Stock #1: Discover Financial Services (DFS)

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2 Stock #1: Discover Financial Services (DFS) When compared to competitors such as Mastercard, Visa and American Express, Discover seems to have them all beat. Discover has the lowest P/E (ttm), with the highest EPS (ttm). In addition, The company also has the highest analyst ratings of the four. Even though the fundamentals listed above would seem to favor DFS, the stock has not performed as well as V, nor MA, since the beginning of That being said, the stock still maintains an overall upward trend over the past 5 years, and it also looks to be making up ground during the most recent several months. We think DFS is undervalued and look for the stock to catch up to V and MA in the future. For this reason, we like the prospects for DFS.

3 Stock #2: McDonald s (MCD) McDonald s has had its critics, but there s no arguing the stock s performance. The fundamental catalyst for the bulls was a strong earnings report in the third quarter of fiscal year It marked the first time in roughly two years in which McDonald s quarterly sales increased. Since then, McDonald s has produced two solid earnings beats. Regardless of concerns, Wall Street appears to like what they see. The chart above shows that even with MCD s yearlong, sideways move, the stock has still been trending higher over the past 5 years. Most recently, the stock has been on a straight move upward, and we see no reason not to expect the current momentum to continue. Most analysts have MCD rated as a buy, and so do we.

4 Stock #3: JPMorgan Chase & Co: (JPM) For the 2015 fiscal year, JPMorgan led the nation's largest banks in total profits and tangible book value per share growth. It was second only to Wells Fargo in return on tangible common equity, growing earnings per share 13%. Over the past 10 years, JPMorgan 10% compounded annual growth rate in earnings per share exceeds all of the other mega-sized U.S. banks. For context, Wells Fargo's earnings-per-share CAGR was 6% over this period, Bank of America's was negative 11%, and Citigroup was an abysmal negative 20%. Sounds like a good investment to us. JPM had been in a nice trend from mid-2012 all the way into the 1 st part of 2015, but since then the stock has been stuck in the mud. Based on the fundamentals listed above, the recent stock performance should just be a pause before breaking upward. Assuming the stock doesn t break below the support shelf at $52.50, we like it to head higher for the long run.

5 Stock #4: Home Depot (HD) The Home Depot has consistently increased its revenue since the 2012 fiscal year. Between the 2013 and 2014 fiscal years, the company increased its net sales from $78.8 billion to $83.2 billion, which is a 5.6% increase. The Home Depot continued that trend into Net sales for the first two quarters of the 2015 fiscal year were a combined $45.7 billion, which is a 5% increase from the combined net sales during the same time span last year. The company finished out 2015 just as well as it started it. Fundamentally good or not, there s no arguing the stock s 5-year performance. With the exception of the sideways move, and the beginning of 2016 dip, HD has just been on a steady trajectory higher. As they say, the trend is your friend, and trend is looking good for HD. The stock recently hit new multi-year highs, so no reason not to expect more highs in the future.

6 Stock #5: Starbucks (SBUX) Starbucks trades at high multiples that are comparable to a strong tech company like Google (NASDAQ: GOOG). A major reason for this is SBUX sports solid Y/Y growth, which does not look to slow in the foreseeable future. While comps slowed from 8% in 1Q16 to 6% in 2Q16, CAP still has lots of room to grow. Last year, SBUX reported 19% non-gaap growth and tailwinds in tea and iced-tea. This year, Starbucks plans on opening 900 stores in China, two-thirds of which will be licensed. This is great news for the company, especially as most people in China consume tea on a daily basis. This strong unit growth will likely be coupled with healthy comps backed by tea tailwinds. China currently has a middle class population of 600M people, nearly twice that of the entire United States. SBUX has slowed down over the past 6 months, but this isn t the first time in the past 5 years that the stock has taken a break. The trend is still in tact, and the company is expanding. The stock s current pause simply looks like a great time to get in for the higher prices to come.

7 Stock #6: Apple (AAPL) From a financial standpoint, Apple stock is on top of the world. In FY15, Apple stock had a revenue increase of $51 billion. That s just the increase, which was almost 30%, to $233 billion. That s more than the entire GDP of most nations. The bottom line: the actual net income also increased 30% to $53.3 billion. Free cash flow is $70 billion. These numbers are absolutely mind-boggling. Apple also has $162 billion in net cash and investments. It trades at 11.5 times earnings, and if you back out its net cash of $30 per share, that ratio comes down to about 8 times earnings. No matter what the naysayers say, Apple seems to be very undervalued. Unfortunately, all those great numbers being said, AAPL has had a rough months. Assuming the stock doesn t break its 2016 low, currently in the $90-92 area, we see no reason not to expect the company s performance to catapult the stock higher. This is simply a stock that should be held for quite some time.

8 Stock #7: Lockheed Martin (LMT) Cash from operations at the company surged 63% in Q compared to Q Rising capital expenditures hardly put a dent in the flow of new money, and free cash flow for the quarter rose to $1.4 billion. That was a 68% improvement. Nice. Lockheed Martin has now generated positive free cash flow of $4.7 billion over the past 12 months, 34% better than the company's "net income" number. Weighed against a market capitalization that now stands at $70.1 billion, Lockheed Martin stock now sells for just 14.9 times free cash flow. Not bad for an expected 10% grower paying a 2.9% dividend yield. LMT may be getting a little extended here, but any cool off by the stock should simply be providing investors with an even better entry point. The 5 year trend is obviously upward, and with tensions flaring up all over the world, the need for the military security that the underlying company provides should keep the stock flying higher for quite some time to come.

9 Stock #8: NIke (NKE) In 2013 Nike generated $23.3 billion in revenue. In 2014 Nike generated $27.7 billion in revenue. In 2015 Nike generated over $30 billion in revenues. Get the idea? The company P/E may be a bit higher than the industry, but as the number above shows, that multiple should be worth it at this stage. Like most of the stocks in our portfolio, NKE has been making its way higher and higher over the past 5 year. Like any stock, there s the occasional pause or correction, but when it s all said and done the stock pushes onward and upward. NKE has been consolidating again. This should provide a great entry for long-term investors looking for the right time to invest in a great name.

10 Stock #9: Alphabet (GOOGL) Despite its growing revenue, the company underperformed as compared with the industry average of 21.5%. Since the same quarter one-year prior, revenues rose by 17.8%. Growth in the company's revenue appears to have helped boost the earnings per share. Alphabet's debt-to-equity ratio of 0.04 is very low. Along with this, the company maintains a quick ratio of 4.50, which clearly demonstrates the ability to cover short-term cash needs. The return on equity has improved slightly when compared to the same quarter one-year prior. This can be construed as a modest strength in the organization. Things are looking good for Alphabet. GOOGL has been consolidating over the past 6-7 months, but overall the stock has always managed to hold its ground and move higher. The $700 level is key to the stock s up move. Assuming that level continues to hold up, higher should be the word from here.