Why CarMax, Shire, and BlackBerry Are Today's 3 Best Stocks

The S&P 500 climbs for a sixth-straight session as CarMax, Shire, and BlackBerry all zoom higher.

Jun 20, 2014 at 5:15PM

The week ends as it began -- on a positive note, with the broad-based S&P 500 (SNPINDEX:^GSPC) rising for a sixth-straight session and claiming another all-time high close.


With no economic data on the table today, investors used ongoing merger and acquisition rumors and deals as fuel to send stocks ever higher. M&A activity is often viewed as a positive for the overall market as it signals businesses' willingness to take on additional risk (i.e., the risk of paying a premium for, and then integrating, a new company). The idea here is that a purchasing company wouldn't buy a competitor if it didn't have good earnings visibility. This implies to investors that businesses expect growth to continue. With plenty of M&A activity in the health-care, technology, and energy sectors of late, it would appear to investors that the U.S. economic hamster is far from tired.

Also, despite lowered growth forecasts in 2014 for the U.S. economy, investors seem pleased with the pinpoint clarity the Federal Open Market Committee offered this week with its interest rate predictions through 2016. While the outlook wasn't anything to write home about, it does give investors a way of planning their investing strategy -- and if there's one thing we know it's that the more transparent the Fed is, the happier investors are!

By day's end, the S&P 500 had risen 3.39 points (0.17%) to close at 1,962.87, its 19th gain in the past 25 sessions.

Topping all individual gainers today was used-car retailer CarMax (NYSE:KMX), whose shares advanced 16.5% after the company reported record first-quarter results.

Source: CarMax.

CarMax saw sales rise 13.3% to $3.75 billion as comparable-store unit sales jumped 3.4% and net earnings per diluted share rose 18.8% to $0.76. Wall Street had projected just $3.57 billion in sales and an earnings-per-share profit of just $0.66. What we're seeing here is the total dominance of the U.S. auto industry from used to new vehicles, and consumers' willingness to spend on a new or used car. As long as lending rates remain near historic lows there's a good chance that CarMax could continue to outrun the Street's expectations.


Source: Hipsxxhearts, Flickr.

Finishing just a hair behind CarMax was Ireland-based global pharmaceutical company Shire (NASDAQ:SHPG), which gained 16.3% after it disclosed it had been the target of an an unsolicited bid from rival AbbVie (NYSE:ABBV) on May 30. AbbVie proposed to purchase Shire for $46 billion, a 23% premium at the time of the offer, which would have been paid via a mix of cash and AbbVie common stock.

While AbbVie pressed the deal as a boon for its long-term growth and an expansive boost to its pipeline, the real allure here appears to be Shire's Ireland headquarters address. Because Ireland's top corporate marginal tax rate is 12.5%, compared to 40% in the U.S., AbbVie could have saved hundreds of millions of dollars in taxes each year by relocating. However, Shire rejected the deal, claiming that it undervalued the company's long-term prospects and denied existing shareholders the opportunity to profit from executing on its strategies. Following today's huge run I'm inclined to stick to the sidelines and wait for a sizable dip in Shire's share price.

Blackberry Z

BlackBerry Z30, Source: BlackBerry.

Lastly, smartphone producer BlackBerry (NASDAQ:BBRY) wiggled its way among the best gainers for a second-straight day, this time adding 7.9%, following positive commentary from Citron Research. Yes, the same Citron Research that is normally on the short-sale side of the picture and attempts to expose poorly run companies. Based on Citron's findings, BlackBerry's tie-ins with the Internet of Things could make the stock worth about $20 per share. While I noted yesterday that I appreciate BlackBerry's tight cost controls and ability to work toward sustainable profitability, I don't see enough in the way of innovative capacity yet to make me a buyer. Until we see products or software that users are really excited about it's probably best to stick to the sidelines.

If you think these 3 stocks have upside potential, wait until you take a gander at the growth outlook for this top stock!
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends CarMax. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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