Nasdaq stocks are a bit like sandwich cookies. Some people don’t even want them in the house. Others binge on them.
Nasdaq and the New York Stock Exchange are the two main trading venues in the U.S. Partisans of Nasdaq think of it as the more innovative stock market, home to leading technology companies and a variety of smaller companies.
Others prefer what they see as the safety and stability of the NYSE. Stocks traded on Nasdaq have four-letter stock symbols; those on the Big Board have three-letter symbols.
For my part, I’ve always preferred to have a mixture. About once a year, I devote a column to stocks I like on the Nasdaq. I’ve published these each year from 2001 through 2006, and 2013 to the present.
How They Did
In nine outings, my average one-year result has been a gain of 17.5%. That compares with 12.2% for the Nasdaq Composite Index, and 9.7% for the Standard & Poor’s 500.
My Nasdaq selections have beaten the Nasdaq Composite six times out of nine, and beaten the S&P 500 five times.
Bear in mind that results for my column picks are theoretical and don’t reflect actual trades, trading costs or taxes. The record of my column selections shouldn’t be confused with the performance I achieve for clients. And past performance doesn’t guarantee future results.
Last year I posted a kissing-your-sister result, with a loss of 1.8%. That beat the Nasdaq Composite, which was down 3.8%, but trailed the S&P 500 which declined only 0.4%. Figures are total returns from March 17, 2015, through March 11, 2016.
My best pick last year was Sanderson Farms Inc. (SAFM), which rose 13%. My worst was Strattec Security Corp. (STRT), which fell 23%.
Here are five Nasdaq stocks I like now.
FlexSteel
Remember that 27-year-old nephew of yours who is still living in your brother’s house? Someday he will get his own apartment. Maybe he will even get married and buy a home. Household formations, frozen during the recession of 2007-2009, are on the upswing.
New households need furniture. A furniture stock I like is FlexSteel Industries Inc. (FLXS, Financial) of Dubuque, Iowa. It is financially solid: Debt recently was only 3% of stockholders’ equity.
The stock sells for 14 times recent earnings and 11 times what analysts expect for this year. The average stock these days commands a multiple of 22; the long-run average is about 15.
Cal-Maine
An excellent dividend play is Cal-Maine Foods Inc. (CALM, Financial), which currently yields 5.7%. Cal-Maine, based in Jackson, Mississippi, is the largest U.S. egg producer. It has been buying up organic farms, allowing it to charge premium prices for a rising portion of its eggs.
Avian flu or rising corn prices can hurt this stock from time to time. (Corn is the leading grain used for chicken feed.) But I think it is a good buy now at seven times recent earnings and 12 times estimated 2016 earnings.
AmTrust
AmTrust Financial Services Inc. (AFSI, Financial) is a property & casualty insurance company based in New York City. Originally a workers’ compensation insurer, it has branched out into a wide variety of lines.
AmTrust shares sell for only nine times recent earnings and seven times analysts’ estimated earnings for 2016. The stock is very little followed, either by Wall Street or by the financial press. That isn’t necessarily bad, as some academic research shows superior returns for under-followed companies.
Net 1 Ueps
Net 1 UEPS Technologies Inc. (UEPS, Financial) is a South African company listed directly on Nasdaq. It is a payment processor, operating in South Africa, South Korea and other countries. It handles distribution of welfare payments for the South African government and various international transactions.
Since 2006, the company’s revenue has grown from less than $200 million a year to more than $600 million. Profitability has swung between feast and famine, but the company earned a creditable 19% return on stockholders’ equity recently. The stock is quite cheap at five times earnings.
Sanderson Farms
Finally, I repeat my recommendation of Sanderson Farms from last year. Even though it’s risen a bit, it still sells for about 13 times earnings.
Sanderson, based in Laurel, Mississippi, is a major chicken producer. So my picks this year include both the proverbial chicken and the egg. (To answer the obvious question, the egg came first.) Among the reasons I like Sanderson: a long term trend for Americans to eat more chicken and less red meat.
Disclosure: For clients and personally, I own shares of Cal-Maine Foods, FlexSteel Industries and Sanderson Farms.
