In Their Own Words


The numbers provided in quarterly earnings reports sometimes give investors an incomplete profile of a company's health. We reviewed the conference calls of most of our recommended stocks to take the temperature of executive sentiment on three key topics.


Executives at seven of our recommended stocks discussed the U.K.'s vote to leave the European Union on their latest earnings call. Most of the companies viewed Brexit as essentially immaterial to their results. CDW ($54; CDW), for instance, observed an attitude of "doom and gloom" immediately after the vote. "And then, after a couple of weeks, we actually saw the U.K. customers kind of return to a sense of, okay, normalcy and we'll deal with it when we actually execute the withdrawal, so to speak, of the EU." CDW is a Focus List Buy and a Long-Term Buy.

One exception was F5 Networks ($141; FFIV), which described a tough market after the Brexit announcement, noting that its financial customers were "taking some time to make up their mind as to where they're going to deploy their money moving forward." F5 is a Focus List Buy and a Long-Term Buy.

U.S. presidential election

Discussion concerning the U.S. presidential election was infrequent, though most of our recommended stocks posted their quarterly results before Nov. 8.

In the months leading up to the U.S. presidential election, CDW took a conservative approach to hiring, though management said it's prepared to ramp its staff if the economy picks up in the last two months of the year. Meanwhile, Carnival ($53; CCL) had anticipated a slight slowdown around the election. "Historically there's always been a little fall-off in booking volumes around election time." But as of late September, volumes were healthy and pricing strong. Carnival is a Buy and a Long-Term Buy.

One of few companies to report after the presidential election, Disney ($102; DIS) expects a Trump administration to be more sympathetic to its long-running efforts to lower the U.S. corporate tax rate. Management also said the presidential debates may have contributed to lower ratings for its NFL broadcasts, though CBS ($63; CBS) mentioned that viewership for prime-time games has been down across the board. On a less serious note, Disney said, "We've already prepared a bust of President-elect Trump to go into our Hall of Presidents at Disney World." Disney and CBS are rated Long-Term Buy.


Predictably, executives were careful to avoid tipping off investors to any big deals that may be in the works. Amgen ($141; AMGN) said it's considering a couple of early-stage development deals, adding that, "we're looking at a wider range of opportunities than we were previously." Amgen says it will consider larger acquisitions but will be disciplined on the price. Mohawk ($200; MHK) said its attractive balance sheet lets it pursue multiple takeovers at the same time, and that Brexit would not necessarily curb its appetite for pursuing deals in the U.K. Amgen is a Buy and a Long-Term Buy. Mohawk is a Focus List Buy and a Long-Term Buy.

Disney refused to discuss any specific takeover targets, such as Netflix ($125; NFLX) or Twitter ($19; TWTR). "But we think there's some really interesting opportunities," said CEO Robert Iger, "given what's going on from a technological perspective, to both improve our businesses and also improve the consumer experience by selling directly to consumers."

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