EMC Corporation (NYSE:EMC) develops infrastructure technologies for the IT industry. Demand for data storage should help prop up the company, but cloud computing and virtualization software should be longer-term growth drivers. EMC continues to be a majority owner of VMware, and the two make a good team, as EMC is a leader in data storage and VMware is a leader in virtualization.
These initiatives should help drive the stock’s 5-year expected EPS growth rate of 14% annually. In the interim, company-wide revenues should be up 7% in 2013 and revenues from VMware are expected to be up 17% over the period.
Dollar General Corp. (NYSE:DG) is one of the major discount retailers in the U.S. Shares trade at 16x earnings, alongside Family Dollar and Dollar Tree. The discount retailer’s 3Q EPS results came in at $0.63 compared to $0.50 one year earlier, and this comes on the back of a 4% growth in same store sales. The retail store was added to the S&P 500 Index a few months ago and should perform well given its consumer staple mix, and base of low to mid-income customers. Intriguingly, Steve Cohen of SAC Capital sold off 60% of his Dollar General shares last quarter (check out Steve Cohen’s top picks).
Michael Kors Holdings Ltd (NYSE:KORS), the relatively new public company, is up over 100% since its late-2011 IPO. Kors has beaten earnings expectations each of the last four quarters by at least 20%, and has some of the best growth prospects in its industry. After this robust performance, the stock now trades at 40x earnings, well above peers like PVH (20x) and Ralph Lauren (22x). Despite its valuation, Kors’ EBITDA margin (27%) is well above both its previously mentioned peers, and the sell-side expects its EPS to grow by 30% a year over the next half-decade. It’s an interesting growth opportunity.
Last but certainly not least, Youku Tudou Inc (NYSE:YOKU) is a provider of video content in China. With relatively little debt, Youku appears to be one of the best-positioned Chinese media companies. Compared to other major peers, Youku has the greatest long-term expected EPS growth rate at a 35% CAGR, compared to Sina (24%) and Sohu (11%). There are a number of hedge funds owning the stock, including Blue Ridge Capital, Legg Mason and SAC Capital. Billionaire Ken Griffin – founder of Citadel Investment Group – is also one of Youku’s top-name investors (check out Ken Griffin’s new picks).
In short, two extremely compelling investment opportunities of Brookside’s include newly-public Michael Kors and Youku. We are also encouraged by Dollar General and its expansion efforts. It appears that Bain Capital and Brookside still love Apple, which they have been adding to their position since the third quarter of 2011. For more related coverage, continue reading below:
