“Tap Into the Market’s Fear” with FUTR Stocks?

What are the "Under the Radar Stocks" Pitched by the new Matt McCall Newsletter?

By Travis Johnson, Stock Gumshoe, August 27, 2015

I always try to take at least a quick look when one of the major publishers pushes a new newsletter — this time, it’s Matthew McCall, who has written some tradng books and is apparently a money manager and a bit of a Fox Business News personality, with what he’s calling the FUTR Stocks letter from Investorplace (the folks who bring us Louis Navellier, Hilary Kramer and Richard Band, among others).

That “FUTR” stands for “Flying Under The Radar”, and he says that he’s picking stocks that are fundamentally strong and inexpensive but not well-known, and that have growth catalysts in the foreseeable future and benefit from “mega trends.” Nothing too crazy about that strategy (or unique)…

He starts off with a pretty strong claim that all of his picks have an average return of 27%, including closed positions, and that he has a “win rate” of nearly 90%. I don’t have the info to verify that, it appears that he’s been putting the newsletter out for a while but that Investorplace started publishing/promoting it pretty recently, he’s not yet listed in many places on their website… but we’ll give him the benefit of the doubt, since we’re just interested in finding out what the stocks are that he’s teasing today.

The first “special report” he’s pitching to get subscribers interested is called 3 ‘Under the Radar’ Stocks for ANY Market… so we’ll start with those. He says the report is “a $79 value” (the newsletter retail price right now is $299).

Here are our hints:

“‘Under the Radar’ Stock #1: Flying the Cheap (Real Cheap!) Skies!

“What better time than a bad economy… to invest in a service that’s slashed prices below almost everyone else?

“Plus, they are growing fast. In 2014 alone, they opened 24 new international and 12 new domestic point-to-point flights.

“They’ve actually nearly doubled their share price in the last year… and it’s still shooting up like a rocket!

“This is a stock to own as quickly as you can buy it!”

Well, nothing equivocal about that — what’s the stock? There are actually two reasonable US solutions for this pitch, Alaska Air (ALK) and Spirit Airlines (SAVE) — both added substantial numbers of international and domestic point-to-point flights in 2014, and both are growing quite quickly this year as well — but Spirit is really the low cost provider among international airlines in the US (Allegiant and Frontier, which are sometimes cheaper, don’t have as many international flights… for low cost carriers, “international” mostly means “we fly to Mexico and the Caribbean, and a little bit to Canada”).

Alaska has actually been the better performer of those two low-cost carriers over the past year or two, and hasn’t slumped over the last couple months like SAVE has… so if you’re just going from the “nearly double in a year” hint, ALK is now actually a better match, though a couple months ago ALK and SAVE had similar growth profiles on the chart. But really, Alaska is the “expensive” low cost carrier — they don’t slash prices more aggressively than everyone else, that’s really Spirit’s bailiwick. I’d much rather fly on Alaska Airlines than on Spirit, since Spirit crams more seats into the same cabin and charges for water and carry-on space, but I suspect SAVE is probably the stock being teased here.

And it’s down quite a bit recently, so if you like the extreme no-frills airline it’s a good 20% cheaper now than it was when Louis Navellier was recommending it back in October. Personally, I’m not all that taken with the no-frills idea — all airlines have done very well over the last three years, and the low cost airlines have often been among the best performers (including SAVE for a while, particularly last year), but there’s nothing to indicate to me that SAVE is definitely a better buy than the others. The rising tide has lifted pretty much everyone over the past few years, but SAVE really faltered this year for reasons I don’t know. There’s nothing magical about the business — it’s all about filling your planes and running those planes as efficiently as possible and most of the airlines have gotten really good at that since the 2009 bottom. Perhaps SAVE will do better than the others if there’s a big downturn, I don’t know, but right now their profit margin is about the same as Alaska Air (the two best I looked at by that metric) and the stock carries a forward PE valuation quite similar to the stronger ALK, LUV and JBLU… growth expectations are slightly higher for SAVE than for the others, so maybe the stock could outperform if it gets back to its former valuation and gets credit for that anticipated growth again, but with lots of airlines that appear to me to be better run and to offer more sustainable models I don’t see any great reason to focus on SAVE. We’ll see. Maybe I’m just being critical because I hate hate hate every airline that tries to steal an extra two inches of legroom from me.

Here’s the chart for several of those airline stocks over the last three years — last year, SAVE was a growth darling for a while but is no longer… all have done well, and SAVE has been pretty average as an airline stock other than their big surge last year.

AAL_ALK_JBLU_LUV_SAVE_DAL_UAL_chart

But I think we might actually be getting something a bit sneakier here, and that Matt might be teasing the fast-growing Mexican low-cost carrier Volaris (VLRS)… the stock for that one has indeed been strong recently, and has just about doubled over the past year… and they did report that they added exactly 36 flights last year, including 24 domestic (within Mexico) and 12 international. So on those clues, it matches much better.

VLRS is a significantly smaller stock, market cap around $2 billion, and is growing fast particularly with its hub in Guadalajara and growing service to US cities — though it’s expanding in Central America as wel