April Top Picks Based On Seasonal Trends
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April is nearly upon us and the CressCap team is excited to see all the fresh growth this spring. It’s not just the flowers and plants popping up in April, we anticipate a few stocks to climb in the month to come. We use proprietary algorithms to identify the best monthly trades, based on a particular stock’s history of positive performance during the month over the last 10 years. Our objective for the upcoming month is to combine computer-driven analysis that assesses solid fundamentals with strong seasonal behavioral patterns to determine a handful of timely recommendations for the month of April.
Deere & Company (DE-US)
Our strongest seasonal recommendation is also showing 10 years of finishing April in the green. Deere & Company is a producer of tractors and other farm and forestry equipment with $48.83 billion market cap. The stock is an A+ rated buy recommendation according to CressCap analysis. Deere is in the 97.4% sector percentile and EPS continue to be revised higher for FY1 and FY2. In addition to the A+ grade for EPS revisions, analysts have moved the 2019 annual consensus estimates up in the last 90 days to a current estimate of $11.27 from $8.29. Deere growth is truly exceeding expectations and the earnings momentum may be setting up the perfect springboard for the stock to take off in April. The company is also extremely profitable. The firm’s ROE is 26.85% and it holds a CressCap grade of A relative to the sector. Its operating margin also stands at 19% and exhibits a grade of B relative to the sector. The momentum of this company, reflected in a 1yr market cap change of 40.36% relative to a sector change of 7.19%, implies there has been strong investor demand for the shares. On a P/E and PEG basis, the stock’s multiples are in line with the sector. The company’s strong financial metrics, coupled with its April success consistency, should make Deere a timely buy this month.
WABCO Holdings (WBC-US)
WABCO Holdings is a producer of electromechanical products with a 10-year track record of trading up in April. The stock has risen a monthly average of 8.07% over the past 10 years, but that’s far from the only reason to bet on this stock. WABCO touts ROC and ROI metrics that have achieved A grades in our sector relative evaluations. Although WABCO is not currently a buy-rated stock on CressCap’s computer platform, analysts have been revising their projections up and we think this is a good foundation for the stock to climb in the month ahead. Our parameters prevent stocks with F grades from being recommended as a buy, and in this case, the overall value grade is preventing the stock from being recommended. However, when we looked deeper into the underlying value metrics, we found that price to cash flow is an A- relative to the sector, so it is not a total loss on the value component. With a CressCap growth grade of D+, the stock also possesses poor overall growth compared to the sector. However, the 2-year forward sales growth grade is B+, a strong forward indicator. This may be just enough to see this perennial return for positive returns this April.
Williams Companies (WMB-US)
Williams is an energy and natural gas giant that reaches customers across the U.S.. If behavioral patterns kick in this April for the stock, as we think they will, it will truly exemplify these seasonal patterns. Over the last 10 years, the average growth of 8.17% for April is very impressive. In addition to having risen in each of the last 10 years, this April finds William’s current valuation at an excellent value. The current year P/E and EV/EBIT ratios boast a grade of A and there are a number of other metrics that display the stock is inexpensive. In full disclosure, the stock has been on a downward path and the stock keeps getting cheaper. Additionally, the stock has relatively unimpressive grades for growth and momentum. The traditional April rally may be just what the stock needs to halt its recent downward momentum. On a positive note, what really caught our eye for this stock, as a monthly trade, were its profitability metrics. Profitability as a whole is graded an A+, following net income margins and operating margins of A+ and A, respectively. Furthermore, the current return on equity is 30.41%; substantial against a sector ROE of 11.61%.
FMC Corporation (FMC-US)
Our next April pick, FMC Corporation, produces agricultural chemicals and technology and lithium products. The company operates its lithium production from Argentina. Following a global increase in the demand for lithium to produce goods like batteries, FMC announced that it intends to invest $300 million, doubling its production in the next two years. The company has a 2yr forward sales growth grade of A+, blowing the rest of the sector out of the water at 65.8 % compared to 13.6%. FMC’s gross profit margin, graded A, makes its profitability very attractive as well. Like our other picks, FMC has seen positive price movement every year over the past 10 years, providing a high probability for this year. Sales appear to be showing the same upward trend, with FMC’s 2yr forward sales growth rate earning an A+ grade.
Written By: Steven Cress (steven.cress@cresscap.com) and Tela Wittig (tela.wittig@cresscap.com)
