E Portfolio Highlights: From Hold To Buy - March 2020

Quarterly Rating Change From Hold to Buy
The recent correction has brought many high quality companies back into buying range thanks to more attractive valuations.

AUTOMATIC DATA PROCESSING FREE CASH FLOW +21%
Automatic Data Processing (ADP) reported fiscal second quarter revenues rose 6% on an organic basis to $3.7 billion with EPS jumping 18% to $1.50. Free cash flow increased 21% during the first half of fiscal 2020 to $1.0 billion with the company paying $686 million in dividends and repurchasing $615 million of common stock. ADP has increased its dividend for 45 consecutive years, one of only 30 companies with such a remarkable dividend track record. The dividend currently yields an attractive 2.3%.

We are adding to our position. Buy.

BANK OF HAWAII 3.5% DIVIDEND YIELD
Bank of Hawaii (BOH) reported 2019 EPS rose 6% to $5.56. Return on shareholders’ equity for the year was a solid 17.6%. The bank’s asset quality, capital and liquidity all remain strong. The Board increased the share repurchase authorization by an additional $100 million.

The dividend currently yields a splashy 3.5%. Buy.

ROSS STORES $1.3 BILLION BUYBACK
Ross Stores (ROST) reported fiscal third quarter revenues rose 8% to $3.8 billion with EPS up 13% to $1.03. Comparable store sales increased a strong 5% in the quarter driven by both traffic and average basket size.

For the full year, Ross Stores expects to buy back $1.275 billion in common stock. Buy.

NIKE DOUBLE-DIGIT GROWTH
Nike (NKE) reported fiscal 2020 second quarter sales increased 10% to $10.3 billion with net earnings jumping 32% to $1.1 billion. During the second quarter, Nike repurchased 10.1 million shares for about $922 million, or $91.29 per average share, as part of the four-year, $15 billion repurchase program approved by the Board of Directors in June 2018. Buy.

PAYCHEX 42% RETURN ON EQUITY
Paychex (PAYX) reported fiscal second quarter revenues rose 15% to $990.7 million with net income up 10% to $258.7 million. Return on shareholders’ equity over the trailing 12 months was a stellar 42%. Free cash flow increased a robust 16% during the first half of the year to $505 million thanks to higher earnings and working capital changes. For fiscal 2020, Paychex raised their financial outlook with EPS growth expected to increase in the range of 9% to
10%. Buy.

T. ROWE PRICE INCREASED DIVIDEND 18%
T. Rowe Price (TROW) reported that assets under management increased 25% to end the 2019 year at $1.21 trillion, reflecting asset inflows and market capital appreciation. In 2019, revenues rose 5% to $5.6 billion with net income up 16% to $2.1 billion. Return on shareholders’ equity was an impressive 30% in 2019.

The Board increased the dividend 18.4%, marking the 34th consecutive year of dividend increases. We are adding to our position. Buy.

TRACTOR SUPPLY 36% RETURN ON EQUITY
Tractor Supply (TSCO) reported 2019 sales increased 5.6% to $8.4 billion with EPS growing 8.1% to $4.66. Return on shareholders’ equity for the year was a strapping 36%. Free cash flow increased a robust 43% during the year to $594 million with the company paying $163 million in dividends and repurchasing 5.4 million shares of common stock for $533.3 million at an average cost of $98.76 per share. Fiscal 2020 sales are expected to increase 5%-6% with EPS growth of 5%-9%. Buy.

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