For Immediate Release
Chicago, IL - May 23, 2012 - Today, Zacks Investment Ideas
feature highlights Features:
4 Oversold Stocks
The old adage of "sell in May and go away" has been amazingly
accurate the last three years. Taking a look at the returns on the
S&P 500 over the first four months of the year compared to the
returns from the following four months, you'd see 2010 with a +6.4%
vs. -11.6%, 2011 with +8.4% vs. -10.6% and 2012 (through May 18) at
+11.2% vs. -7.3%, respectively.
Although this may look a little ominous for this summer, I'm a
firm believer that you shouldn't base your investing decisions upon
what month it is. And as long as Europe's problems stay Europe's
problems, meaning their economic woes don't drag the U.S. into a
recession, then the investing landscape looks bullish for
Because the recent economic data, although not stellar, has been
"good enough" to drive strong corporate earnings, as we saw this
past earnings season. And with the S&P now trading at just
12.1x forward four quarters earnings estimates, stocks look awfully
attractive compared to the paltry returns of other asset classes
like cash, bonds or real estate.
Price and Fundamentals Diverging
The recent stock market pullback has indiscriminately dragged
down some stocks that otherwise should be marching higher. I ran a
screen for companies that (1) delivered strong first quarter
revenue and earnings surprises, (2) have had strong positive
earnings estimate revisions, but (3) have sold off more than -10%
over the last month.
This decoupling of price and fundamentals could prove to be a
wonderful buying opportunity if the U.S. economy continues to at
least slowly improve.
Here are 4 stocks that look oversold right now:
Cabela's is a growing specialty retailer focused on hunting,
fishing, camping and other outdoor recreation merchandise. The
company has delivered 4 consecutive positive earnings surprises,
including a strong revenue and earnings beat in late April driven
by a 4.2% increase in same-store sales. Consensus estimates have
been soaring ever since, sending the stock to a Zacks #1 Rank
Despite the strong fundamentals, shares have sold off this month
along with the overall market. The stock now trades at just 12.6x
12-month forward earnings, and it sports a PEG ratio of 0.9 based
on a consensus long-term growth rate of 14.3%.
Titan delivered a blowout quarter in April with revenue soaring
65% to $607 million, crushing the consensus of $439 million. And
EPS jumped 47% to 84 cents, easily beating the Zacks Consensus
Estimate of 53 cents.
Earnings estimates soared, sending the stock to a Zacks #1 Rank
(Strong Buy) stock. The stock was soaring too, until European
concerns caused the overall market, and Titan, to selloff.
But shares of TITN look awfully attractive now trading at just
11.0x 12-month forward earnings, a discount to its historical
median of 13.1x.
Trinity has gotten beaten up during the pullback too. But this
isn't due to any company-specific problems. The company, which
manufactures railroad, marine and structural products, delivered a
huge earnings surprise on April 25 driven by a 46% surge in
And management provided bullish guidance for the remainder of
the year, prompting analysts to revise their estimates higher. This
sent the stock to a Zacks #1 Rank (Strong Buy).
Shares are now trading at just 7.9x 12-month forward earnings,
well below its 10-year median of 18.4x. If the company can deliver
on management's earnings guidance, this stock warrants a much
Wesco delivered a strong 'beat & raise' quarter in late
April that has gotten almost completely overlooked by a nervous
market. The company provides electrical, industrial, and
communications maintenance, repair, and operations (MRO) and OEM
products. It is a Zacks #1 Rank (Strong Buy) stock.
Despite the strong earnings momentum, shares have fallen sharply
this month. Valuation looks awfully attractive with the stock
trading at just 11.1x forward earnings. Its PEG ratio is just below
1.0 based on a consensus long-term EPS growth rate of 11.5%.
The Bottom Line
These 4 stocks have been punished not because of their
fundamentals but because of a fearful stock market. If concerns
over Europe's problems spreading to the U.S. turn out to be
overblown, look for these same stocks to rally the fastest.
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CABELAS INC (CAB): Free Stock Analysis Report
TITAN MACHINERY (TITN): Free Stock Analysis
TRINITY INDS IN (TRN): Free Stock Analysis
WESCO INTL INC (WCC): Free Stock Analysis
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