New Stocks On Most Attractive/Most Dangerous: January 2017

Recap from December Picks

Our Most Attractive Stocks (+5.5%) outperformed the S&P 500 (+2.2%) last month. Most Attractive Large Cap stock InterDigital (IDCC: $91/share) gained 18%. Most Attractive Small Cap stock Francesca’s Holdings (FRAN: $19/share) was up 19%. Overall, 27 out of the 40 Most Attractive stocks outperformed the S&P 500 in December.

Most Dangerous Large Cap stock Dollar Tree (DLTR: $78/share) fell by 11% and Most Dangerous Small Cap Stock VOXX International (VOXX: $5/share) fell by 5%. Overall, 13 out of the 40 Most Dangerous stocks outperformed the S&P 500 in December.

The successes of the Most Attractive and Most Dangerous stocks highlight the value of our forensic accounting as featured in Barron’s. Our research helps clients fulfill fiduciary duties when making investment recommendations.

14 new stocks make our Most Attractive list this month and 10 new stocks fall onto the Most Dangerous list this month. January’s Most Attractive and Most Dangerous stocks were made available to members on 1/4/17.

Our Most Attractive stocks have high and rising returns on invested capital (ROIC) and low price to economic book value ratios. Most Dangerous stocks have misleading earnings and long growth appreciation periods implied by their market valuations.

Most Attractive Stocks Feature for January: Hasbro Inc. (HAS: $83/share)

Hasbro Inc. (HAS), global toy and game manufacturer, is one of the additions to our Most Attractive stocks for January. We recently featured Hasbro in September 2016 when it was added to our Exec Comp Aligned With ROIC Model Portfolio. Despite the stock rising 6% since the publish date (S&P 500 +4%), HAS remains undervalued.

Over the past decade, Hasbro has grown after-tax profit (NOPAT) by 10% compounded annually to $542 million in 2015 and $599 million over the last twelve months (TTM). Per Figure 1, Hasbro has also improved its NOPAT margin from 7% in 2005 to 12% TTM.

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Disclosure: David Trainer, Kyle Guske II, and Kyle Martone receive no compensation to write about any specific stock, style, or theme.

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