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Stock #1: Discover Financial Services (DFS)

Discover was in our Top Stocks 2016 report, and being as that trade was a winner, were going
to stick with it. When compared to competitors such as Mastercard (MA), Visa (V) and
American Express (AXP), Discover seems to have them all beat. When we wrote it up in 2016,
Discover had the lowest P/E (ttm), with the highest EPS (ttm). In addition, the company also
had the highest analyst ratings of the four.

Even though the fundamentals listed above would seem to continue to favor DFS, the stock
had not performed as well as V, nor MA, for most of 2015 and beginning of 2016. That being
said, the stock has still maintained an overall upward trend over the past 5 years, and the
rest of 2016 saw the stock do exactly what we had forecasted it to do.

We still think DFS is a good value, but the recent rise into 2017 certainly brings the stock
closer to par. The stock has been pulling back most of this year, so far, but that should provide
a better entry for another run higher.
Stock #2: Amazon (AMZN)
Back in mid-2016, Amazon.com posted quarterly earnings results where the e-commerce giant
reported $1.78 earnings per share (EPS) for the quarter, topping the consensus estimate of
$1.11 by a whopping $0.67. The company earned $30.40 billion during the quarter, compared
to analyst estimates of $29.54 billion. The businesss revenue for the quarter was up 31.1% on
a year-over-year basis.

Add all that up and everything sure looked bright on Amazons horizon, and the stock has
continued to reflect that view ever since.

The chart above shows that even with AMZNs 2014 consolidation, and the January 2016 drop,
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.

Expect pullbacks to occur along the way, but use them as opportunities to buy more of AMZN.

Most analysts have AMZN rated as a buy, and so do we.


Stock #3: JPMorgan Chase & Co: (JPM)
JPMorgan was also in our Top Stocks 2016 report, and at that time we pointed out that for the
2015 fiscal year, JP had 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 (WFC) earnings-per-share was 6% over this period, Bank of America's was
negative 11%, and Citigroup (C) was an abysmal negative 20%.

The stock sounded like a good investment to us then, and we still think it is now as well.

JPM had been in a nice trend from mid-2012 all the way into the 1st half of 2015, but in
mid-2015 the stock got stuck in the mud. Based on the fundamentals listed above, the stocks
performance during that stretch should have been just be a pause before breaking upward,
and that ended up being the case.

Since pushing above its 52-week high resistance area in October 2016, JPM has soared. The
stock just finished pulling back, but new highs ultimately followed, again.
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 was a 5.6% increase.

The Home Depot continued that trend into 2015. Net sales for the first two quarters of the
2015 fiscal year were a combined $45.7 billion, which was 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, and 2016 showed no signs of a let down. So, why should 2017 be any different?

Good fundamentals or not, theres no arguing the stocks 5-year performance. With the
exception of the 2013-14 sideways move, and a couple of 2016 dips, HD has just been on a
steady trajectory higher. As they say, the trend is your friend, and the trend is looking good
for HD.

The stock has hit new multi-year highs, so no reason not to expect continued highs coming in
the future. However, pullbacks should be expected.
Stock #5: Starbucks (SBUX)
Starbucks trades at high multiples that are comparable to a strong tech company like Google
(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 a
lot of room to grow. Last year, SBUX reported 19% non-GAAP growth and tailwinds in tea and
iced-tea.

Last year, Starbucks also had plans of opening 900 stores in China, two-thirds of which were to
be licensed. This was great news for the company, especially as most people in China
consume tea on a daily basis. That 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 had slowed down for the 9 months leading into October 2016, but that wasnt the first
time in the past 5 years that the stock had taken a break. What happened after SBUX took a
breather in 2012 and 2014? Higher. The trend is still in tact, and the company is expanding.
The stocks pause simply ended up being a great time to get in for the higher prices to come.
Stock #6: Apple (AAPL)
From a financial standpoint, Apple stock is on top of the world. Back in FY15, Apple stock had
a revenue increase of $51 billion. Thats just the increase, whichwas almost 30%, to $233
billion. Thats 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. Applealso 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 still seems to be very undervalued.

Unfortunately, all those great numbers being said, AAPL had a rough 12-14 months going into
the first part of 2016. However, the stock held its $90 support area, and the stock started on
yet another rally from there.

This is simply a stock that should be held for quite some time, and the recent break back
above $130 earlier this year confirmed that the next leg up for the stock was well underway.
Investors should use AAPL pullbacks as opportunities to get into the name.
Stock #7: Lockheed Martin (LMT)
Cash from operations at the company surged 63% in Q1 2016 compared to Q1 2015. 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, thats also 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, regardless of what Donald Trump tweets.
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, theres the occasional pause or correction, but when its all
said and done the stock pushes onward and upward.

NKE had been consolidating for over a year, but that appears to have provided the ideal entry
for long-term investors looking for the right time to invest in a great name. In the near-term,
a break above $60 will most likely confirm that stocks newfound footing.
Stock #9: Alphabet (GOOGL)
Alphabet is another name that was highlighted in our previous 2016 report. 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 had been consolidating during the first half of 2016, but overall the stock has always
managed to hold its ground and move higher, and again, it has recently been hitting new
highs. The $1000 mark could send the stock back a bit further, but higher prices should
ultimately follow.
Stock #10: Fiserv (FISV)
Fiserv is our slow and steady pick. The companys total revenue recently increased 4.4% year
over year to $1.331 billion, while adjusted revenues grew 5% year over year to $1.25 billion.
Adjusted operating income increased to $399 million, up 7.5% from $371 million in the year-
ago quarter. The companys adjusted operating margin of 31.9% increased 80 bps on a year-
over-year basis.

Fiservs cash from operating activities for the year ended Mar 31, 2016 was $509 million, up
nearly 47.1% from the prior-year period. The companys free cash flow came in at $298
million, an increase of 11.2% on a year-over-year basis. Long-term debt at year-end was
$4.445 billion.

The market seems to like the fact the FISV offers no surprises. The company isnt too hot, and
its certainly not cold. At the end of the day, thats what we like about it as well. For the past
5 years the stock has simply moved higher, with the mildest pullbacks of any stock on our list.
No surprises, just like the company.