To be honest, I'm nervous about the ability of the equity
market to continue with its sharp run up in the short term.
The S&P 500 is flirting with 1700 and has rallied almost 9%
from the June 24
low. Investors itching to put fresh cash to work may want to
think about a screen of strong earnings and inexpensive valuation
to navigate the investment waters.
In order to search for companies with value and earnings
strength, I set up a screen looking for stocks with forward PE
ratios of less than or equal to 14, an earnings surprise of at
least 10% in the last reporting quarter, and a Zacks Rank
#1 (Strong Buy). This simple screen feature and
criteria was run on Zacks.com. Twenty six stocks fit
Twenty six stocks are a lot to choose from. I
decided to inject some discretion into the process. Given
the run in financial names and the fact that finance companies
can trade at "low" PE ratios, financials were thrown out of the
mix. I also reviewed bar charts, looking for a setup which
could support price strength.
Here are a few names which caught my interest:
). Visteon is an auto supplier, AMERCO is a
diversified company with a truck rental and insurance operation,
and Sanderson Farms is a poultry producer. A quick run
down of potential fundamental positives and chart perspectives
are provided for each name:
Visteon could benefit from the favorable outlook for auto
sales. Ford (
) recently narrowed its 2013 sales range to 15.5 to 16.0 mlu from
15.0 to 16.0 mlu suggesting that the build in China and North
America would be above prior estimates, however, the build in
Europe was revised lower. The average age of a U.S.
passanger vehicle on the road is old and there is pent up demand.
Technically, Visteon is in a broad consolidation. A rally over
the $67 area could signal a new leg higher. Prices have
recently found support in the $64.50 area. The spike low
near $58 suggested buying power under the market during June.
Sanderson Farms could benefit from lower corn prices.
New crop corn prices have been falling on an expected build in
supply and favorable North American weather patterns.
Extremely high beef and hog prices could also benefit
poultry demand on a substitution effect. Prices remain in
an uptrend from the February low and have recently pulled back
into support in the $68 area. It may take a close below the
trend line to signal a reversal of the uptrend.
AMERCO may be able to benefit from moving and storage activity
on the back of increased home sales and a stronger housing
market. It has also increased its distribution through more
company locations and a larger truck fleet. The chart shows
a large triangle formation. A break out over the $180 area
could signal a new leg higher. Typically, this type of
consolidation is a pause before prices continue with the trend.
A break under $160 would invalidate the friendly looking
Poultry production, auto parts, and truck rental and storage
are not sexy names, but may be the ticket for investors looking
for ideas in a high flying market.
SPDR-DJ IND AVG (DIA): ETF Research Reports
FORD MOTOR CO (F): Free Stock Analysis Report
SANDERSON FARMS (SAFM): Free Stock Analysis
SPDR-SP 500 TR (SPY): ETF Research Reports
AMERCO INC (UHAL): Get Free Report
VISTEON CORP (VC): Free Stock Analysis Report
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