Ross’ Watchlist week of Sep 27, 2021

Kimco Realty Corporation

Kimco Realty Corporation (KIM) is a real estate investment trust (REIT) that has a focus on open-air shopping malls. Now, I know that that sounds crazy as shopping malls were toast even before the virus lockdowns and the even bigger surge in online shopping.

But Kimco’s properties are a whole different kind of mall. They are open-air and are centered on must-visit stores – even during lockdowns – that don’t compete with or complement online shopping.

Home Depot (HD), Ahold Delhaize (ADRNY), Albertsons (ACI), PetSmart and other leading stores are what Kimco counts as their prime location tenants. These are stores that all of us have to visit for home goods, groceries and all of the stuff to make our dogs, cats and other pets happy and healthy.

Attached to these stores are ancillary stores that again are must-visit – even in the world of online shopping. Revenue did take some hits last year, but that’s in the past. Current quarter numbers show a massive gain of 20.97% in sales.

And as a REIT, you need to focus on the return on the funds from operations (FFO) and not just revenue. FFO tracks the actual cash from operating the properties and not ancillary business stuff.

This is the core of a REIT. And the return on FFO is pretty good at 10.40%, especially for a retail REIT.

 Here’s how the chart sets up:

And here’s how the stock sets up with my Stock Surge Indicator (SSI):

• Surge score: 88/100
• % Above 52-wk low: 118%
• MFI reading: 51
• Sales growth: +21%
• Triple momentum: yes

KIM more than doubled from November to June before taking a breath and beginning to consolidate.

Price has now become tight with the most recent dip limited to just 5%, even with the bloodbath we saw last Monday.

I would consider buying on new highs above $22.25. You only need to risk 5.5% to see if the breakout is real.

Donnelley Financial Solutions, Inc.

Publicly traded companies have a huge number of regulatory requirements to comply with both inside the US and around the globe. This includes all sorts of data and other communications that have to get to investors from individuals to institutions – both in physical and virtual forms.

Donnelley Financial Solutions, Inc. (DFIN) is a leader in this market that is not only a core necessity – it is also a cash cow business for the company. Quarter by quarter, month by month and year by year, Donnelly is contracted to deliver and manage all sorts of communications and data. And it gets paid well to do this.

This is one of the more lucrative behind the scenes businesses of Wall Street and the corporate world that is vital to the financial market – and it generates lots of revenue.

That revenue is steady and makes the company a dependable one for investors. And while margins are thin, it does so much volume that it delivers a good return on its own shareholders’ equity that is running at 16.70%.

And it runs itself responsibly with lots of cash on hand and limited debt.

Here’s how the chart sets up:

And here’s how the stock sets up with the SSI:

• Surge score: 95/100
• % Above 52-wk low: 179%
• MFI reading: 55
• Sales growth: +5%
• Triple momentum: yes

Sales growth is a bit lower than I would prefer with Donnelley, but earnings have seen tremendous growth of 59% in the most recent quarter. Earnings per share have been on the rise over the trailing five years by a compound annual growth rate (CAGR) of 17.18%.

Plus, the price action is very strong. With a surge score of 95/100, DFIN is outpacing 95% of stocks in terms of relative strength.

Monday’s selloff created a shakeout to what looked like a pending breakout. That will likely only strengthen this setup since retail stops were hit, and shares are now concentrated into even fewer hands.

I would buy a break above $35.51 and use Tuesday’s low as a stop.

Stride, Inc.

Stride, Inc. (LRN) is an online education company with a focus on remote learning and tutoring.

It has both public and private institutions that contract with the company to provide its platform and services – that have become all the more vital over the past two years.

Revenue growth has been off of the charts from 2020 through to 2021 with the recent quarter’s gain of 47.81%.

Here’s how the chart sets up:

And here’s how the stock sets up with the SSI:

• Surge score: 80/100
• % Above 52-wk low: 71.7%
• MFI reading: 57
• Sales growth: +48%
• Triple momentum: yes

Stride was added to our watchlist last week but has not yet hit our entry point. Last Monday’s selloff was in line with previous dips in the stock, so the setup is still intact.

The chart above is a weekly chart. It shows a clear pattern of compressing volatility with defined resistance at the $36 area.

Unlike a lot of setups, which are in the late stages of the run up that began last March, Stride is fresh off its lows.

This is a large, early-stage base formation that could lead to a surge of 50% or more, so I wanted to keep it on our buy list for the coming week.