We’re expanding our Bullpen following this week’s January Monthly Meeting — adding four stocks and bringing our watch list to a total of 10 names. TXRH 1Y mountain Texas Roadhouse 1 year Texas Roadhouse is a restaurant chain. It’s best known for its namesake fast casual steak house that offers high-quality food at a surprisingly low price. You don’t get comparable restaurant sales of 8.7% in the third quarter without people coming back for more. In addition to the Texas Roadhouse nameplate, the company also owns two other concepts: Bubba’s 33 and Jaggers. The stock had a great 2024, rallying roughly 50% but has pulled back from its November high of $205.27. Earlier this week, analysts at Morgan Stanley took advantage of the pullback by upgrading their rating to an overweight, buy-equivalent — expanding strong traffic growth and slight margin improvement this year. The company also has a clean balance sheet with no debt, providing management the opportunity to continue investing and expanding its three brands, and returning cash to shareholders. VFC 1Y mountain VF Corp 1 year VF Corp is a footwear and apparel company known for brands like Vans, The North Face, Timberland, and Dickies. It might be a high-risk, high-reward situation, but it’s hard to ignore the progress CEO Bracken Darrell has made in turning around the business. It would mark Darrell’s third successful turnaround after fixing up Logitech and Old Spice. Since coming on board, Darrell has lowered costs, fixed up the balance sheet by divesting streetwear brand Supreme, increased gross margins, and improved sales in the Americas. With all that progress, there’s a lot more work to be done here. If VF can get Vans going again with Darrell’s help and under the direction of Sun Choe, who joined the company last May from Lululemon, then we could see this stock getting at least back to its late 2022 levels. COF 1Y mountain Capital One 1 year Capital One is a financial services company that might be best known as one of the largest issues of credit cards in the United States. We spent the bulk of the Monthly Meeting talking about how catalysts can take stocks higher, and Capital One has a big one happening this year if it can close its acquisition of Discover Financial Services. The all-stock transaction was announced in February 2024, valuing Discover at $35.3 billion. It’s expected to close in early 2025. This is a transformative deal for Capital One, helping it gain scale and move up the card issuer ranks to the top spot from No. 3. At the time of the deal announcement, Capital One said it expects to generate $2.7 billion in pre-tax synergies, and that would be more than 15% accretive to adjusted earnings per share (EPS) in 2027. That’s quite meaningful for a stock that currently trades at less than 10 times its current 2027 adjusted EPS consensus estimate. There are still some hurdles that the deal needs to get over to get done — namely shareholder and regulatory approval. We expect shareholders will vote “yes” at the Feb. 18 shareholder meeting. If regulators planned on blocking the deal, it probably would have happened under the Biden administration. President Donald Trump’s deregulatory regime will likely let it go through. ISRG 1Y mountain Intuitive Surgical 1 year Intuitive Surgical, a MedTech company known for its leadership in robotic-assisted, minimally invasive surgery, might have been the star of last week’s JPMorgan Healthcare Conference. The stock surged after announcing stronger-than-expected preliminary fourth-quarter sales. The company said revenue increased 25% year over year to $2.41 billion, well above the $2.23 billion consensus estimate. The 25% growth rate marked the third straight quarter of accelerating revenue growth, which is something you don’t always see from a healthcare company of this size. Intuitive Surgical said it placed 493 of its da Vinci surgical systems in the fourth quarter — nearly a third of the 1,526 da Vincis that it placed for all of last year. Of those 493 systems, 174 were the latest-generation da Vinci 5 systems. Worldwide da Vinci procedures grew approximately 18% in the fourth quarter, roughly in line with the 17% full-year 2024 procedure growth rate. Although the preannouncement sent shares soaring, Intuitive Surgical stock gave back some gains Friday after reporting its full results. The company reiterated its view that da Vinci procedure growth will increase 13% to 16% this year, but some investors may have taken issue with some slight adjusted gross profit margin compression versus last year and a bigger-than-expected increase in operating expense growth. . However, we are hardly phased by these two issues. The company explained the gross margin compression reflects things like incremental depreciation on new facilities, the impact of growth in newer products, and headwinds from the strong US dollar that’s hitting every multinational. There is some tariff risk here since the bulk of the company’s instruments and accessories are made in Mexico and that may spook some investors. But if the new Trump administration focuses more of its trade policy on China, not Mexico, then these worries will be overblown. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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A trader at the opening bell of the New York Stock Exchange in New York, on January 23, 2025.
Timothy A. Clary AFP | Getty Images
