2 Great Stocks to Ride a Market Correction: AHS and FLT
Smart investors overcome wild market gyrations by identifying well-managed, innovative companies. Here are two to consider.
The August stock market correction came quickly and has been brutal. It started with another dramatic attempt from China to prop up its stock market. This time Beijing threw in the kitchen sink by unexpectedly devaluing their currency. Markets do not like surprises, especially when they cause negative feedback loops in other already-weakening sectors such as oil and emerging markets.
As students of individual stock analysis, we at Peck Management see healthy activity at many companies and conclude that Main Street USA is doing just fine.
History has proven that, over the long term, disciplined investors overcome the short-term pain of wildly gyrating markets. Why? Because they identify and invest in well-managed, innovating companies that continuously apply smarter ways of operating that destruct and replace the older ways. Quoting Google’s CEO, Larry Page: “We’ve long believed that, over time, companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.” We believe this should be the motto for all companies in all industries.
Often it is the smaller and mid-sized companies that sneak in when the big guys get too comfortable. Here are a couple examples of the smart initiatives we are seeing from not-so-obvious, hardy, midsize companies:
AMN Health Care Services (AHS) is a leading healthcare services provider citing broad-based positive demand trends as it helps its customers improve staffing productivity by effectively applying technology combined with human support. The company is in a sweet spot as increased spending under ObamaCare, changing demographics and an improved economy have helped spark a surge in demand for health care workers. Its revenues are growing by 40%, and its other financial trends are healthy.
FleetCor Technologies (FLT) is a leading provider of fuel payment services for government and commercial fleet operators. It recently announced a new partnership with Uber, the ride-sharing service, giving its drivers discounts on gas, with Uber able to automatically deduct fuel purchases from their weekly earnings.
A common thread we see in these examples is that these companies are generating higher levels of earnings by combining human talent with technological advancements, all in an effort to drive higher profit levels for both themselves and their customers. As we research, we use what we call “Chain Reaction Catapults” to find investment opportunities.
Here’s an example of a chain that could occur involving AMN and FleetCor as the star actors:
Nurse: Gets a better job with a higher salary. Hospital: Applies improved scheduling resources and saves money. Car share: Obtains fuel savings, saving money. Nurse: Uses a car-share service and saves money.
Everyone is a winner here: The staffing service, fuel payment service, car share company, the hospital and the nurse.
Can you imagine how this type of situation might multiply throughout the economy? And, along the way, many of the major companies that continuously apply creative destruction and reinvention, such as Apple, Google and Facebook, are smack-dab in the middle of creating value within the entire economy.
Yes, the current economic expansion of six years is long in terms of historical patterns, but the magnitude of the recovery has been slow, and we see steady, continuing growth. Remember, the U.S. is a consumer-driven economy, and the average household is in its best financial shape in a generation thanks to the forces that put the brakes on excessive leverage. Incomes and job creation are rising slowly, and soon interest rates will creep up from a very low level. That is a sign of a healthy, steady as-you-go economy, and a manageable one at that.
For professional traders, the stock market is for swinging in and out within tiny time slots. However, for long-term investors, attempting this is a stupid game to play. For investors, the stock market is an intelligent and proven way to grow wealth not only during a lifetime, but also over successive generations.
Peck Wealth Management, LLC is a Registered Investment Adviser and manages investments for wealthy families, foundations, retirement and 401k plans.
About the Author
President, Peck Wealth Management
Alison Peck, CFA has held senior positions for over thirty years with leading firms in both research and portfolio management including JPMorgan and US Trust. The Wall Street Journal, Forbes and Fortune recognized Alison for her stock-picking skills early in her career as director of research for Stephens Inc. Peck Wealth Management manages investments for wealthy families, foundations and retirement plans. Growing up in a family-owned Hotel gave Alison the skills to care about her clients as individuals.