Here's my analysis for a few more stocks I looked at in my recently published, Stocks Wanted for 2016.
The book (which you can buy at the Amazon Kindle store or get for free by subscribing to Trading With Cody), covers 78 stocks that I analyzed for 2016 -- many of which I reviewed at Real Money readers' request.
Below is a rundown of my analysis and "Revolution Investing Ratings" for stocks from four different sectors:
First Data Corp. (FDC)
First Data provides electronic commerce-and-payment solutions for merchants, financial institutions and card issuers.
That's a hot area, but FDC is competing in the space against Alphabet (GOOG, GOOGL), Amazon (AMZN), Apple (AAPL), PayPal (PYPL), Square (SQ) and others. And a look at the company's nearly $20 billion in net debt (vs. $8 billion of revenues) should make you want to run for the hills.
I also believe former owner KKR wrung every dollar possible out of First Data when the company was private. I don't like to buy when a private-equity firm is doing the selling.
Revolution Investment Rating: 5/10
This medical-device giant pays a decent dividend and is growing at just about the same rate as the broad U.S. economy.
But MDT borrowed tens of billions of dollars to do acquisitions and has bought back billions of dollars of its own stock when it could have been building a war chest and investing in the future.
The stock isn't cheap at 12x next year's earnings, and it looks even more expensive when you account for all that debt that MedTronic carries. I also worry that health-care regulators will squeeze the company's margins in coming years.
Revolution Investment Rating: 4/10
Pure Storage (PSTG)
This high-growth company is in the (formerly?) hot sector of cloud-data storage, but is currently losing money.
PSTG has a strong balance sheet with no debt, as it did good job of getting as much money possible out of its initial public offering. But with losses ahead for the next year or two (at least), this stock has some serious downside risk even if growth eventually justifies its current $2.6 billion market capitalization.
That market cap is 7x estimated 2016 sales, so Pure Storage is far from cheap. But with 50% topline growth and a high-gross-margin business, I suppose you could consider the stock "cheap" if you view it as a venture-capital-type investment.
Revolution Investment Rating: 7/10
Southwestern Energy (SWN)
Why would anyone invest in a company that allowed its balance sheet to reach nearly $5 billion in debt and just a few million dollars in cash? I wouldn't.
There are better fish to fry out there with stronger net-cash balance sheets. And with energy prices down 60% year over year heading into 2016, Southwestern can expect negative sales growth for the year.
Revolution Investment Rating: 2/10
As a bonus, here's a stock I was asked about this morning in the Trading With Cody chat room:
National Oilwell Varco (NOV)
NOV has a relatively strong balance sheet -- $3 billion in cash and $3 billion in debt at a time when most energy firms that I've looked at are highly leveraged with little cash.
But National Oilwell sells oil-and-gas equipment and oilfield services, a business line that looks like it's about to see its customer base totally collapse. I don't know much about NOV, but I wouldn't want to try to game this stock at all.
The Bottom Line
As I'm already long a dozen stocks, I'm not in a rush to add any of the names above. However, I have PSTG on my watch list.