Argus has made four additions to its Focus List this month, and a like number of subtractions. The 30 stock list features timely analyst recommendations. The additions are highlighted below:
CarMax (KMX): This company operates over 200 used car stores. We believe trends favor the used-car business. The U.S. vehicle fleet is at an all-time record, according to IHS Markit. Meanwhile, new-vehicle sales declined in the U.S. in 2019 and are expected to decline again in 2020 and 2021. CarMax has been expanding in recent years with 10-20 store openings annually. It developed an omnichannel approach to car buying by giving customers the option of completing purchases without ever entering a store.
Apollo Global Management (APO): Apollo is a leading global manager of alternative assets. It is differentiated by its focus on complex, nontraditional, distressed-for-control investments that may be converted to a controlling equity stake. In September 2019, following peers KKR and Blackstone, Apollo converted to C-Corp status from a publicly traded partnership, which we believe will expand its shareholder base and enhance liquidity.
HCA Healthcare (HCA): This company is one of the largest hospital companies in the U.S. Facing greater competition in the commercial markets in recent years, HCA responded by making acquisitions, leveraging the innovative use of big data, and reducing the impact of lower-margin customers by growing market share. Given the aging U.S. population, we like HCA’s reach within the healthcare services market and believe it is well positioned for long-term growth.
Zions Bancorporation (ZION): Zions provides a range of retail and commercial banking, residential mortgage lending, and asset management services. Operating as a collection of seven community banks has allowed the company’s affiliates to operate “locally” but with the backing of a large institution. Zions has strong capital levels, a high loan-to-deposit ratio, and is benefiting from reduced regulatory oversight.
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