OPINION

Stocks in the News: Home Depot a Good Buy as Housing Recovers

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Stock number one is: 

Eli Lilly and Company, (SYMBOL: LLY) and the headline says: Eli Lilly Lung Cancer Drug Improves Patient Survival in Trial -- Bloomberg

Eli Lilly stock is up today on unexpected news that the company’s squamous non-small cell lung cancer treatment has increased survival rates in stage IV cancer patients in a Phase III study.  Results will be presented in 2014, followed by applications for regulatory approval.

Lilly’s earnings per share are expected to rise 22% this year, then fall 33% in 2014, reflecting the loss of patent protection on the antidepressant Cymbalta.  However, the company has many drug therapies in its research pipeline, and is gaining ground in Japan, emerging markets, animal health, diabetes and oncology.  The dividend yield is hefty at 3.5%.

The stock price is recovering from the 2008 Financial Meltdown, currently trading this year between $49 and $58.

Our Ransom Note trendline says:  HOLD ELI LILLY.

LLY Chart

LLY data by YCharts

Stock number two is: 

Yum! Brands Inc., (SYMBOL: YUM) and the headline says: China Sales Remain Fowl – Morgan Stanley Research

Yum! Brands reported July same-store sales down 13% in China, due to macroeconomic weakness, and poultry supplier issues harming KFC sales.  Yum! Brands earns nearly 50% of profits from China, and expects a rapidly improving Chinese economy in the coming decade.

Yum’s earnings per share are project to fall 5% this year, then rise 24% next year.  The PE is 23 and the dividend yield is 1.9%.

The stock’s been trading between $63 and $74 for 18 months, and appears ready to break out on the upside in the near future.  Based on future earnings growth and a bullish chart….

Our Ransom Note trendline says..... ACCUMULATE YUM BRANDS.

YUM Chart

YUM data by YCharts

Stock number three is:

The Home Depot, Inc., (SYMBOL:  HD) and the headline says: Second Quarter Looks Like a Homer – Morgan Stanley Research

Home Depot will report second quarter earnings on August 20.  Morgan Stanley is expecting a 6.5% increase in comparable store sales growth, up from a 4.3% increase in the first quarter.  Strong real estate trends and favorable weather are contributing to repair & remodel activity.

Earnings growth projections keep rising, currently at 17% growth in each of the next two years.  Standard & Poor's Research says, "Favorable demographic trends, such as the aging of houses and low interest rates, should help support home remodeling efforts over the long term."

The stock is up 15% since we said to buy it at $66 in February and appears ready to break past resistance at $81 in the near-term.  With strong earnings growth, a bullish chart, and a 2% dividend….

Our Ransom Note trendline says....  BUY HOME DEPOT.

HD Chart

HD data by YCharts

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.