2016 Winners – Look at Briggs & Stratton
|Written by GSCR Staff|
|Wednesday, 11 November 2015 07:05|
First and foremost, we want to wish all of our service men and women, past and present, a blessed Veterans Day. We have the freedoms we do because of you, and cannot thank you enough.
In this week’s Goldman Guide we started talking about the end of year dynamics in the market, particularly in small can microcap stocks. Now is the time to look at stocks that have been downtrodden this year that look to be candidates for 2016 accumulation.
Illustrated below is the one year chart for Briggs & Stratton Corporation (NYSE – BGG - $17.55) that indicates the stock has been up and down this year, but overall down 12% from the opening of $20.21 on January 1st.
Additionally, we featured BGG in the Market Monitor on Tax Day this year at $20.20. So our pick is also down close to 12%
BGG Chart – Year to Date
The Company is a diverse outdoor products manufacturer offering everything from lawn mowers to snow blowers. We believe the improved economy will help Briggs & Stratton meet the revenue expectations of over $1.9 billion this year and next. Along those lines, the Company has hit or exceeded revenue expectations four quarters in a row and met or exceeded EPS forecasts three of the last four. This is critical when considering what 2015 losers Wall Street will look to for 2016.
Could BGG be an M&A target? This is probably unlikely, with the possible exception of a multinational conglomerate. In any event, an Enterprise Value/EBITDA of 7 shows an exceptional value in this respect as anything under 10 is really great. This is something else that could catch the eyes of large institutional investors.
Finally, the Company continues to innovate related to its existing products and introduce new ones. Not only will this grow the customer base, it keeps existing customers coming back for maintenance and upgrades. The Company had $54 million cash on hand as of the end of 3Q15. A positive sign in this regard.
We believe BGG is a solid candidate for a 2016 turnaround story. The stock has averaged over half a million shares traded per day over the last three months. However, this figure is truly a statistical average, as large moves have been predicated with volumes with over 1 million shares traded per day. Look for the sign to get in when there are up days on this order. We believe the stock gets back to the $20 range by late Q1 or early Q2 in 2016.
Have a great day!
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