Scalper1 News
I’ve created Project $1M to try and attain a $1M capital base from growth stocks in 11 years. I’m focused on including stocks that have a moat and some strong growth drivers. I will introduce the next 6 stocks in the list in this update. I introduced the concept of my growth oriented model portfolio in a previous article. The focus of that portfolio was directed toward achieving a $1M capital base in approximately 11 years, starting from a base of $217,500. I introduced the first 6 stocks in the portfolio last week. I’d like to introduce the next 6 stocks in the portfolio in this update and show how the portfolio currently stands. LinkedIn (NYSE: LNKD ) – The reason that I’ve included LinkedIn in my portfolio is because I view LinkedIn as the flip side to Facebook (NASDAQ: FB ). LinkedIn is an indispensable tool for professional networking that enterprises and recruiters are increasingly eager to tap into. Similar to the case with social networks, the platform with the largest set of professional contacts is the one that more users will ultimately wish to join. Similarly, the platform with the greatest user base is the one that advertisers and marketers will gravitate toward. LinkedIn’s rise has been pretty stratospheric, and the company now has close to 350M users in less than a decade. LinkedIn has a variety of revenue generating opportunities open to it, including enterprise talent acquisition as well as advertising, which it has just started to play a role in. Business to business advertising is a $30B annual market. The market for recruiting tools is also estimated at over $35B. I believe LinkedIn has at least a decade of double digit revenue growth. NovoNordisk (NYSE: NVO ) has a lock on the insulin supplied diabetes market, with the firm estimated to control roughly 30% of the overall market. Novo has returns on capital in excess of 60% over the last few years and has increased revenues more than 3x over the last decade. The market for insulin dependent diabetes is close to $30B currently. This is only expected to increase as an increasing number of obesity cases triggers a greater percentage of insulin dependent diabetes. Market growth estimates for the next 5 years are for approximately 6% volume growth in insulin supplies, and as the market leader, NovoNordisk will likely see volume growth slightly higher than this. Novo should also be able to implement pricing increases to take annual revenue growth of close to 10% over the next 5 years, if not beyond. Core Labs (NYSE: CLB ) provides yield enhancement services to the oil and gas industry. Essentially, the company works with oil and gas companies to help them best optimize their oil fields to extract the maximum level of output. With oil and gas producers recently reducing capex levels and investment on fields offering marginal profitability, Core Labs has experienced some revenue pressure. However historical returns on capital have been quite exceptional and even now remain close to 40%. Core Labs helps its clients identify the best sites for new production, as well as maximize returns on existing assets. As such, it is fairly well positioned across all aspects of the production life cycle. Once the oil price recovers over the next few years, I expect Core Labs will once again resume its uptrend in revenue growth. Moody’s (NYSE: MCO ) is a strong part of the debt rating oligopoly along with S&P and Fitch, and has managed consistent, double digit EPS growth for the last 5 years. The debt ratings business has particularly strong barriers to entry, and natural incentives on the part of those in the ecosystem to keep the number of ratings players low. Too many different ratings providers allows companies to “ratings shop” in a bid to get the best rating from an issuer. This relative industry strength and the lack of any real price competition is reflected in Moody’s return on invested capital, which is in excess of 30%. While the last few years have been a bonanza for Moody’s as companies have issued significant debt to take advantage of low interest rates, I expect Moody’s will still see strong revenue growth over the medium term as low interest rates continue to persist, and industry structure remains favorable. Starbucks (NASDAQ: SBUX ) is synonymous with coffee, and increasingly teas and pastries. The stock has a long-term track record of delivering excellent returns for its investors. In fact, a $10,000 investment in SBUX made in 1992 would be worth $1.93M today. This reflects a return over time of just under 25.5% annually. One of the things that distinguish Starbucks compared to other retailers is the company’s willingness to experiment with new concepts. Starbucks recently announced a partnership with Dannon to provide a range of yoghurt based products into the store. The US market for yogurt is worth approximately $7B and has grown at an average rate of 8.5% annually, according to EuroMonitor, so Starbucks presence in the space stands to be a nice contributor to the company’s bottom line. Starbucks’ extensive store footprint and brand perception gives the company license to extend its in-store offering to other product categories, such as smoothies and teas, which the company is beginning to offer. Starbucks still manages double digit revenue growth, with an impressive return on equity that is over 30%. Resmed (NYSE: RMD ) is one of the key solution providers for the sleep apnea market. The company controls almost 40% of CPAP instruments. A large portion of the population with sleep apnea is still undiagnosed, so Resmed likely has years of growth ahead of it. The company has managed mid teens EPS growth for most of the last decade, with a return on invested capital in the high teens. A launch of in home solutions will likely further open up the market for apnea sufferers who have severe sleeping problems, but who haven’t been inclined to go to sleep labs to get the appropriate testing for diagnosis. The 12 names that existing in the Project $1M portfolio, and their respective weightings are shown below. Name Shares Held $ Market Value % Weight Baidu Inc ADR (NASDAQ: BIDU ) 54 10,123.38 6.4% Core Laboratories NV 64 7,445.12 4.7% Facebook Inc Class A 99 10,095.03 6.4% LinkedIn Corp Class A 42 10,116.54 6.4% MasterCard Inc Class A 305 30,191.95 19.1% Mercadolibre Inc 102 10,033.74 6.3% Moody’s Corporation 156 15,000.96 9.5% Novo Nordisk A/S ADR 235 12,497.30 7.9% Priceline Group Inc 7 10,179.68 6.4% ResMed Inc 174 10,024.14 6.3% Starbucks Corp 201 12,576.57 8.0% Visa Inc Class A 256 19,860.48 12.6% Project $1M 158,144.89 100 Scalper1 News
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