Today’s Sell idea is a financial giant that recently missed earnings estimates and hasn’t shown enough improvement to remain on this editor’s Buy list.
Discover Financial Inc. (DFS)
from Louis Navellier, Blue Chip Growth Stocks
With the “froth” in the market fizzling while the “cream” is rising to the top, we want to be in the strongest companies that benefit from the flight to quality. That’s why I constantly monitor the Buy List, and periodically buying pressure or fundamentals weaken to the point that upside potential diminishes. That’s when we prune those names to focus on quality market leaders.
Lately, Discover Financial Inc. (DFS) hasn’t shown that it has what it takes to attract persistent buying pressure. A few weeks ago, Discover Financial announced that net profit declined 7%, and that it missed the consensus EPS estimate. At the time I wanted to continue holding DFS in anticipation of its upcoming ex-dividend date and the fact that the company is in the middle of a multi-billion-dollar stock buyback program.
We got what we were waiting for. In the three-plus weeks since the third-quarter earnings announcement, DFS rebounded modestly, and the stock went ex-dividend on November 5. So if you owned the stock, you received $0.20 for each share on November 21.
Those who bought shares at the time of my original recommendation in the November 2012 issue locked in about a 32% profit.
But I haven’t seen any significant improvements that would persuade me to keep this stock on the Buy List. In fact, when it comes to annual earnings growth, the analyst community expects Discover Financial will underperform the industry average for the next several quarters.
So please find a good time to sell DFS.
Louis Navellier, Blue Chip Growth, www.bluechipgrowth.com, 800-718-8289, December 2013