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Published on Oct 18, 2016
Don't
punt on your CBS shares just because professional football ratings are
down this season. The media giant's digital initiatives and steady diet
of share buybacks will help the stock over the long-term, said Erin
Gibbs, portfolio manager at S&P Investment Advisory Services. "CBS
is seeing increasing revenues, margins and earnings. The Wall Street
consensus estimate is for long term earnings per share growth of 19%,"
said Gibbs. "Meanwhile, the stock is trading at 13 times its forward
earnings, well below its three year average, as well as that of the
sector." Shares of CBS are up 18% thus far in 2016. Gibbs is also
bullish on Constellation Brands , up 17% year-to-date, saying its recent
acquisitions are supporting growth in both the beer and wine segments.
The stock is trading at 23 times its forward earnings, higher than the
sector's average of 20, but Constellation has significantly higher
growth. Monsanto , up 3% year-to-date, is another one of Gibbs' top
picks. Bayer AG offered $128 per share to acquire Monsanto last month.
There are many regulatory hurdles and it is expected that the companies
will have to shed some businesses for approval. But it is expected to be
approved and contribute to higher margins. "Either you make money from
the Bayer merger if it gets completed or you are looking at 9% growth
and the leader in GMO technology. So it's a win/win situation," said
Gibbs. " Finally, Gibbs is a fan of healthcare provider Aetna , up 3%
year-to-date. The stock has taken a beating now that it looks unlikely
that the Humana deal will be approved. And Aetna would owe Humana a $1
billion breakup fee due to an antitrust termination. Plus, every time
healthcare is brought up in the election, healthcare stocks take another
beating. But in spite of the merger rejection and headlines, Aetna
looks extremely well valued, according to Gibbs. "We don't think the
deal is going to get done but the headline risk is creating a cheap
stock in the meantime," said Gibbs.
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