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Several 1990s 'Original Gangsters' Poised For Long-Term Breakouts

Some '90s growth giants are starting to stir after years spent revamping their business models.

Microsoft is the first growth tech giant of the '90s to break out above its Spring 2000 high.

Coca-Cola is not too far from its August 1998 all-time high after having dramatically underperformed the S&P 500 since the late '90s.

As a product of the 1980s and 1990s bull market, the original gangstas, to me, were the tech giants of that era, as well as the granddaddies of them all, General Electric (NYSE:GE) and Coca-Cola (NYSE:KO). (Coke's run started in the mid '80s and lasted until the Long-Term Capital Management Crisis of August 1998.)

Here are five OGs of the '90s that will likely make runs at their all-time highs -- keep in mind that technically, it is considered very bullish for a stock to break out above a previous multi-year high.

Microsoft (NASDAQ:MSFT) traded above its January 2000 high point of $53.81 on October 26, 2015, and closed the day just there at its new all-time high on very good volume.

Microsoft rose 9% on heavy volume last Friday, October 23rd, after reporting solid earnings and revenue growth. More importantly, operating margin expanded 300 basis points after the stock had consolidated in the last year, hovering between $40 and $50 per share. (Here is another perspective on why MSFT moved sharply on the latest earnings report.)

Microsoft lagged the S&P 500 badly from the March 2009 low until April 2013, when ValueAct announced a 1% stake in the software giant, and the board began rethinking Microsoft's long-time leadership.

Like a lot of the tech giants of the '90s, Microsoft is trying to reposition itself into the growth businesses of the next decade, while the legacy Windows business generates enormous cash flow.

Forward EPS estimate increases were rather tepid for Microsoft for the rest of their fiscal year (ends June 30, 2016) but few seem to be noting that MSFT is expecting mid-teens EPS growth over the next three years (fiscal 2016 to 2018). It is tough to find that kind of earnings growth in "old tech" along with a reasonable valuation.

Using a $3.50 "core" earnings number, with a 20(x) multiple (still a reasonable multiple relative to earnings growth), MSFT should trade to $70 per share in the next few years pretty easily.

The technical breakout was just the start, and this is without any real meaningful return of capital from overseas.

For the growth giants of the 1990s, MSFT is the first to take out its tech-bubble high, which is definitely a positive sign.

A close back below $50 or the November 2014 high would not be a positive.

Coca-Cola: Readers might be surprised at this one, but the all-time high for Coca-Cola was in July 1998, when the stock topped out at $44.47 and peaked with the SP 500 just before the Long-Term Capital Management crisis hit capital markets like a tsunami.

In July 1998, the S&P 500 traded between 1180 and 1190, while today it sits at 2055 to 2,060 -- 74% higher than the last time Coca-Cola hit a meaningful (and higher-volume) all-time high. (Note: KO traded to $45 in late 2014, but each time the stock nears that July '98 high, it gets rejected and trades back to the high $30s.)

KO has started to be bought again for clients, since the world's largest beverage company is starting to grow its non-carbonated soft drink business, and has embarked on a cost-cutting program to improve margins in the face of tepid revenue growth.

KO has not made a meaningful all-time high in 17 years. Constant currency revenue growth in the September 2015 quarter was +3%, while revenue, operating income, and...


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