In 2016 with the worst start to a new year ever, the U.S. stock market continues to experience extreme volatility with triple-digit moves in the Dow Jones Industrial Average index occurring on almost a daily basis. Concerns about China, commodities, credit and currency, along with the first Fed rate hike in years, is contributing to a rollicking roller-coaster ride for investors. During the past three months amid high volatility, the S&P 500 index pulled back 6.4%. The following HI-quality stocks all generated positive gains during same period.
Michael Kors Aggressive Buyback
Michael Kors (KORS) reported third fiscal quarter revenues rose 6% to $1.3 billion with net income down 3% to $294.5 million and EPS up 7% to $1.59 on lower shares outstanding. During the third quarter, the company repurchased 4.6 million of its own shares for $200 million at an average price of $42.72 per share.
Management expects to continue to be aggressive with its share repurchases with $558.1 million remaining authorized for future share repurchases. For fiscal 2016, management reaffirmed its outlook for total revenue to approximate $4.65 billion with EPS in the range of $4.38-$4.42. From depressed valuation levels, Michael Kors stock price rebounded a dressy 32% during the past quarter. Hold.
Hormel Foods Fat Profits
Hormel Foods (HRL) reported first fiscal quarter sales declined 4% to $2.3 billion on a 3% volume decline with net earnings increasing a meaty 37% to $235 million. Sales were muted by turkey supply constraints due to last year’s avian influenza outbreak and lower pricing in pork markets. Hormel Foods is constructing a new plant in China to produce SPAM. Hormel raised its fiscal 2016 EPS outlook to a range of $1.50-$1.56, representing 14%-18% growth. Hormel’s stock has delivered a fat 705% total return over the last 15 years. Hold.
CPSI Dividend Yields 4.6%
In 2015, Computer Programs & Systems Inc. (CPSI) generated a 23.8% return on shareholders’ equity. After yearend, CPSI completed the acquisition of Healthland, adding $150 million in long-term debt and two million additional shares of common stock to its capital structure. The long-term debt to equity ratio should approximate 1:1. Management is committed to paying down the debt in a reasonable manner while continuing to pay its healthy
dividend, which currently yields 4.6%. The outlook for CPSI in 2016 is for a return to growth. The Healthland operations will add approximately $100 million to sales in 2016. Earnings will also jump ahead in 2016 with adjusted non-GAAP earnings per share expected in a range of $3.47 to $3.64 per
share. CPSI’s stock rebounded 10% during the past quarter. Hold.
