In 2016 with the worst start to a new year ever, the U.S. stock market continues to experience extreme volatility with triple-digit moves in the Dow Jones Industrial Average index occurring on almost a daily basis. Concerns about China, commodities, credit and currency, along with the first Fed rate hike in years, is contributing to a rollicking roller-coaster ride for investors. During the past three months amid high volatility, the S&P 500 index pulled back 6.4%. The following HI-quality stocks all generated positive gains during same period.

Michael Kors Aggressive Buyback

Michael Kors (KORS) reported third fiscal quarter revenues rose 6% to $1.3 billion with net income down 3% to $294.5 million and EPS up 7% to $1.59 on lower shares outstanding. During the third quarter, the company repurchased 4.6 million of its own shares for $200 million at an average price of $42.72 per share. 

Management expects to continue to be aggressive with its share repurchases with $558.1 million remaining authorized for future share repurchases. For fiscal 2016, management reaffirmed its outlook for total revenue to approximate $4.65 billion with EPS in the range of $4.38-$4.42. From depressed valuation levels, Michael Kors stock price rebounded a dressy 32% during the past quarter. Hold.

Hormel Foods Fat Profits

Hormel Foods (HRL) reported first fiscal quarter sales declined 4% to $2.3 billion on a 3% volume decline with net earnings increasing a meaty 37% to $235 million. Sales were muted by turkey supply constraints due to last year’s avian influenza outbreak and lower pricing in pork markets. Hormel Foods is constructing a new plant in China to produce SPAM. Hormel raised its fiscal 2016 EPS outlook to a range of $1.50-$1.56, representing 14%-18% growth. Hormel’s stock has delivered a fat 705% total return over the last 15 years. Hold.

CPSI Dividend Yields 4.6%

In 2015, Computer Programs & Systems Inc. (CPSI) generated a 23.8% return on shareholders’ equity. After yearend, CPSI completed the acquisition of Healthland, adding $150 million in long-term debt and two million additional shares of common stock to its capital structure. The long-term debt to equity ratio should approximate 1:1. Management is committed to paying down the debt in a reasonable manner while continuing to pay its healthy
dividend, which currently yields 4.6%. The outlook for CPSI in 2016 is for a return to growth. The Healthland operations will add approximately $100 million to sales in 2016. Earnings will also jump ahead in 2016 with adjusted non-GAAP earnings per share expected in a range of $3.47 to $3.64 per
share. CPSI’s stock rebounded 10% during the past quarter. Hold.

Fastenal Increased Dividend 7%

Fastenal (FAST) reported 2015 revenues rose 4% to $3.9 billion with net income up 5% to $516.4 million and EPS up 5% to $1.77. Fastenal hammered out an impressive 28.7% return on shareholders’ equity in 2015.

Fastenal’s business in 2015 was hit hard by the slowdown in business with customers in the oil and gas industry with the “industrial economy in a recession.” Despite this, free cash flow jumped 26% to $392 million. Fastenal recently increased its dividend 7% and expanded its share repurchase program by two million shares. The dividend currently yields 2.7%. Fastenal’s stock is up more than nine-fold over the last 16 years. Hold.

Procter & Gamble $15-$16 Billion Distributions

Procter & Gamble (PG) reported second fiscal quarter sales declined 9% to $17 billion on an 8% foreign currency headwind with EPS from continuing operations increasing a tidy 10% to $1.01 on continued cost reductions. Operating cash flow was $4.5 billion for the quarter and adjusted free cash flow productivity was 117%. The company continues to expect to retire shares at a value of approximately $8-$9 billion through a combination of direct share repurchases and shares that will be exchanged in the Duracell transaction with Berkshire Hathaway. In addition to the share retirements, Procter & Gamble expects to pay dividends of more than $7 billion for a total of $15-$16 billion in dividend payments, share
exchanges and share repurchases in fiscal 2016. Procter & Gamble’s stock rose a pampered 8% during the past quarter. Hold.

TJX Increased Dividend 24%

Fiscal 2016 marked TJX Company Inc.’s (TJX) 20th consecutive year of increases in comp sales and EPS with sales topping $30 billion. During fiscal 2016, TJX generated an impressive 53% return on shareholders’ equity and $2 billion in free cash flow. The company returned nearly $2.4 billion to shareholders through dividends of $544 million and share repurchases of $1.8 billion during fiscal 2016. TJX announced plans to stuff shareholders’
wallets with a 24% dividend increase, marking the 20th consecutive year of dividend increases. Over the past 20 years, TJX’s dividend has grown at a
compound annual rate of 23%. The company also announced plans to repurchase $1.5 to $2 billion of TJX stock during fiscal 2017. Over the past 16 years, TJX’s stock price has risen a fashionable 1,375%. Hold.

Express Scripts 10% Free Cash Flow Yield

Express Scripts (ESRX) reported revenues rose 1% in 2015 to $101.8 billion with net income increasing 23% to $2.5 billion and EPS up 35% to $3.56. On an adjusted basis, excluding specified items, EPS rose 13%. Return on shareholders’ equity for the year improved to 14.4%. Express Scripts retained 97% of its clients, which was their strongest retention year ever, and also enjoyed a good 2016 selling season.

Free cash flow increased 11% during 2015 to $4.6 billion. The company repurchased 64.2 million of its own shares for $5.5 billion during 2015 at an average price of approximately $85.67 per share. The company recently announced a new $2.8 billion accelerated share repurchase program for 2016.

As Express Scripts celebrates its 30th anniversary in 2016, the company raised the lower end of its adjusted EPS guidance, which excludes amortization of intangible assets, to a range of $6.10-$6.28, representing 10%-14% growth. Cash flow provided by operating activities in 2016 is expected in the range of $4.6-$5.1 billion, representing a cash flow yield of approximately 10% based on the company’s current market capitalization. Express Scripts’ stock price pulled back after their largest customer, Anthem, claimed they are overpaying ESRX by $3 billion annually. Express
Scripts’ management disagrees and is hopeful that they can reach an agreement with Anthem through ongoing negotiations.

While the negotiations pose a business risk, Express Scripts’ stock price appears to more than reflect this risk. Buy.

Factset Research $250 Million Buyback

FactSet Research Systems (FDS) reported first fiscal quarter revenues increased 12% to $270.5 million with net income up 7% to $60 million and EPS up 8% to $1.43. Growth of Annual Subscription Value, the forward looking revenues for the next 12 months from all services currently supplied to clients, accelerated 9.4% to $1.1 billion and user count grew 14% to 63,169. Annual client retention rate increased to 95%, up from 93% a year ago.

FactSet borrowed $265 million under its existing revolving credit facility during the quarter to purchase Portware, an award winning, multi-asset execution management system trusted by the world's largest asset managers.

During the quarter, FactSet Research generated $57 million in free cash flow, down 15% from last year on higher capital expenditures, primarily related to the build-out of the company’s New York City office space. During the first quarter, FactSet Research repurchased 250,000 shares for $41.9 million, or $167.60 per share. FactSet’s Board recently approved a $250 million expansion of the existing share repurchase program, bringing the total currently authorized for repurchase to $342.3 million. During the past 12 months, FactSet has returned $318.4 million to stockholders in the form of share repurchases and regular quarterly cash dividends, funded entirely by cash generated from operations.

With FactSet Research Systems’ stock pulling back, it is a fact that the stock once again appears reasonably valued. Buy.

Abbott Acquiring Alere For $5.8 Billion

Abbott Labs (ABT) reported sales increased 0.8% in 2015 to $20.4 billion with EPS from continuing operations increasing 54% to $1.72. Full year 2016 revenues are expected to grow in the low single digits after a 4% foreign currency headwind and reported earnings are expected in the $1.55 to $1.65 range, including an estimated $0.55 charge from specified items.

Abbott plans to acquire Alere (ALR) for $5.8 billion in cash, significantly advancing Abbott's global diagnostics presence and leadership. Abbott's total
diagnostics sales will exceed $7 billion after the close. The transaction will be immediately accretive to Abbott's EPS upon close and significantly accretive thereafter, with approximately 12-13 cents of accretion in 2017 and more than 20 cents in 2018. During the past quarter, Abbott increased the
company's quarterly dividend 8.3%, marking the 44th consecutive year of dividend increases. Hold.

Polaris Increased Dividend 4%

Due to macroeconomic headwinds and currency and competitive pressures, Polaris Industries (PII) reported weaker than expected results in 2015 with sales up 5% to $4.7 billion and EPS up 2% to $6.65. Nevertheless, thanks to strong cash flows, Polaris increased its dividend 4%, marking the 21st consecutive year of dividend increases. Polaris also announced an increase in the stock repurchase authorization by 7.5 million shares, bringing the total share repurchase authorization up to about 16% of the company’s currently outstanding shares. Hold.