Market Monitor: Thomas Plumb’s Picks

Thomas Plumb, President & Portfolio Manager at Plumb Funds

Many were looking for a volatile September for stocks but looks like we could end the month up – what does this suggest about the market in the near term. 

The market has followed the classic pattern of climbing the wall of worry, so far it has shrugged off the current headlines.  

What will be key. What should investors brace themselves next month and/or the remainder of the year.

The world economy is weakening, and Governments and monetary authorities have turned to classic stimulus policies to hold off the bear.  In the next year, this will bode well for the markets. October earnings season will include decent numbers and cautious sentiment for the rest of the year and next year. Expect headlines to cause volatility. We will really see a differentiation between winners and losers. We are not in the environment of a rising tide raises all boats.

Stock picks

Names that could rise between 15% and 25% over the next year:

Square (SQ- $61) Price Target: $80 – Fintech is going to provide incredible disruption and opportunity for the drivers, enablers and beneficiaries of these efficiencies.  The under-served small businesses often turn to Square.  Merchant lending, instant account funding and cash People 2 People apps are adding fast growth innovative products to their payment processing services.

Constellation Brands (STZ-$206) Price Target: $230 –  is benefitting from the continued trend of premiumization of wine, liquor and beer gaining market share in slow growth domestic beer market. They have innovated and executed.  First the national roll out of the branding of Corona (a vacation in a bottle), then Modelo’s appeal to Latin pride and next Pacifica.  And they are investing in the future with Canopy Growth (CGC-26) the largest Cannabis company in Canada.

Exact Sciences (EXAS-$97) Price Target: $130 –  developed disruptive innovation in colon cancer screening with Cologuard DNA testing product.  Colon cancer is slow growing and easily treated if discovered early enough.  The old gold standard, Colonoscopy is expensive, invasive, requires anesthesia and uncomfortable bowel cleansing the night before.  Cologuard is a do it yourself home stool DNA based test that is gaining wide acceptance in what could be a $15 billion market.  It is growing revenue 70% this year and last year before this week’s US FDA approval and recommendation to lower the testing age to 45 from 50 for healthy individuals, potentially adding another $3 billion to their addressable market.

Disclosures:  Thomas Plumb own SQ, STZ & EXAS through his funds. Plumb owns EXAS personally. 

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