Q: It seems ZDC has fallen in your ratings. Over the past few weeks it hasn't been mentioned as a go to growth stock as it once was. What are your thoughts on it? I'm considering completing a position in it. Good time to buy? If not, what would you suggest that has opportunity to do well over the next 6-12 months?
5i Research Answer:
We continue to like ZDC, but it is up 71% year-to-date and some profit taking and consolidation is likely appropriate here. It is not cheap at 164X forward earnings, but we like its growth profile and we think it has secular tailwinds. It is also a small name ($633M market cap), and with increased volatility in the markets, this name can see large daily moves. We think it can do well over the long-term, but it is also possible that it further consolidates over the next several weeks. We would be comfortable building a position here, while acknowledging its very high valuation levels and small-cap risks.
Although, we might give PNG or CLS the edge here today, for high-growth stocks over the next several months.