020 - Managed Health care
16 GSK GlaxoSmithKline plc (ADR) 56 - Healthcare 56201040 - Pharmaceuticals
17 DIS Walt Disney Co 53 - Consumer Cyclicals 53302020 - Broadcasting
18 JNJ Johnson & Johnson 56 - Healthcare 56201040 - Pharmaceuticals
19 PANW Palo Alto Networks Inc 57 - Technology 57201030 - Online Services
20 GS Goldman Sachs Group Inc 55 - Financials 55102010 - Investment Banking & Brokerage Services
21 CVS CVS Health Corp 56 - Healthcare 56102010 - Healthcare Facilities & Services
22 BAC Bank of America Corp 55 - Financials 55101010 - Banks
23 C Citigroup Inc 55 - Financials 55101010 - Banks
24 BA Boeing Co 52 - Industrials 52101010 - Aerospace & Defense
25 STZ Constellation Brands, Inc. 54 - Non-Cyclicals 54101020 - Distillers & Wineries
As of November 25th, 2019- Subject to change.December 2019 Growth Stock Picks
As of November 25th, 2019. Subject to change.December 2019 Growth Stock Picks
As of November 25th, 2019. Subject to change.December 2019 Growth Stock Picks
As of November 25th, 2019- Subject to change.December 2019 Growth Stock Picks
As of November 25th, 2019- Subject to change.December 2019 Growth Stock Picks
As of November 25th, 2019- Subject to change.December 2019 Growth Stock Picks
As of November 25th,2019- Subject to change.Apple Inc. (AAPL)
Apple Inc. designs, manufactures, and markets mobile communication and media devices, and
personal computers. It also sells various related software, services, accessories, and third-
party digital content and applications. The company offers iPhone, a line of smartphones;
iPad, a line of multi-purpose tablets; and Mac, a line of desktop and portable personal
computers, as well as iOS, macOS, watchOS, and tvOS operating systems. It also provides
iTunes Store, an app store that allows customers to purchase and download, or stream music
and TV shows; rent or purchase movies; and download free podcasts, as well as iCloud, a
cloud service, which stores music, photos, contacts, calendars, mail, documents, and others.
In addition, the company offers AppleCare support services; Apple Pay, a cashless payment
service; Apple TV that connects to consumers' TVs and enables them to access digital content
directly for streaming video, playing music and games, and viewing photos; and Apple Watch,
a personal electronic device, as well as AirPods, Beats products, HomePod, iPod touch, and
other Apple-branded and third-party accessories. The company serves consumers, and small
and mid-sized businesses; and education, enterprise, and government customers worldwide.
It sells and delivers digital content and applications through the iTunes Store, App Store, Mac
App Store, TV App Store, Book Store, and Apple Music. The company also sells its products
through its retail and online stores, and direct sales force; and third-party cellular network
carriers, wholesalers, retailers, and resellers. Apple Inc. was founded in 1977 and is
headquartered in Cupertino, California.
Source: FinViz.com, October 2019Apple Inc. (AAPL)
POSITIVES: Apple’s non-iPhone businesses, particularly Services and Wearables, are expected to drive top-
line growth in fiscal 2019 and beyond. The Services portfolio has emerged as the company’s new cash cow.
Apple’s endeavors to open up its ecosystem, through partnerships with the likes of Samsung and Amazon,
are positive for the Services segment. The recently announced subscription-based video streaming, news
and gaming services are expected to benefit from Apple’s strong installed base. Robust App Store sales
coupled with solid adoption of Apple Pay and Apple Music are expected to help Apple double its 2016
Services revenues by 2020. Moreover, its Wearables business is expected to be driven by solid demand for
Apple Watch. Apple currently has more than 420 million paid subscribers across its Services portfolio. The
App Store continues to draw the attention of prominent developers from around the world, helping the
company offer appealing new apps that drive App Store traffic. Further, growing number of AI-infused apps
will attract more subscribers on App Store. Apple is encouraging developers to use artificial intelligence (AI)
and machine learning in their apps. The company’s Core ML 2 API helps developers recognize faces or
animals in photos, and parse the meaning of text. Further, the company is offering Create ML for simple and
efficient machine learning training on the Mac, which is built on top of Swift programming language. Apple’s
focus on autonomous vehicles and augmented reality/virtual reality (AR/VR) technologies presents growth
opportunity in the long haul. These are fast emerging as lucrative business opportunities. To ramp up its
efforts, Apple has acquired several smaller firms with expertise in AR hardware, 3D gaming and VR software.
Possible concerns: Lackluster demand for iPhone primarily in China and emerging countries, stiff
competition and increasing regulatory hassles are major headwinds. Apple’s excessive dependence on
iPhone is a risk to overall growth. Although iPhone sales have been benefiting from higher average selling
price (ASP), premium pricing has been blamed for Apple’s declining market share in countries like China and
India.
Source: Zacks Research, October 2019Adobe Inc. (ADBE)
Adobe Inc. operates as a diversified software company worldwide. Its Digital Media segment
provides tools and solutions that enable individuals, small and medium businesses, and enterprises
to create, publish, promote, and monetize their digital content. Its flagship product is Creative Cloud,
a subscription service that allows customer to download and access the latest versions of its creative
products. This segment serves traditional content creators, Web application developers, and digital
media professionals, as well as their management in marketing departments and agencies,
companies, and publishers. The company's Digital Experience segment offers solutions for how
digital advertising and marketing are created, managed, executed, measured, and optimized. This
segment provides analytics, social marketing, targeting, media optimization, digital experience
management, cross-channel campaign management, marketing automation, audience management,
and video delivery and monetization solutions to digital marketers, advertisers, publishers,
merchandisers, Web analysts, chief marketing officers, chief information officers, and chief revenue
officers. Its Publishing segment offers products and services, such as e-learning solutions, technical
document publishing, Web application development, and high-end printing, as well as publishing
needs of technical and business, and original equipment manufacturers (OEMs) printing businesses.
The company offers its products and services directly to enterprise customers through its sales force,
as well as to end-users through app stores and through its Website at adobe.com. It also distributes
products and services through a network of distributors, value-added resellers, systems integrators,
software vendors and developers, retailers, and OEMs. The company was formerly known as Adobe
Systems Incorporated and changed its name to Adobe Inc. in October 2018. The company was
founded in 1982 and is headquartered in San Jose, California..
Source: FinViz.com, October 2019Adobe Inc. (ADBE)
POSITIVES: Adobe continues to be the market leader in the Digital Media space. The company provides one of the
best solutions in most categories of digital media design and publishing, including Internet and video. In fiscal first
quarter, total Digital Media ARR (Annualized recurring revenue), the key cloud performance measure, grew to
$7.07 billion. This indicates strong growth in the Creative Cloud and Document Cloud businesses. As advertising,
entertainment and other content-creation markets are becoming increasingly digitalized, Adobe is well positioned
to benefit from this trend and should enjoy above-average long-term growth. Adobe entered the digital marketing
space with the acquisition of Omniture. This is an area where corporate spending is on the rise. A number of trends
are spurring this trend, including the increased adoption of cloud computing, social media and mobile devices, as
well as the emergence of big data analytics. Acrobat is one of the company’s most successful product lines with a
huge installed base of satisfied customers. Through Acrobat.com, the company offers a set of a cloud-based
document and collaboration subscription services which include PDF creation, centralized online file sharing and
contract signing solutions. There are currently many drivers of the Acrobat business. A portion of the business has
historically been dependent on GDP growth. This business has responded to the improving economic conditions
and stronger IT spending in the U.S. and Europe. Management expects the gradual uptick in enterprise spending to
be an overall positive for the Acrobat business. Using its new cloud-based platform, Adobe is also diversifying into
digital marketing services, offering data mining services, which help businesses to measure page views, purchases
and social media sites. Adobe Marketing Cloud enables marketers to deliver personalized web experiences across
multiple devices, manage multichannel campaigns and optimize media monetization. These services help
businesses streamline marketing and products for targeted consumer groups, including chief marketing officers,
chief revenue officers, advertising agencies, publishing executives and digital marketers. It is expected that Creative
Cloud customers will be wooed to purchase products from the Marketing Cloud, accelerating Adobe’s revenue
growth in both the segments simultaneously.
Possible concerns: Lower end-market demand as a result of weak global economic conditions could impact results.
Also, significant exposure to Europe remains a major concern.
Source: Zacks Research, June 2019Amazon.com Inc. (AMZN)
Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North
America and internationally. The company operates through three segments: North America,
International, and Amazon Web Services (AWS) segments. It sells merchandise and content
purchased for resale from third-party sellers through physical stores and online stores. The
company also manufactures and sells electronic devices, including Kindle e-readers, Fire tablets,
Fire TVs, and Echo devices; provides Kindle Direct Publishing, an online service that allows
independent authors and publishers to make their books available in the Kindle Store; and
develops and produces media content. In addition, it offers programs that enable sellers to sell
their products on its Websites, as well as their own branded Websites; and programs that allow
authors, musicians, filmmakers, skill and app developers, and others to publish and sell content.
Further, the company provides compute, storage, database, and other AWS services, as well as
compute, storage, database offerings, fulfillment, publishing, digital content subscriptions,
advertising, and co-branded credit card agreement services. Additionally, it offers Amazon Prime,
a membership program, which provides free shipping of various items; access to streaming of
movies and TV episodes; and other services. It serves consumers, sellers, developers, enterprises,
and content creators. Amazon.com, Inc. has a strategic partnership with Volkswagen AG. The
company was founded in 1994 and is headquartered in Seattle, Washington.
Source: FinViz.com, October 2019Amazon.com Inc. (AMZN)
POSITIVES: Amazon.com is one of the largest e-commerce companies in the world. Amazon keeps its retail business
very hard to beat on price, choice, and convenience with the help of a solid loyalty system in Prime and its FBA
strategy. The company continues to push advantages exclusively to Prime members, thus encouraging them to
spend more on Amazon. The current focus is on building video content, primarily for Prime subscribers because the
growth prospects in the market are considerable. Prime members are much more loyal and spend double the
amount spent by non-Prime members. Amazon’s strategy of gradually merging online and offline retail looks
promising. It will not only reshape the retail landscape but also help it fend off competition, if it could manage a first
mover advantage. Amazon is the leading provider of cloud infrastructure as a service to enterprise customers. The
expanding customer base of Amazon Web Services (AWS) driven by its strengthening cloud offerings will continue to
aid Amazon's dominance in the global cloud space. Amazon is pushing well with its devices strategy. Alexa powered
Echo devices are going great guns and help the company sell products and services. Artificial intelligence (AI) driven
Alexa has already been integrated into a host of everyday devices for the digital home, which has converted the
nascent smart home market into a potential area of growth in a very short time. Amazon is gradually choosing the
buy option over build, which, along with the other positives, ensures that the company generates revenues right
way without wasting any time in building its own infrastructure. In Jul, 2017, the company completed the acquisition
of a Dubai-based e-commerce giant, Souq.com. The deal will help Amazon to establish a presence in countries like
Egypt, Saudi Arabia, and the UAE markets like Egypt, Saudi Arabia, and the UAE.
Possible concerns: There is a downside to a growing international business in the current economic environment.
While expansion opportunities automatically increase, currency also starts playing a bigger role. Prime’s saturation
in the U.S. market is apparent, because Amazon has very high penetration rates in the country. The competition in
online retail is heating up. Traditional retailers have always provided the strongest competition and a number of
them are running e-commerce sites as well. Most retail businesses tend to be seasonal and Amazon’s is no different.
Source: Zacks Research, October 2019The Boeing Company (BA)
The Boeing Company, together with its subsidiaries, designs, develops, manufactures, sales, services, and
supports commercial jetliners, military aircraft, satellites, missile defense, human space flight and launch
systems, and services worldwide. The company operates in four segments: Commercial Airplanes;
Defense, Space & Security; Global Services; and Boeing Capital. The Commercial Airplanes segment
provides commercial jet aircraft for passenger and cargo requirements, as well as fleet support services,
principally. The Defense, Space & Security segment engages in the research, development, production,
and modification of manned and unmanned military aircraft and weapons systems; strategic defense and
intelligence systems, which include strategic missile and defense systems, command, control,
communications, computers, intelligence, surveillance and reconnaissance, cyber and information
solutions, and intelligence systems; and satellite systems, such as government and commercial satellites,
and space exploration. The Global Services segment offers products and services, including supply chain
and logistics management, engineering, maintenance and modifications, upgrades and conversions, spare
parts, pilot and maintenance training systems and services, technical and maintenance documents, and
data analytics and digital services to commercial and defense customers. The Boeing Capital segment
offers financing services and manages financing exposure for a portfolio of equipment under operating
and finance leases, notes and other receivables, assets held for sale or re-lease, and investments. The
Boeing Company was founded in 1916 and is based in Chicago, Illinois.
Source: FinViz.com, October 2019The Boeing Company (BA)
POSITIVES: Boeing is the largest aircraft manufacturer in the world in terms of revenue, orders and deliveries, and is
one of the largest aerospace and defense contractors. Its revenue exposure is spread across more than 90 countries
around the globe. Boeing expects the commercial fleet to be fueled by sustained annual growth in commercial
passenger traffic along with a big wave of retiring, old planes. Of the total units, 44% of the demand will be for the
replacement of old aircraft, while the rest will support future growth. The massive demand for commercial jets
generates a strong and growing demand for aviation services ranging from supply chain support (parts and parts
logistics), to maintenance and engineering services, to aircraft modifications, to airline operations. In this line, Boeing
expects commercial aviation services market to grow 4.1% annually to a value worth $9.1 trillion, over the next 20
years. This should bode well for the company’s growth trajectory. While Boeing’s commercial business has not been
performing well for the past couple of quarters, on account of lower 737 deliveries, the aerospace giant’s defense
business remains buoyant. In the third quarter, the BDS segment registered 2% year-over-year revenue growth driven
by higher volume from satellites, weapons and T-7A Red Hawk programs. Looking ahead, the current U.S.
government’s inclination toward strengthening the nation’s defense system should act as a growth catalyst for
defense players like Boeing. Notably, as part of the fiscal 2020 defense budget, $718.3 billion is allocated as funding
for the Pentagon, reflecting 5% growth over the fiscal 2019 budget.
Possible concerns: Boeing’s commercial business continued to suffer due to lower 737 deliveries as a result of the
worldwide grounding of 737 Max jets in March, following two fatal crashes involving these jets. Consequently, its
commercial deliveries plunged 67% year over year, resulting in a huge 41% decline in the unit’s revenues during the
third quarter. Such dismal performance recorded by Boeing’s largest revenue-generating business segment also hit
the company’s bottom line and cash position. Consequently, Boeing’s adjusted earnings declined 59% year over year
in the third quarter, while its operating cash outflow was $0.26 billion. Canadian, Russian and Chinese manufacturers
will begin delivering airplanes, comparable to Boeing 737 over the next few years. Meanwhile, its arch rival, Airbus
outpaced Boeing in commercial plane deliveries at the end of first half of 2019 for the first time in eight years.
Source: Zacks Research, October 2019Bank of America Corporation (BAC)
Bank of America Corporation, through its subsidiaries, provides banking and financial products and
services for individual consumers, small- and middle-market businesses, institutional investors, large
corporations, and governments worldwide. It operates in Consumer Banking, Global Wealth & Investment
Management (GWIM), Global Banking, and Global Markets segments. The Consumer Banking segment
offers traditional and money market savings accounts, CDs and IRAs, noninterest- and interest-bearing
checking accounts, and investment accounts and products; and credit and debit cards, residential
mortgages, and home equity loans, as well as direct and indirect loans, such as automotive, recreational
vehicle, and consumer personal loans. As of July 22, 2019, this segment served 66 million consumer and
small business clients with approximately 4,300 retail financial centers; 16,600 ATMs; and digital banking.
The GWIM segment offers investment management, brokerage, banking, and trust and retirement
products; and wealth management solutions targeted to high net worth and ultra high net worth clients,
as well as customized solutions to meet clients' wealth structuring, investment management, and trust
and banking needs, including specialty asset management services. The Global Banking segment provides
lending products and services, including commercial loans, leases, commitment facilities, trade finance,
and real estate and asset-based lending; treasury solutions, such as treasury management, foreign
exchange, and short-term investing options; working capital management solutions; and debt and equity
underwriting and distribution, and merger-related and other advisory services. The Global Markets
segment offers market-making, financing, securities clearing, settlement, and custody services, as well as
risk management, foreign exchange, fixed-income, and mortgage-related products. Bank of America
Corporation was founded in 1874 and is headquartered in Charlotte, North Carolina.
Source: FinViz.com, October 2019Bank of America Corporation (BAC)
POSITIVES: Rising loans and deposits, manageable expenses and expansion into new markets will support Bank
of America’s financials. Technological upgrades are likely to help in cross selling opportunities.Steady loan
growth is expected to continue supporting Bank of America’s interest income. Over the last three years (2016-
2018), net interest income (NII) saw a CAGR of 7.4%. Bank of America continues to align its banking center
network according to the customer needs. By 2021, the bank intends to expand to new cities, open nearly 500
new centers and redesign 2,500 centers with technology upgrades. The company is opening fully automated
branches that will feature ATMs and video conferencing facility, allowing customers to communicate with off-
site bankers. These branches, aiming to sell mortgages, auto loans and credit cards, are smaller in size and
utilize advance technology. Further, the company has announced plans to add 2,200 more ATMs to its network.
Bank of America’s sturdy capital deployment activities look impressive. In June, the company received the Fed's
approval for its 2019 capital plan, which includes a 20% quarterly dividend hike and a share repurchase
authorization worth $30.9 billion. Therefore, in aggregate, the bank intends to return roughly $37 billion to
shareholders. Given the robust capital position and lower dividend payout ratio compared to its peers, the
company will likely be able sustain its capital deployment activities and continue enhancing shareholder value.
Possible concerns: Muted investment banking and trading performance remain major near-term challenges for
Bank of America. This is expected to have an adverse impact on the company’s non-interest income growth.
Source: Zacks Research, October 2019Citigroup Inc. (C)
Citigroup Inc., a diversified financial services holding company, provides various financial
products and services for consumers, corporations, governments, and institutions in North
America, Latin America, Asia, Europe, the Middle East, and Africa. The company operates
through two segments, Global Consumer Banking (GCB) and Institutional Clients Group (ICG).
The GCB segment offers traditional banking services to retail customers through retail banking,
commercial banking, Citi-branded cards, and Citi retail services. It also provides various
banking, credit card lending, and investment services through a network of local branches,
offices, and electronic delivery systems. The ICG segment provides wholesale banking products
and services, including fixed income and equity sales and trading, foreign exchange, prime
brokerage, derivative services, equity and fixed income research, corporate and consumer
loans, investment banking and advisory services, private banking, cash management, trade
finance, and securities services to corporate, institutional, public sector, and high-net-worth
clients. As of December 31, 2018, it operated 2,410 branches in the United States, Mexico, and
Asia. Citigroup Inc. was founded in 1812 and is headquartered in New York, New York.
Source: FinViz.com, October 2019Citigroup Inc. (C)
POSITIVES: A diverse business model, focus on core operations and streamlining of international businesses
will continue to support Citigroup’s growth. Further, steady capital deployment is a tailwind. Over the past
several years, Citigroup’s net interest revenues had been under pressure amid a low interest-rate
environment. However, with improvement in the interest rates scenario following the rate hikes and steady
loan growth, strain on NIR continues to ease. In 2018 and the first nine months of 2019, uptrend in NIR was
recorded, after witnessing a declining trend for years. Notably, management expects net interest income
(NII) to rise in the range of 3-4% for 2019, lower than the prior projection of 4% amid more Fed rate cut
expectations and flattening of the yield curve. Citigroup's long-term strategy to shrink its non-core assets and
increase fee-based business mix would improve valuation over time. The rundown of Citi Holdings – its
legacy problem assets portfolio – is largely complete. Citigroup has been emphasizing on growth in core
businesses through expense management and streamlining operations internationally. Further, the company
continues to optimize its branch network, with focus on core urban markets, improving digital channels and
reducing branches. Driven by a solid capital position, Citigroup remains committed towards enhancing its
shareholders’ value with steady capital deployment activities. Notably, following the approval of 2019 capital
plan, the company increased its quarterly dividend by 13.3% from the prior payout in July 2019.
Possible concerns: Citigroup is burdened with numerous investigations and lawsuits escalating legal costs
and limiting the company’s business growth. Moreover, muted fee income is a concern for the company.
Source: Zacks Research, October 2019Caterpillar Inc. (CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines,
and industrial gas turbines. Its Construction Industries segment offers asphalt pavers, compactors, cold
planers, feller bunchers, harvesters, motorgraders, pipelayers, road reclaimers, skidders, telehandlers,
and utility vehicles; backhoe, knuckleboom, compact track, multi-terrain, skid steer, and track-type
loaders; forestry and wheel excavators; and site prep and track-type tractors. The company's Resource
Industries segment provides electric rope and hydraulic shovels, draglines, rotary drills, hard rock
vehicles, track-type tractors, mining trucks, longwall miners, wheel loaders, off-highway and articulated
trucks, wheel tractor scrapers, wheel dozers, landfill and soil compactors, machinery components,
electronics and control systems, select work tools, and hard rock continuous mining systems. Its Energy
& Transportation segment offers reciprocating engine powered generator sets; reciprocating engines
and integrated systems for the power generation, marine, oil, and gas industries; turbines, centrifugal
gas compressors, and related services; remanufactured reciprocating engines and components; and
diesel-electric locomotives and components, and other rail-related products. The company's Financial
Products segment provides operating and finance leases, installment sale contracts, working capital
loans, and wholesale financing; and insurance and risk management products. Its All Other operating
segment manufactures filters and fluids, undercarriage, ground engaging tools, fluid transfer products,
precision seals, and rubber sealing and connecting components; parts distribution; integrated logistics
solutions and distribution services; and digital investments services. The company was formerly known
as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in
1925 and is headquartered in Deerfield, Illinois.
Source: FinViz.com, October 2019Caterpillar Inc. (CAT)
POSITIVES: Caterpillar will continue to monitor end-user demand, commercial shipments, dealer inventory,
orders and backlog and plans to adjust production levels accordingly. The company has been successful in
reducing the lead times, which allows dealers to maintain lower levels of inventory. Further, shorter lead times
enable both the company and its dealers to adapt quickly to changing market conditions. The company is also
taking steps to reduce production to match dealer demand and will proactively increase production once order
levels improve. For the Construction Industries segment, improvement in residential and non-residential
construction in North America, and infrastructure demand is likely to drive revenues. Increasing commodity
prices are likely to support capital investment in the mining sector. Caterpillar’s cash and liquidity position
remains strong with the company ending third-quarter 2019 with cash and short-term investments of $7.9
billion. In the third quarter of 2019, the company repurchased $1.2 billion of Caterpillar common stock and paid
out dividends of $0.6 billion. So far this fiscal, the company has made share repurchases worth $3.3 billion.
Caterpillar expects around 9% share count reduction by the end of this year. In September 2015, Caterpillar set
out with significant restructuring and cost reduction initiative, which has now been substantially completed. The
plan will likely lower annual operating costs by about $1.5 billion. Caterpillar is focused on developing a more
competitive and flexible cost structure and controlling discretionary spending. Caterpillar continues to focus on
customers and on the future by continuing to invest in digital capabilities, connecting assets and jobsites along
with developing the next generation of more productive and efficient products. The company plans to fund
initiatives that drive long-term profitable growth focused on areas of expanded offerings and services and digital
initiatives like e-commerce.
Possible concerns: Impact of raw material cost inflation on margins, inventory reduction at its dealers and low
end-user demand owing to the global economic uncertainty remain headwinds.
Source: Zacks Research, October 2019Centene Corporation (CNC)
Centene Corporation operates as a diversified and multi-national healthcare enterprise that provides
programs and services to under-insured and uninsured individuals in the United States. The
company's Managed Care segment offers health plan coverage to individuals through government
subsidized programs, including Medicaid, the State children's health insurance program, long-term
services and support, foster care, and medicare-medicaid plans, which covers dually eligible
individuals, as well as aged, blind, or disabled programs. Its health plans include primary and
specialty physician care, inpatient and outpatient hospital care, emergency and urgent care,
prenatal care, laboratory and X-ray, home-based primary care, transportation assistance, vision
care, dental care, telehealth, immunization, specialty pharmacy, therapy, social work, nurse
advisory, and care coordination services, as well as prescriptions, limited over-the-counter drugs,
medical equipment, and behavioral health and abuse services. This segment also offers various
individual, small group, and large group commercial healthcare products to employers and directly
to members in the Managed Care segment. Its Specialty Services segment provides pharmacy
benefits management services; health, triage, wellness, and disease management services; and
vision and dental, and management services, as well as care management software that automate
the clinical, administrative, and technical components of care management programs. This
segment offers its services and products to state programs, correctional facilities, healthcare
organizations, employer groups, and other commercial organizations. The company provides its
services through primary and specialty care physicians, hospitals, and ancillary providers. Centene
Corporation was founded in 1984 and is headquartered in St. Louis, Missouri.
Source: FinViz.com, October 2019Centene Corporation (CNC)
POSITIVES: Growing Top Line: Centene has been witnessing consistent and significant revenue growth since
2002. The witnessed a CAGR of 39.6% from 2012 to 2018. The same was up 28% year over year in the first
nine months of 2019 on the back of the Fidelis Care buyout, growth in the Health Insurance Marketplace
business and expansions plus new programs across many of states in 2018 and 2019. Inorganic Growth:
Centene’s mergers and acquisitions strategy is mainly targeted at expanding the company’s markets and
increasing its Medicaid membership. Certain acquisitions like Community Medical Holdings, MHM Services
and Fidelis Care have contributed to its revenues and helped it expand is capabilities. Centene is on course to
acquire WellCare, which is expected to close by the first half of 2020. The combined entity will have a wider
scale and diversification with more than 12 million Medicaid and around 5 million Medicare members. In
total, it will have around 22 million members across 50 US states. It is presumed that this new company will
have estimated pro forma 2019 revenues in excess of $100 billion and an EBITDA of $5 billion. Medical
membership of the company has been rising over the past several quarters due to contract wins and
expansion across different regions. Following solid third-quarter 2019 results, the company has retained its
2019 guidance. It now expects revenues in the range of $73.6-$74.2 billion, the mid-point point of which is
23.2% above the reported figure of 2018.
Possible concerns: Centene's financial results suffer from rising level of debt and increasing costs. Its
reducing cash flow from operations also remain a concern. Its low return on equity also bothers.
Source: Zacks Research, October 2019Costco Wholesale Corporation (COST)
Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses in
the United States, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Korea, Australia,
Spain, France, Iceland, China, and Taiwan. It offers branded and private-label products in a range
of merchandise categories. The company provides dry and packaged foods, and groceries; snack
foods, candies, alcoholic and nonalcoholic beverages, and cleaning supplies; appliances,
electronics, health and beauty aids, hardware, and garden and patio products; meat, bakery, and
deli products, as well as produce; and apparel and small appliances. It also operates gas stations,
pharmacies, optical dispensing centers, food courts, and hearing-aid centers; and offers business
delivery, travel, and various other services online in various countries. As of September 1, 2019,
the company operated 782 warehouses, including 543 in the United States and Puerto Rico, 100
in Canada, 39 in Mexico, 29 in the United Kingdom, 26 in Japan, 16 in South Korea, 13 in Taiwan,
11 in Australia, 2 in Spain, 1 in Iceland, 1 in France, and 1 in China. It also operates e-commerce
Websites in the United States, Canada, the United Kingdom, Mexico, South Korea, and Taiwan.
The company was formerly known as Costco Companies, Inc. and changed its name to Costco
Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and
is based in Issaquah, Washington.
Source: FinViz.com, October 2019Costco Wholesale Corporation (COST)
POSITIVES: In the evolving retail ecosystem, Costco has been able to create a niche for itself on the back of
growth strategies, better price management, strong membership trends and increasing penetration of e-
commerce business. Certainly, these helped the company to continue with its decent comparable sales run.
Definitely, improving job prospects and rising disposable income have also aided the performance. We believe
that Costco continues to be one of the dominant retail wholesalers based on the breadth and quality of
merchandise offered. The company’s strategy to sell products at heavily discounted prices has helped it to
remain on a growth track as cash-strapped customers continue to reckon Costco as a viable option for low-cost
necessities. The company is also gradually expanding its e-commerce capabilities in the U.S., Canada, U.K.,
Mexico, Korea and Taiwan. To drive its online sales further, Costco launched new delivery services for its
customers, one CostcoGrocery option to deliver non-perishable items to buyer’s home within two days of
ordering and another same day grocery delivery service in collaboration with Instacart. Costco continues to
make prudent use of its cash flow through share repurchases and dividend payments. During the fourth
quarter, the company bought back shares worth of $52 million bringing the total to $247 million in fiscal 2019.
We are also encouraged by the company’s expansion strategy. Costco has one of the highest square footage
growth in the industry, and remains committed to opening new clubs in the domestic and international
markets. In our view, the company’s diversification strategy is a natural hedge against risks that may arise in
specific markets.
Possible concerns: Costco faces stiff competition from BJ’s Wholesale Club and Sam’s Club, a division of Wal-
Mart Stores. These two rivals follow similar business models as they market high volumes of merchandise at
low prices in a membership-only warehouse clubs. The company’s customers are very sensitive to
macroeconomic factors including interest rate hikes, increase in fuel and energy costs, sluggishness in the
housing market, unemployment levels, and high household debt levels, which may affect their spending levels.
Source: Zacks Research, October 2019CVS Health Corporation (CVS)
CVS Health Corporation provides health services and plans in the United States. Its Pharmacy Services
segment offers pharmacy benefit management solutions, such as plan design and administration,
formulary management, retail pharmacy network management, mail order pharmacy, specialty
pharmacy and infusion, Medicare Part D, clinical, disease management, and medical spend
management services. The company's Retail/LTC segment sells prescription drugs and general
merchandise, such as over-the-counter drugs, beauty products, cosmetics, and personal care
products, as well as provides health care services through its MinuteClinic walk-in medical clinics.
Its Health Care Benefits segment offers traditional, voluntary, and consumer-directed health
insurance products and related services, including medical, pharmacy, dental, behavioral health,
medical management, Medicare plans, PDPs, Medicaid health care management services, workers'
compensation administrative services, and health information technology products and services.
The company's customers include employers, insurance companies, unions, government employee
groups, health plans, Medicare Part D prescription drug plans, Medicaid managed care plans, plans
offered on public health insurance exchanges and private health insurance exchanges, other
sponsors of health benefit plans, individuals, college students, workers, labor groups, and
expatriates. As of December 31, 2018, it had approximately 40 leased on-site pharmacies, 25
leased retail specialty pharmacy stores, 20 specialty mail order pharmacies, and 90 branches for
infusion and enteral services; and 9,900 retail locations and 1,100 MinuteClinic locations, as well as
operated an online retail pharmacy Websites, LTC pharmacies, and onsite pharmacies. The
company was formerly known as CVS Caremark Corporation and changed its name to CVS Health
Corporation in September 2014. CVS Health Corporation was founded in 1963 and is
headquartered in Woonsocket, Rhode Island.
Source: FinViz.com, October 2019CVS Health Corporation (CVS)
POSITIVES: Over the past three months, CVS Health outperformed its industry. The stock gained 15.7%, in
comparison to the 8.9% growth of the industry. Following the colossal 70-billion acquisition of health insurance giant
Aetna for a colossal sum of $70 billion, CVS Health has introduced a new business arm called Health Care Benefits.
This segment has already started to show strong momentum, particularly in government business. With regard to its
2020 PBM selling season, CVS Health has noted that, as of June, its gross new businesses increased by $600 million
with net new business improving by about $1.4 billion. : The soaring demand for specialty pharmacy, especially in
the on-going decade, is likely to accelerate growth for the company. This time the company encouragingly noted that
despite a slowdown in revenue growth compared to prior years on lower levels of inflation on specialty drugs and
increase in generic dispensing, the company registered strong performance overall. We are optimistic about
domestic demographic trends, which are expected to drive utilization rates for years to come as the population ages.
CVS Health exited the second quarter of 2019 with cash and cash equivalents of $6.06 billion compared with $5.89
billion at the end of the first quarter. Year-to-date, net cash provided by operating activities was $7.29 billion, as
compared to $5.29 billion a year ago. This remains perfectly on track with the company's free cash expectations for
the year.
Possible concerns: Rising pressure to reduce reimbursement rates for generic drugs, disappointing retail
performance, highly competitive market and pressure on margins provide stiff challenges to CVS Health. CVS Health
expects 2019 to be a transition year as it integrates the Aetna and expects that the following challenges may have
certain adverse impact on the operating income of its Pharmacy Services and Retail/LTC segments in 2019 compared
to 2018. Despite significant new client wins in the course of a strong selling season, intense competition and tough
industry conditions act as major impediments. Major competitors such as Walgreens, Target and Wal-Mart are
expanding their pharmacy businesses.
Source: Zacks Research, October 2019The Walt Disney Company (DIS)
The Walt Disney Company, together with its subsidiaries, operates as an entertainment company
worldwide. The company's Media Networks segment operates cable programming businesses under
the ESPN, Disney, and Freeform brands; broadcast businesses, including ABC TV Network and eight
owned television stations; and radio businesses. It also produces original live-action and animated
television programming to first-run syndication and television markets; and subscription video-on-
demand services and in home entertainment formats, as well as operates ESPN+, a direct-to-
consumer streaming service providing multi-sports content. Its Parks and Resorts segment owns and
operates the Walt Disney World Resort in Florida and the Disneyland Resort in California. This
segment also operates Disney Resort & Spa in Hawaii, Disney Vacation Club, Disneyland Paris, Disney
Cruise Line, and Adventures by Disney; and manages Hong Kong Disneyland Resort and Shanghai
Disney Resort, as well as licenses its intellectual property to a third party for the operations of the
Tokyo Disney Resort in Japan. The company's Studio Entertainment segment produces and acquires
live-action and animated motion pictures for distribution in the theatrical, home entertainment, and
television markets primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and Touchstone
banners. This segment also produces stage plays and musical recordings; licenses and produces live
entertainment events; and provides visual and audio effects, and other post-production services. Its
Consumer Products & Interactive Media segment licenses its trade names, characters, and visual and
literary properties; develops and publishes mobile games, books, magazines, and comic books;
distributes branded merchandise directly through retail, online, and wholesale businesses; offers
Website management and design; and develops and distributes online video content. The company
was founded in 1923 and is based in Burbank, California.
Source: FinViz.com, October 2019The Walt Disney Company (DIS)
POSITIVES: Disney completed the acquisition of Twenty-First Century Fox. The majority of Fox’s assets
acquired contribute to Disney’s content portfolio. Fox’s television business is expected to help the company
strengthen its TV slate globally, which has been facing some issues in terms of distribution or subscribers.
Disney’s international footprint will increase substantially post the acquisition. Notably, Fox Networks
International operates above 350 channels in 170 countries, while Star India has 69 channels serving 720
viewers per month. Disney’s Studio Entertainment segment has an impressive line-up of big budget movies
slated to be released over the next 18 months. Additionally, following Fox’s acquisition, the company’s slate of
movies releases have increased. The movies scheduled to release till Christmas include Maleficent: Mistress of
Evil, from Disney; Frozen 2 from Disney Animation; and Star Wars: The Rise of Skywalker as well as Stuber, The
Art of Racing in the Rain, Ready or Not, Ad Astra, Woman in the Window, Ford V. Ferrari, and Spies in Disguise
from the Fox Studios. Disney plans to launch its own direct-to-consumer service by November this year in the
United States. The service called Disney+ is expected to be launched in European markets in the near future.
Notably, Disney+ will feature exclusive content from Disney, Pixar, Marvel, Star Wars, National Geographic
content and Lucasfilm. Additionally, users will have access to the company’s film and television library content,
including all the theatrical releases starting with the 2019 slate. Further, to support its direct-to-consumer
(DTC) business, Disney is looking to boost FX network’s production capacity. The company is also working with
National Geographic to bring its content to its DTC platforms.
Possible concerns: Higher programming costs at ESPN, heavy investments in ESPN+ and Disney+ and softness
experienced in tourism and consumer confidence in China are factors that may hamper growth in the near
term.
Source: Zacks Research, October 2019Alphabet Inc. (GOOGL)
Alphabet Inc. provides online advertising services in the United States, Europe, the Middle East,
Africa, the Asia-Pacific, Canada, and Latin America. It offers performance and brand advertising
services. The company operates through Google and Other Bets segments. The Google segment
offers products, such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play,
Hardware, Search, and YouTube, as well as technical infrastructure. This segment also offers
digital content, cloud services, hardware devices, and other miscellaneous products and services.
The Other Bets segment includes businesses, including Access, Calico, CapitalG, GV, Verily,
Waymo, and X, as well as Internet and television services. Alphabet Inc. was founded in 1998 and
is headquartered in Mountain View, California.
Source: FinViz.com, October 2019The Alphabet Inc. (GOOGL)
POSITIVES: Alphabet is showing increased appetite in the Home Assistant space. The company made its foray
into this market in 2016 with the launch of Google Home. Google Home performs an array of tasks such as
playing music, reading books, managing calendars, answering queries, searching places, calling over cabs,
controlling smart home devices and so on. It runs on Google’s new voice assistant. Alphabet focuses on
innovation, launching products and services for multiple industries. The development and enhancements of its
search technology over time has created win-win situations wherein buyers, sellers and the public at large were
benefited. The success of this strategy led to very strong growth since inception. Google has been growing
rapidly in this fast-growing highly-competitive cloud market. The company has signed many partnerships and
has been opening data centers to extend its cloud footprint worldwide. Alphabet and Cisco announced a
partnership per which the duo will deliver an open hybrid cloud solution. The solution will enable usage and
management of applications and services across on-premises setups and the Google Cloud Platform. Google has
also partnered with Nutanix for hybrid cloud computing. The Google search engine is advanced, simple and
adaptable, all at once. This is the main reason for its leading search market share. A Jul 2016 global desktop
search market share report from netmarketshare.com says that Google had 72.5% of market share, followed by
Bing’s 10.4%, Yahoo’s 7.8% and Baidu’s 7.2%. In mobile, Google was even more dominant with a 94.9% share of
the search market globally, compared to Yahoo’s 3.0% and Bing’s 1.1%. Although the desktop was the most
popular computing device in the past, mobile search is now equally if not more popular. Alphabet has a number
of mobile initiatives. First, it is leveraging its Android OS not just to build search market share but also to drive
sales of apps and digital products through Google Play. The company continues to bring improvements with
each version of the OS, at the same time spurring app development. Online and mobile video consumption is
soaring and Alphabet remains strongly positioned here with the YouTube platform.
Possible concerns: Alphabet’s diversification strategy involves significant investment in mobile, cloud, devices
and digital goods. Growing competition and legal hassles are other headwinds.
Source: Zacks Research, September 2019Goldman Sachs Group Inc. (GS)
The Goldman Sachs Group, Inc. operates as an investment banking, securities, and investment
management company worldwide. It operates in four segments: Investment Banking, Institutional Client
Services, Investing & Lending, and Investment Management. The Investment Banking segment provides
financial advisory services, including strategic advisory assignments related to mergers and acquisitions,
divestitures, corporate defense activities, restructurings, spin-offs, and risk management; and
underwriting services, such as debt and equity underwriting of public offerings and private placements
of various securities and other financial instruments, as well as derivative transactions with public and
private sector clients. The Institutional Client Services segment is involved in client execution activities
related to making markets in cash and derivative instruments for interest rate products, credit products,
mortgages, currencies, commodities, and equities; and provision of securities services comprising
financing, securities lending, and other brokerage services, as well as the marketing and clearing of
client transactions on various stock, options, and futures exchanges. The Investing & Lending segment
invests in and originates longer-term loans; and makes investments in debt securities and loans, public
and private equity securities, and infrastructure and real estate entities, as well as provides unsecured
and secured loans through its digital platforms. The Investment Management segment offers
investment management services; and wealth advisory services consisting of portfolio management,
financial planning and counseling, and brokerage and other transaction services. The company serves
corporations, financial institutions, governments, and individuals. The Goldman Sachs Group, Inc. was
founded in 1869 and is headquartered in New York, New York.
Source: FinViz.com, October 2019Goldman Sachs Group Inc. (GS)
POSITIVES: The key source of Goldman’s earnings stability is its business diversification. Within
traditional banking, a diversified product portfolio has better chances of sustaining growth than many
other banks, which have exited some of these areas. Notably, Goldman has been undertaking initiatives
to boost the GS Bank’s business with its acquisition of the online deposit platform of GE Capital Bank in
April 2016. Though Goldman recorded 8% decrease in investment banking revenues in the first nine
months of 2019, affected by weak underwriting business, revenues recorded a three-year (2016-2018)
CAGR of 12% providing a decent support to Goldman’s top-line growth despite lower industry-wide
transactions in 2016. Nevertheless, M&A activities were strong in 2018, with the execution of many
large transactions. Steady economic growth and low interest rates in the emerging economies, along
with growth in corporate earnings on tax reforms, are likely to keep the momentum alive in the quarters
ahead. Moreover, Goldman’s solid position in worldwide announced and completed M&As will likely
give it further edge over its peers. Goldman has benefited for the past few years from its successful
expense-reduction initiatives. Backed by a solid capital position, Goldman has consistently enhanced
shareholders’ value with steady capital-deployment activities. The company’s approved 2019 capital
plan includes up to $7 billion in repurchases and $1.8 billion in total common stock dividends beginning
third-quarter 2019 through second-quarter 2020.
Possible concerns: Muted trading activities aided by low client activity may hinder top-line growth of
Goldman. Further, legal hassles and higher dependence on overseas revenues remain other headwinds
for the company.
Source: Zacks Research, October 2019GlaxoSmithKline plc, (GSK)
GlaxoSmithKline plc engages in the creation, discovery, development, manufacture, and
marketing of pharmaceutical products, vaccines, over-the-counter medicines, and health-
related consumer products in the United Kingdom, the United States, and internationally. It
operates through four segments: Pharmaceuticals, Pharmaceuticals R&D, Vaccines, and
Consumer Healthcare. The company offers pharmaceutical products comprising medicines
in the therapeutic areas, such as respiratory, HIV, immuno-inflammation, anti-virals, central
nervous system, cardiovascular and urogenital, metabolic, anti-bacterials, and
dermatology. It also provides consumer healthcare products in wellness, oral health,
nutrition, and skin health categories primarily under the Sensodyne, parodontax, Poligrip,
Voltaren, Panadol, Otrivin, and Theraflu brand names. The company offers its consumer
healthcare products in the form of nasal sprays, tablets, syrups, pods, lozenges, gum and
trans-dermal patches, caplets, infant syrup drops, gels, effervescents, toothpastes,
toothbrushes, mouthwashes, denture adhesives and cleansers, topical creams and non-
medicated patches, and malted drinks and foods. It has collaboration agreements with
23andMe; Liquidia Technologies, Inc.; SpringWorks Therapeutics, Inc.; Merck KGaA.; and
Lyell Immunopharma. GlaxoSmithKline plc was founded in 1715 and is headquartered in
Brentford, the United Kingdom.
Source: FinViz.com, October 2019GlaxoSmithKline plc, (GSK)
POSITIVES: Glaxo's three newest products — Trelegy Ellipta, Shingrix and Juluca — are doing well. They coupled
with buyout of Novartis’ stake in the Consumer Healthcare JV have strengthened its competitive position. The
company’s diversified base and presence in different geographical areas should help support revenues.
Expansion into markets like Japan and emerging markets should provide new opportunities for growth. The
company has made significant progress in expanding its presence in emerging markets by acquiring product
portfolios from companies like Bristol-Myers and UCB. Glaxo is focused on oncology, immuno-inflammation, HIV
and respiratory therapeutic areas. The company has terminated or divested around 80 pipeline programs since
2017 as those showed less potential to succeed, allowing the company to focus more on the most promising
assets. Glaxo has had major positive data read-outs on multiple new medicines in HIV, oncology, immuno-
inflammation and respiratory in 2019 so far with many other scheduled for the second half. The successful
development and commercialization of the pipeline candidates should boost the company’s top line. Glaxo has
made a significant progress in its oncology pipeline recently and now has 16 assets in development, double from
8 as of July 2018. Glaxo has delivered annual cost savings of more than £3 billion following the Novartis
transaction. These cost savings have helped the company overcome pricing pressure and decline in sales of key
brands like Seretide/Advair/Avodart despite significant promotional investment behind new products
Possible concerns: A generic version of its top-selling drug Advair has been launched, which is significantly
eroding Advair’s sales. Glaxo’s top line is under significant pressure due to generic competition faced by key
products. Products like Lovaza and Avodart are facing declining sales due to intense generic competition. In
addition to facing generic competition, most of Glaxo’s products are up against significant competition from
small as well as large pharmaceutical companies. Advair is facing stiff competition in the COPD and asthma
market from AstraZeneca’s and Merck’s respiratory disease drugs. Glaxo’s Consumer Healthcare segment faces
competition from big companies like Colgate-Palmolive, Johnson & Johnson, Procter & Gamble and Pfizer.
Glaxo’s Consumer Healthcare business has been affected by certain supply interruptions. In addition, there are
many small companies that compete with Glaxo in certain markets. Loss of market share due to intense
competition will severely impact Glaxo’s top line.
Source: Zacks Research, October 2019You can also read
