One of the many benefits of our proprietary POWR Ratings system is the upgrades page. This page shows us which companies are improving from a growth and quality standpoint. This is reflected in higher grades in our ratings system. While we recommend investors only buy stocks that are rated a Buy or Strong Buy, picking up a recently upgraded Buy stock allows investors to get ahead of the game.
Many stocks get upgraded daily, which is why it’s important to focus on stocks with the best prospects. That’s why I like to take a qualitative approach to find catalysts that will drive shares up. One feature that I’m particularly keen on is a company that is a leader in its industry. These types of companies are typically one of, if not the largest, and most recognized brands in their space.
So, I ran a screen to find recently Buy-rated upgraded stocks that were leaders in their industry and offered the potential for growth in the months ahead, and these three top stocks were leading the pack: Starbucks Corporation (SBUX), Sherwin-Williams Company (SHW), and Stryker Corporation (SYK).
Starbucks Corporation (SBUX)
SBUX is one of the most widely recognized coffee and restaurant brands globally, with over 32,000 stores across 83 countries. In addition to its own retail stores, the company generates revenues through licensed stores, consumer packaged goods, and foodservice operations. SBUX sells packed coffee and tea products to grocery, warehouse clubs, and specialty retail stores.
As one of the most recognized coffee brands in the world, the company has been able to increase global market share by opening stores in new and existing markets and remodeling existing stores. SBUX has also allied with Swiss food giant Nestle SA, which gives the latter perpetual rights to market SBUX products. This should expand SBUX’s global reach in the consumer-packaged goods segment.
With China and the Asia Pacific regions becoming the fastest-growing segment, SBUX announced a partnership with Alibaba (BABA) to drive growth in China. SBUX has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of A, which makes sense as analysts forecast earnings soar 267.4% year over year in the current quarter.
SBUX also has a Quality Grade of B, which is indicative of a healthy balance sheet. The company had $4 billion in cash on end as of the end of March compared with only $18 million in short-term debt. We also provide grades for SBUX based on Value, Momentum, Stability, and Sentiment. You can find those here. SBUX is ranked #4 in the B-rated Restaurants industry. You can find other top stocks in the industry here.
Sherwin-Williams Company (SHW)
SHW is the largest provider of architectural paint in the United States. The company has about 4,800 stores and sells premium paint at higher prices than most of its competitors. It also sells paint-related products in big-box stores and provides coatings for original equipment manufacturers. Its well-known brands include Dutch Boy, Minwax, and Krylon, and its acquisition of rival paints maker Valspar bodes well.
That acquisition has enabled the company to strengthen its position as the leading paints and coatings provider in the world. It extends the company’s brand portfolio and increases its customer relationships in North America, Asia-Pacific and Europe, the Middle East, and Africa regions. SHW sees strong demand in domestic markets with higher architectural paint sales volumes. In particular, the firm saw robust demand for architectural DIY paint in North America in the most recent quarter.
SHW also sees strong demand for new residential and residential repaint. Plus, its aggressive cost control initiatives are increasing liquidity. The company has an overall grade of Buy in the POWR Ratings system. It has a Quality Grade of A, which means it has a rock-solid balance sheet. Profitability and management efficiency are off the charts, with a return on equity of 68.8%.
SHW is ranked #27 in the Home Improvement & Goods industry. You can find other top stocks in the industry by clicking here. To see how the company fares in its other component grades (Growth, Value, Momentum, Stability, and Sentiment), click here.
Stryker Corporation (SYK)
SYK is one of the world’s largest medical device companies operating in the global orthopedic market. It designs, manufactures, and markets an array of medical equipment, instruments, consumable supplies, and implantable devices. Its product portfolio includes hip and knee replacements, endoscopy systems, operating room equipment, embolic coils, and spinal devices.
The company’s flagship product, robotic-arm assisted surgery platform Mako, is seeing massive demand. SYK launched the robotic-arm assisted total knee arthroplasty with its Mako system, which is the first and only robotic technology used for total knee, hip, and partial knee replacement procedures.
The company has received recent approvals for Mako in China, Russia, and Brazil, which offer strong growth potential as these markets have been rapidly adopting robotic technologies. SYL has also been one of the early adopters of 3D printing technology. Its Tritanium TL Curved Posterior Lumbar Cage is FDA approved for use as an aid in lumbar fixation.
The stock has an overall grade of B, translating into a Buy rating in our POWR Ratings system. SYK has a Growth Grade of B as analysts expect earnings to grow 232.8% year over year in the current quarter. The company also has a Stability Grade of B, which means it has shown consistent growth and stable price performance. To access the rest of SYK’s grades (Value, Momentum, Stability, and Quality), click here.
SYK is ranked #52 in the Medical – Devices & Equipment industry. For more top stocks in that industry, click here.
SBUX shares fell $0.13 (-0.11%) in after-hours trading Friday. Year-to-date, SBUX has gained 7.34%, versus a 13.27% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More…
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