By James Dennin for Kapitall
If you're bullish on 2014, then the January Slide may have created a juicy, juicy buying opportunity.
Stocks are rallying this morning, across the board on all the major indices. Of particular note is the NASDAQ, which was beating both the S&P 500 and the DOW in off-hours trading. It's currently up about 0.3% as of 10:45 AM EST.
While the Dow Jones (which is also up, slightly more), is a good bellwether for the economy as a whole, the NASDAQ is particularly useful for gauging how investors are feeling about technology. A high demand for technology stocks indicates that the investing population as a whole is excited about the future, and optimistic enough about the economy to invest in it.
The market's relatively strong performance in mid-February supports many analyst assessments of the so-called January Slide. Last month a lot of people were arguing that the stock market wasn't falling because of emerging market currencies, troubles in China, or that the fundamentals of the economy weren't strong.
It was falling simply because it had gotten too high.
For stocks to be performing this well, particularly more speculative ones in technology, indicates that the pullback which took place was simply an adjustment – one that may already be over. Even China's economy is predicted to be ready for as much as a 20% surge, as outflows led to attractive valuations.
Still, there is a lot to consider when weighing stocks. Fed Chair Janet Yellen says the labor market has far from recovered: job numbers are okay, but not great – and it seems like there's a good chance some Republicans in Congress are going to raise a stink again about increasing the debt ceiling. The stock market doesn't usually react well when the US credit rating is threatened.
If you want to bet that the 'January Slide' was really just a valuation adjustment which makes stocks attractive again, it make sense to look for some combination of value and growth.
We looked for companies that had very high return on equity (ROE) of at least 30%, which means they were very efficient at using their capital. We also looked for companies with historic sales growth over the last 5 years of at least 10%. Finally, we looked for stocks that were trading at a discount despite these favorable numbers, with a price to equity ratio (P/E) below 15.
Click on the chart to view data over time.
Do you think the January Slide created buying opportunities? Use the list below to begin your analysis.
1.Apollo Global Management, LLC (APO, Earnings, Analysts, Financials):Is a publicly owned investment manager. Market cap at $4.6B, most recent closing price at $31.90.
Sales Growth Past 5 Yrs: 35%
2.Alliance Resource Partners LP (ARLP, Earnings, Analysts, Financials):Produces and markets coal to utilities and industrial users. Market cap at $3.00B, most recent closing price at $80.68.
Sales Growth Past 5 Yrs: 13.8%
3.Buckle Inc. (BKE, Earnings, Analysts, Financials):Operates as a retailer of casual apparel, footwear, and accessories for young men and women in the continental United States. Market cap at $2.04B, most recent closing price at $44.03.
Sales Growth Past 5 Yrs: 12.6%
4.Credit Acceptance Corp. (CACC, Earnings, Analysts, Financials):Provides auto loans to consumers primarily in the United States. Market cap at $3.03B, most recent closing price at $129.84.
Sales Growth Past 5 Yrs: 20.5%
5.CVR Energy, Inc. (CVI, Earnings, Analysts, Financials):Refines and markets transportation fuels in the United States. Market cap at $3.13B, most recent closing price at $36.72.
Sales Growth Past 5 Yrs: 23.6%
6.NeuStar, Inc. (NSR, Earnings, Analysts, Financials):Provides technology and directory services to its communications service provider (carrier) and non-carrier, commercial business customers primarily in North America, Europe, and the Middle East. Market cap at $2.18B, most recent closing price at $34.99.
Sales Growth Past 5 Yrs: 13.7%
7.Nu Skin Enterprises Inc. (NUS, Earnings, Analysts, Financials):Develops and distributes anti-aging personal care products and nutritional supplements worldwide. Market cap at $4.3B, most recent closing price at $71.83.
Sales Growth Past 5 Yrs: 13.4%
(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)