A lot can happen in a year. Take these three companies: Avago Technologies Limited (AVGO), Chipotle Mexican Grill (CMG) and Las Vegas Sands (LVS). This time last year, each of these stocks was at the bottom of the barrel, earnings a D- or F-rating in my Portfolio Grader tool.
However, over the past 12 months, these companies have been working overtime to turn things around, and their efforts have paid off. Now, they’re A- and B-rated buys, receiving top marks for fundamental strength and buying pressure. And investors have taken note: These stocks have gained an average 80% over the past 12 months.
So here’s the million dollar question: Is there further upside ahead for these “rags to riches’ stories?
Avago Technologies Limited (AVGO) is an integrated-circuit semiconductor company. For three decades it was a part of Hewlett-Packard, and then it was spun off together with the whole HP semiconductor business as part of Agilent Technologies.
As part of HP’s semiconductor business, Avago assembled a team of over 1,000 design and product engineers and developed an extensive portfolio of intellectual property plans that currently include more than 5,000 U.S. and foreign patents and patent applications. Avago operates design centers in Asia, Europe and the U.S and manufacturing facilities primarily in Asia. About 80% of its sales come from outside the U.S. and the company is a clear beneficiary of global growth.
The stock floundered in 2012 as the smartphone boom gave way to softness in industrial and consumer end-markets. Investors cooled to chip makers like AVGO so it wasn’t worth holding the stock. However, the smart phone supplier redeemed itself in 2013 by blasting through analyst earnings estimates one quarter after the next. Meanwhile, the company bought CyOptics for $400 million, strengthening its fiber optics portfolio.
Now AVGO is a better buy than ever. The company recently hiked up its dividend by 12% and the company is in the process of buying back its stock. Better yet, the company is headed towards double-digit sales and earnings growth for the next several quarters. This stock is a B-rated Buy.
My second comeback story, Chipotle Mexican Grill (CMG), owns and operates one of the most popular Mexican food franchises in the country. The company has over 1,500 locations throughout the U.S. and Canada.
In 2012 the company’s margins suffered due to rising food prices, increasing competition and slowing comparable store sales. And with the stock trading in the triple digits, some investors couldn’t look past the high price tag.
Even so, Chipotle Mexican Grill was able to weather the dips and came back swinging in 2013. That’s because there’s nothing quite like Chipotle; it serves up sit-down quality burritos for just a skosh more than fast food prices. So Chipotle Mexican Grill was able to restore its momentum and is slated to post double-digit sales and earnings growth through the end of next year. CMG is an A-rated Buy.
Las Vegas Sands (LVS), as its name suggests, a major player in the Las Vegas gambling and entertainment scene. The company operates the Venetian hotel in Las Vegas, which offers a 120,000-square-foot casino and a 4,000-room suite hotel, as well as a shopping, dining and entertainment complex. The company also operates The Palazzo Casino and Sands Expo Center trade show and convention center. Outside of Sin City, the company is also expanding operations in Spain, Macau and Singapore.
When it comes to casinos and resorts, the competition is fierce. On the Las Vegas strip, Las Vegas Sands competes with the likes of Caesar’s Entertainment Corp.(CZR), MGM Resorts International (MGM) and Wynn Resorts Ltd. (WYNN). Abroad, it has to deal with the likes of Melco Crown Entertainment (MPEL) in Macau. So 2012 was a tough year for the casino operator. The company issued quarter-after-quarter of disappointing results on slowing revenue from Macau so LVS shares remained in neutral for much of the year. This time last year, LVS was a D-rated sell.
But what a difference a year can make. The company was able to turn around its operations at home and in Macau last quarter, so it posted a 19% annual jump in sales and a 33% increase in earnings. All the while, the company repurchased over aEncouraged by these results, management declared a quarterly dividend of $0.50 per share, payable to shareholders of record (on March 21) on March 31. So at time of writing this, LVS is a B-rated Buy.