Mr. David Alton Clark, the founder of Clark Capital, has earned a reputation for recommending solid investments that stand the test of time. According to TipRanks, a fintech company that tracks and measures the performance of financial experts, Clark’s investment ideas have seen an average yearly return of 25.6% with a success rate of 70%. It's not a surprise, then, that Clark has held down the #1 spot on Tiprank’s Top 25 Financial Bloggers list for a majority of the past decade.
Highlighting the current geopolitical and macro-economic landscape, Clark advises against making any big bets until the Chinese Coronavirus outbreak is contained. Clark states, “Often these types of viral outbreaks effects on the markets are only temporary. Yet, I advise against attempting to catch a falling knife. Wait for the markets to turn prior to starting any new positions. You may miss out on a small amount of the upside, nonetheless, you will have greatly reduced the risk to your hard earned nest egg.” Furthermore, "with the economic expansion entering its 11th year, the odds of a pullback in the near-term are relatively high especially if the coronavirus worsens and caused economic activity to dampen just as the markets are reaching all-time highs," says Clark.
With this in mind, we asked the top financial blogger if he would share his three stock picks for the coming decade. Let's take a closer look.
Zoom Video Communications (ZM)
Cloud-based video and web conferencing Zoom Video Communications is my speculative high-flyer selection. I always suggest an investor allocate at least 5% of their portfolio to a speculative play with the potential for exponential growth.
This company falls into my long-term sustainability thesis I believe more and more companies will adopt. In my heyday as a consultant and auditor for Ernst & Young I traveled far and wide to meet face to face with clients across the country. Now, we are entering an age where visualization will become the norm rather than the exception as companies strive to become better stewards of the environment. This pick seems like a no-brainer with all the current focus on climate change and the environment presently. Plus it saves companies time and money. It checks all the boxes for me.
Zoom is growing by leaps and bounds currently with an over 80% sales growth rate quarter-over-quarter and 100% EPS growth over the past year. Even so, with a sky high forward P/E ratio you could make the case that most of prospects for growth are already priced in. Nonetheless, the stock is currently trading at 30% below its recent 52 week highs. This is definitely a speculative play not to be taken lightly. It will be a wild ride, yet I believe in the end Zoom will come out on top and be a profitable investment over the long haul. High risk equals high reward.
The stock has fallen on hard times as of late trading 30% off its recent 52 week highs. Nevertheless, it has recently bounced off its lows and is poised to retake its 200 day sma and breakout of the recent downtrend. As always, never plunk down your entire allocation in one fell swoop. Always layer in to new positions overtime to reduce risk especially in the current market environment.
As I said before, layer into the position as any type of negative macro event may provide a better entry point over the course of the decade. I like to say its “time in” the market not “timing” the market that generates profitable investments and creates long-term wealth. My 12 month price target is $100 over the next 12 months providing over 30% near-term upside. (See Zoom stock analysis on TipRanks)
Telecommunications giant CenturyLink is my contrarian income/dividend play with potential for capital appreciation. The stock has been in the doghouse for quite some time, yet, has recently shown signs of strength. I see the company well-positioned to benefit from the roll out of 5G networks.
The stock has been under pressure since management cut the dividend. Nonetheless, with a current dividend yield of 7.2% and a forward P/E ratio of 9.52, the stock makes for an excellent contrarian turnaround play. Whenever analyzing these types of investments the key factor I look for is cash flow. CenturyLink checks this box with a P/FCF ratio of 8.25 and a book value per share of $12.75. So, if I can buy a stock for book value, a 7.2% yield, plenty of free cash flow to cover the dividend and capital expenditures, I am in. As always, take your time building a position. As the recent coronavirus outbreak demonstrates, no one can anticipate an erroneous exogenous event. My primary investing mantra is “Patience equals profits.”
The stock has recently bounced off the 200 day sma and is current attempting to break through resistance at the 50 day. With and RSI of 49 its neither over bought or oversold. CTL is expected to report earnings on February 12th. With the current macroeconomic environment I would wait until after earnings to initial a position.
The company just recent double their capacity to transmit content in 11 cities across Asia Pacific (APAC) to cater to growing demands from global broadcasters, over the top (OTT) video streaming platforms and gaming companies to deliver high-performing web applications, ultra-high-definition (UHD) video streaming and game downloads.
CenturyLink is well-positioned to benefit from the coming 5G revolution. With a 7.2% yield and trading for book value, the risk seems well worth the reward at present. I’d say we have the potential for 20% upside over the next 12 months. What’s more, you get paid 7.2% while you wait. (See CenturyLink stock analysis on TipRanks)
Apple is my cash cow solid capital appreciation play. The company is printing money and is well-positioned to benefit from the upcoming 5G revolution. Furthermore, Apple has created an ecosystem around its primary product, the iPhone, which is increasingly inescapable. Apple is continuously expanding services and creating new peripheral devices that augur well for continued growth. I would not bet against them. I have been a user of Apple products since day one.
Apple is a cash flow machine. The company currently has a huge cash hoard of over $200 billion, although it now has approximately $100 billion in debt. With a forward P/E of 24 the stock has doubled in valuation over the past 12 months from 12. The stock is up 95% over the past 52 weeks. The fundamentals are looking somewhat rich at the moment. Even so, this may be justified with the advent of 5G just around the corner.
The current technical status for Apple is somewhat overheated. The stock is trading at just 1% off its 52 week high and has recently gone parabolic. The current trajectory of the stock will be hard to sustain. I would wait for a pullback of 5-10% in the stock prior to imitating a new position. With several supplies located in China Apple has significant exposure to China. If the coronavirus outbreak worsens, we could see the stock pullback significantly. I submit this would be an excellent buying opportunity though.
Apple always seems to have another ace up their sleeve. From the Apple Watch to the new Apple Airpods to the new streaming service offering, I only see blue skies ahead in the coming decade. Use any pullbacks to build a full position in the stock. I see 10% upside over the next 12 months with a $356 price target. (See Apple stock analysis on TipRanks)
Disclosure: David Alton Clark has a Long position in ZM, AAPL and CTL.