4 Stocks I Own! July 2018
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This is 4 stocks I own July 2018! In this series i talk about my 4 biggest stock market holding going into July 2018! Enjoy!
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For stocks I own July 2018 edition welcome in if you are new here I am Jeremy. This is a financial education channel. And today we get to do my favorite series we do every single month at the beginning of the month talking about my four biggest stock market investments going into the next month guys.
I love this series just kind of talking about why I like these particular stocks, why they’re my biggest positions right now. And as always, let’s just get right into this if you have not already follow me on Instagram.
Make sure you follow me on Instagram posting a lot of content on Instagram now, especially if you’re in the stock market stuff definitely follow me on there. Alright, my fourth the biggest investment in the entire stock market right now is in a company named Callaway ticker symbol, Eli All right.
Callaway is a golf company. They also own a few other clothing brands, the one they just bought the past year, which is Travis Matthews, which I’m really excited about another one called ojio.
That does a few different things. And it’s a company that has a pretty small market cap of about $1.7 billion market cap or so they do over a billion dollars in sales as a business that has really turned around in a big, big way that I’m excited about.
If you look here, okay, they are dominant in pretty much every market they really want to compete in in the golf game. Okay. In the United States, the number one in total clubs. All right, huge market share their huge market share in Europe.
Massive market share in Japan massive market share in Korea, they’re the creme de la creme in all the markets, they compete, which is one of the biggest things I look at an investment I’m really want like that top brand.
Or if there’s somebody coming up, then maybe they have a chance to be that top brand someday. Callaway has been one that’s been taking market share from competitors over and over again. We’ll look at some stuff here in just a second.
A matter of fact, it’s on this slide here. Okay, this is a US market, okay, the US retail hardgoods market share, look at the way they’ve increased their market share over the years. All right now to run a 14% market share just going back to 2012 now in the United States are up to a 26% market share.
All right, that is huge. That is huge for a company like this that just shows that management is executing on their vision, I’m kind of expanding this company and taking market share from competitors.
And the best part is it has not hurt gross margins, gross margins have actually been helped. First off, let’s look at net sales, net sales, you can see the business has turned around dramatically.
Okay, this was a business that, you know, was kind of just you know, stuck in the 800 million type revenue number. And now they’re actually over a billion dollars in growing quite substantially. gross margins have turned around completely first company going back to 2013.
They’re around a 37% gross margin. Now they’re up to 46% gross margin. epss was a company that was losing money. If you go back to 2013. Then they started kind of eating out small profits.
And now this company is getting much more profitable. Obviously in 2017. They pretty much over doubled up their NPS net cash from operations is up substantially. They’re starting to throw off a lot of money with this business.
And part of the reason is the US market is up 9.5% just in q1 2018 the US market has been improving. And this is a one of the big bullish thesis on why I got involved with this stock in the first place.
I started buying the stock back in January in February. And one of the big reasons was I saw the the market kind of coming back to Golf and whatnot. And as the economy gets better, more people like to play golf, but that wasn’t the biggest thing.
The biggest thing was the return of a gentleman by the name of Tiger Woods and some people laughed at me when I when I talked about this Tiger Woods, do you think he’s gonna bring people back to Golf.
And oh my gosh, does it work because basically what happens when Tigers playing good when Tigers playing in tournaments? What ends up happening is viewership goes through the roof.
If you look at ratings, that it’s done on a golf tournament that Tiger Woods is n right? versus one he’s not in, it’s not even on the same like the same level. It’s unbelievable the amount of viewers Tiger Woods brings in.
And when a lot of people are watching golf, that means a lot more people actually want to go out there and play golf. It’s just one of those kinds of sports, where people the more they watch, the more they’re like hey man.
I need to go pick up my clubs and go play and you know, maybe get some new equipment and things like that. It’s a very, very big thing. That’s one of the big reasons why golf is growing again in the United States Golf Ball this this is this a business that has really exploded for the company.
Look at their us retail dollar ball market share, okay, going back to 2013 was less than 8% Nellore all the way up to over 14% and have a great chance of taking that well over 15% as of this this most current quarter they were actually at a 16.2%.
So regardless, even if things were to weaken somehow for the company, they should still be well at a 15% plus market share. So they’ve grown that business phenomenally, not just grown it and for grown it for growing its sake but also brought this business to be very profitable.
Going back to 2012. This was this was a business for them a line of business that lost them money, they took a $14.5 million loss in 2012. Okay, know the $3 million loss in 2013. And then they start finally making some profits with this business.
And now they’ve made almost $27 million in segments In this past year, that should be well over 30 in this upcoming year, as long as they execute All right, now one of the biggest hidden advantages to the stock, something is not even seen as their top call for investment.
All right, Top Golf is an amazing venue, if you have never been in it, I don’t even want to explain it to you, you just need to freaking go to Top Golf, all right. And so they own between 14 and 15% ownership in this company.
Their their cost basis on what they actually bought in for ownership of this business is somewhere around $70 million ish. That isn’t that their investment should be worth at least four to 500 million now.
And basically the way Top Golf is increasing their business and increasing their profitability increasing around the world, I guess the Top Golf was a standalone company being worth at least 10 to $20 billion within five to 10 years.
All right, if you do the math on that, so you know Callaway has around a 15% investment in that, right, you basically you’re getting the whole entire Callaway business for free, essentially, okay, as long as they can sell out for a massive profit, which, you know.
Top Golf is just something that’s exploding around the world. Anybody that’s got one in their city knows how busy it is, like, it’s crazy busy, they make a lot of money, there’s a lot of fun, it’s a great time.
And so it’s a it’s an odd thing, it’s not even like seeing what this business that is just, it’s just phenomenal to have, okay, now this company has a little bit of a rich for piano, but it’s not really rich when you start breaking it down.
So a 21, forward p and this business, but once again, they don’t even take into the fact that this company has on their balance sheet, a massive Top Golf investment, that if they were to sell it off tomorrow, they could probably get at least four to 500 million for that investment, right.
That they could just buy back shares, you know, in a huge way and make that epcs look way better. And so the 40, in my opinion, is not where it should be. And also, I think they’re gonna actually beat where analysts are expecting earnings per share to be at this year and whatnot.
So a business I’m really excited about. That’s why it’s my fourth biggest investment. My third biggest investment is a company named Toll Brothers Toll Brothers is a home builder. If you do not already know Toll Brothers is a luxury home builder specifically Alright.
You can see the way this business has increased over the over the, you know, past few years for the for the company, I mean, coming out of the recession business was weak, you know.
$1.48 billion in revenue in 2011 1.8 a 2012. And then they start to kind of, you know, get this business kind of going as the economy strengthened. And now in 2018 they’re expecting close to $7 billion in revenue guys.
Everything in the past year is just across the board up units dollar average selling price, you know, is a backlog everything across the board is just going great for this company. All right. Also something I want to point out.
Some people say, you know, oh, man, we could you know, have a, you know, real estate crisis again, and someday we’ll have a real estate crisis, I’m sure who knows if it will ever have anything like it was in 2008 2009.
That was so ugly, but you know, there’s a big fact here, okay, the fact is going back from 1970 to 2007, there was around 1.6 million homes built per year. Okay, single family homes.
If you go back and you look at 2008 to 2017, there was only about 885 homes built per year right? That’s around a 700,000 home per year shortfall All right, which means anybody that thinks we’re over built at this point.
It just doesn’t make factual information right doesn’t make factual information if you’re looking at it from you know historical standards in the United States. So we have not been building nearly as many homes as historically you know.
If you go back to the past so which means there’s definitely a lot of potential still out there to grow in in the housing market especially if the economy strengthens stronger This is a company that’s well diversified across the country.
It’s not like they’re just in one or two markets and if those one or two markets get hit, they get hit they are diversified all over the United States and they’re in all the markets you want to be okay.
So basically meaning the United States would have to go into a massive recession for this company really be hurt if just one or two markets got weak for this company it’s not like the company would be devastated or something by that was just something.
I love that they’re very well diversified. All right. Something else I love is this company doesn’t really compete against most companies. This company competes against a lot of the private builders because they can they have homes and the luxury in their homes are 800 plus $1,000 going into this year on average.
You know home price could go up to somewhere close to 900,000 for Toll Brothers right well other everybody else you know, the Dr. Horton’s abusers Lenore polti kB home, all those guys, they’re competing really in the middle class, they’re competing in that 250 to $400,000 home bracket.
Which is why you know, a lot of these guys have their average selling price of somewhere around 300 plus $1,000. So, you know, a lot of those guys are cutthroat. They’re they’re really fighting it out.
Toll Brothers like we’re gonna compete over here against some of the private builders, we have way less competition are focusing on the high end, which is a phenomenal thing. All right. This is a company that they don’t just sell single family homes, okay.
They also have a big condo business. They also have really increased their business in age. qualified, which basically means you know, like retirement communities are where you got to be like 55 plus, that’s now almost 20% of their business which we know baby boomers are retiring in mass amounts over the next decade.
So that could definitely be a benefit to their business also they have a city living part of their business which is building skyscrapers and you know, different types of not necessarily skyscrapers but big buildings and big cities think about New York City and some of those type of markets where you’re going to build you know.
A big complex sites, you know, 4050 stories. They also own you know, a big chunk of that business All right, next thing I want to draw your attention to here is a fourth of the buyers have a Toll Brothers home pay cash, all right, they pay cash from the for that home.
Also phenomenal credit credit ratings for these type of customers. All right, they’re the type of customers that if interest, you know, continued interest rates continue to rise, do the type of customers that are hurt nearly as bad as some other customers because basically the fourth of them are buying cash flow interest rate blue.
Really doesn’t even affect them. And then also another great segment of them you know, have the best of the best credit rating. So getting a loan is not an issue to them. A lot of these these buyers have a lot of money behind them substantial assets in the bank substantial income.
So you know if their their payment goes up, if they do have a mortgage, their payment goes up 100 $200 a month a lot of these guys are not you know breaking the bank for it’s not really like the more middle class type Home Builders where you know that the mortgage goes up 100 $200 like the person can’t pay.
It’s a different situation there were Toll Brothers buyers for P on this company have around a seven and a half so very very low four p on this company. I love the business love the company love the management team.
Great company overall. That’s why it’s my third biggest investment. My second biggest investment is a company named Cirrus Logic otherwise known as cruisey doozy ticker symbol c r u s.
Cruz is a audio chip supplier to basically most smartphone providers out there. Also a lot of smart devices and accessories and things like that they’re getting into think about anytime you have to talk to your phone or basically anytime you talk to any type of device.
There’s audio going through that okay is good chances could be a Cirrus Logic chip it’s going through it could also be a Qualcomm or some other company. All right. Think about any time you hear music out of any type of device whether you’re talking to your iPad or your phone or or you know a speaker of some kind or anything.
Cirrus Logic makes chips for that Okay, so and if it’s an Apple product, it’s probably going through Cirrus Logic chips All right, Apple’s by far and away their biggest customers not even close.
All right, so Cirrus Logic, this is a company that right now they’re spending a lot of money on research and development. Okay, record amounts on r&d right now unbelievable amounts through a you know, for as the size company Cirrus Logic is to be spending.
You know, somewhere around 366 million in fiscal 2018. That’s a substantial amount of money. But the reason they’re doing is they have a phenomenal growth trajectory for this company.
They have a lot of huge opportunities. And think of Cirrus Logic as a home run business. It’s not like they’re just hitting singles and doubles out there. They hit home runs. All right, this is a company that they spent a ton of money on r&d.
And then all of a sudden you’re like why are they spending all this money on r&d their businesses going down to their businesses and doing anything right now? Why are they spending all this money and then all sudden.
There’s a new product that comes out in a new Apple device or whatnot. That’s Cirrus Logic has a next thing you know, their revenue grows 100 200 300 million their profitability explodes and whatnot for this company.
They’re a home run based business they have a lot going for that it’s a company that has a long term track record of growth right? phenomenal when I love to look at you know where company’s income and revenue has gone over time.
All right, Jason road the CEO since he became CEO around 2007 2008 his business has taken off this used to be a business that brought in around $180 million in revenue it Look how the way it’s just increased.
Now every single year is not an up year for Cirrus Logic Well, like I said, it’s a home run based business. Okay, so if you look fiscal year 2014 was a down year actually, for the company it looked like oh my gosh, what are the things that are about to go bad for Cirrus Logic you know.
Everybody you know was getting out of that stock and the stock was devastated when from a stock that was around $45.44 or $45 to next thing you know, this stock was somewhere around it was bottomed out around $16.16 $17.
And everybody was really scared of the business and next thing you know, his business just takes off to massive growth. And now fiscal year 2018 it was not a growth year for the company it was just a you know, kind of a rock steady year, technically down just a bit there.
And that’s kind of the way their business is just you know, they have times when they’re just growing like crazy. And then they’ll have a year where they kind of flatline or maybe their business down a bit and it looks like they can’t grow and then all sudden.
The next thing you know they have a huge growth trajectory because they got a new product. So this is really the only company in the world that is completely dedicated to the audio experience. Okay.
No one you know a lot of companies make different audio chips here and there. But in terms of one company focusing on the whole audio signal chain Cirrus Logic is really the only one out there.
Everything from the most microphones to the audio codecs to the digital signal processing. They have unbelievable, you know, custom software, they can do audio amplifiers, the whole deal.
They they can do it all. Okay, so anything you possibly need in audio, they they provide that for you they have those type of chips available for you. All right. And they are really close with our customers, Apple and them are like this. Okay.
That’s the type of business we’re talking about. So they’re accelerating r&d into a few different things. All right. So one is digital headsets. Another one is voice biometrics, which is going to be a huge opportunity for the company.
All right, they’re also expanding their portfolio in in boosted amplifiers, which they’re really excited about some boost. Two amplifiers are actually providing for the Android Market now.
They basically have said, you know, Jason rose said on a conference recently that he hasn’t shown it to a customer who’s not excited about and wants to include in future products. Smart codecs.
Mims microphones can be a big business for the for the company, software capabilities. They have a lot of stuff they’re working on with Apple that they can’t talk about. Unfortunately, it’s the one you know, kind of annoying thing about their Apple relationship is all the stuff that working behind the scenes.
Which I will guarantee you the majority high majority of Cirrus logics. employee base is focused on Apple and expanding content apple in doing innovative things and whatnot. Like I said them an apple like this, right.
So basically, a lot of the stuff that’s going on with them an apple they can’t talk about, they can’t talk about specifics. Oh, yeah, we’re doing this, we’re going to include this, this new chip and an Apple device next year or whatever, they can’t talk about that it’s in their contracts.
They’re not allowed to talk about any of that type of stuff. So a lot of what they talk about is kind of expanding into the Android Market and whatnot. Balance Sheet was phenomenal balance sheet, 434 million in cash.
No debt on that balance sheet anymore. They have a big share repurchase on the just in q4, they purchased around $60 million worth of shares at an average cost basis of 4220. I would assume they’re buying shares in a major way right now.
Reason being as his shares are really cheap right now. And where this company is headed, as long as they continue to execute is much higher from here. So needless to say, I would bet money.
They’re probably buying shares really heavy right now, right now it looks like their business is down. Once again, I just want to kind of point this out, looks like they’ll do on a non GAAP basis, somewhere around they’re expecting at least around 51 cents per share on a non GAAP basis.
We’re in the same quarter last year, they did around 85 cents. You know, we don’t know all the specifics around it. What is kind of speculated out there is basically Apple is probably going to go to another Cirrus Logic chip.
And so they’re trying to wind down some inventory there. And basically, you know, so they can produce for the next iPhone. Also, I think Apple’s kind of doing things a little more conservative going into this year.
Where they got all their chips suppliers too excited last year, they ordered way too many chips early end up hurting the entire supply chain and whatnot. In her all semiconductor stocks out there pretty much ended up getting dinged in the end with that one.
So I think Apple’s just kind of taking a more conservative this year, and kind of limiting their inventory going into this next iPhone cycle. All right, next thing I want to point out is a low four P.
So Ford P of under 12, in this company, and that doesn’t even take into account like why I’m in the stock, I’m really in the stock for all the things they’re going to be doing in 2020. And past.
I think this company has a very bright long term future. So that’s what I’m really excited about. And some news just came out last week in regards to Cirrus Logic which somehow and analysts knows or speculating which I you know.
I don’t know what his sources are. But he says Cirrus Logic has won the spot and the next generation of Apple air pods. All right, Apple EarPods have a wireless, you know, little headphones that Apple sells.
I think they’re like 139 $159, or whatever, is not going to be a huge revenue generator for the company, but this guy’s talking about, it could add 50 cents to the EPA sign that’s massive.
And this is one of those things. You know, it’s always been out there that they could you know, definitely expand a new Apple devices over time, something like this make sense. But this wasn’t really one of my bullish thesis is on why I’m involved with the stock.
I’m involved with the stock because I think over time, Apple units will continue to move up. I think over time Cirrus Logic will continue to expand content with Apple. I think over time, they’re gonna you know.
They Samsung is a customer of theirs, but Samsung buy some of their cheapest products, I think they’re going to be able to upsell Samsung over time. And maybe they have a chance of someday getting Samsung to be like an apple related customer to them, meaning they work like this with Apple.
I think there’s a great possibility that voice by metrics is going to be huge for this company. You know, Jason Rodas said in the past that this is something that could potentially double the company when those chips actually start coming out.
So there’s so much excitement for me around Cirrus Logic. The short term is a short term, which is kind of like blah right now, but looking at this from 234 year perspective, it’s a really exciting company guys.
As a company I’ve been in and out of several times in my investing career. I follow this company for a long, long time. I know the business very well. management’s phenomenal. They’re my number one biggest investment out there is a company name other brands ticker symbol LD they own Phenomenal brands, okay.
Victoria’s Secret we’re talking bath and Bodyworks pink brand does a get better than that, right? You know, a strongest strong brands. This is a business that makes the majority of their profits in the fall time in wintertime, obviously around Christmas time.
The rest of the quarters are kind of like lame o quarters. But needless to say, even in this past quarter, they were able to grow net sales 8% net income was down pretty substantially because the Victoria’s Secret products.
Basically elburn is is kind of at least in the short term here. They’re growing revenue for revenue sake, I guess you could say, which is not something I always liked, but it’s something I understand because from a competitive landscape.
Sometimes you just want to steal market share, you know, you’re gonna get the customers through the door, however, you need to get them through the door. Okay? Amazon does this all the time.
Amazon gets a pass on it like like l brands, because I guess an established company, no one ever gives l brands a pass on, you know, growing revenue for growth, growing revenue sake.
Whereas somebody like Amazon, or some of these other companies, Netflix, for instance, they’re like, Oh, my gosh, yeah, they’re just growing to take market share right now. But someday.
They’re gonna turn on the profitability, I think Elle brands will be able to turn that profitability on in a big way over time right now just kind of fighting off some some threats there, Victoria’s Secret businesses.
What’s holding the business back right now when they get are able to get that turn, which I’m pretty confident they’ll be able to do, it’s just going to be a huge catalyst for the company, bath and Bodyworks is growing phenomenally.
We now look at the the profit for bath and Bodyworks, up 21%. So I’m very confident they’ll be able to turn that Victoria’s Secret business, eventually, I’m not confident on when it will be whether it will be this quarter, whether it be this year, or whether it be next year.
But I would expect them to be able to turn up pretty soon. on the balance sheet side, they got an okay, balance sheet. All right, I give them a pass basically, basically, because it’s such a profitable business, all right.
But they still have over a billion dollars just sitting around in cash, that number should go up as the year progresses. And you know, we were the big profits poor and in the back half of the year, they do have around $5.7 billion in long term debt.
But like I said, this business is one of those that just throws off a lot of money. And I don’t want to call it necessarily a recession proof business. But it’s one of those businesses that gets hurt.
You know, way less than other businesses out there because they sell bra and panties and soap and stuff like that, like stuff that’s not very expensive. and stuff that people would say are, you know, necessity based products, rather than, you know, selling high priced products that some companies sell and whatnot.
So I give them a little bit of pass on the balance sheet. They’re certainly not my favorite ever though. comps have improved dramatically for the company. So the company is expected full year 2018 comps to be up low single digits.
They’re also expecting earnings per share ever between $2.70 in $3 per share, it’ll be interesting to see if they were just kind of sandbagging those aiming even if they hit those numbers, like I’m happy as a shareholder of L brands like 270 to $3 for a company that’s $37 a share like like.
I’m happy with that I have no complaints there. But it’ll be interesting to see if they’d maybe sandbagged a little bit. That’s what you know, some analysts are expecting maybe they sandbagged a little bit and they’re actually going to have better numbers we’ll just have to see I’m not banking on that.
But we’ll see how things play out comps have been improving dramatically for this company All right. If you look 2013 comp store sales were a disaster for this company just an absolute disaster comes the comp sales in general right 2017 every single month was down it was just ugly, ugly ugly is just horrible.
All right, but look at how things have recovered so February they grow they grow 3% and then March 4% April No, but then March error Excuse me, may they grow 5% which is the biggest improvement in a long long time.
And I think June is going to be a pretty strong month for the company we’ll have to wait the numbers should come out within the next few days of me posting this so it’d be very interesting to see what those numbers end up coming out.
To be company at a 12 and a half four p so relatively low for PE on that company and they pay out massive dividends the dividend yield still in that stock is I think somewhere around 6% huge dividend payer very profitable business great brands.
It just as soon as the one thing is holding this company back is turning that Victoria’s Secret business around in a big way once they get that term which I’m pretty confident they can do you know it’s a game changing type stock as far as the amount it can go up in a short amount of time.
So I hope you guys really enjoy this as always, I love sharing my four biggest investments with you guys and just kind of like the reasons I’m bullish. Let me know what you think about those stocks in that comment section.
Let me know what your four biggest investments are or just your biggest investments in general I’d love to hear from you guys. As always, by the way make sure you follow me on Instagram if you are not already veg you for watching have a great today.