Seagate Technology (STX)

[chmcnfunds]

10 Reasons To Buy These 3 Stocks

Feb. 11, 2014 5:24 PM ET | 2 comments |
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CPA, SIMO over the next 72 hours. (More...)
In previous articles, I have spoken of an investment strategy based on 20 rules for buying and selling shares. In this article, I use a similar approach to scan and find 3 more stocks that fit the criteria.

The Search
To begin the search I used the simple stock screener found at Google Finance. I have recently tested a number of rules-based strategies and found that some metrics are more important than others. With this in mind I set the following stock selection criteria:

Rule 1: Market cap should be greater than $100m.
Rule 2: PE ratio must be greater than 5 and less than 25.
Rule 3: PEG must be less than 1.
Rule 4: Dividend yield must be between 2% and 7%.
Rule 5: 52 week price change must be over 10%.
Rule 6: Price to sales must be higher than 0.5 and less than 3.
Rule 7: Current ratio must be higher than 1.
Rule 8: Return on equity must be higher than 5%.
Rule 9: Net profit margin must be higher than 5%.
Rule 10: EPS growth must be greater than 10 over last 5 years.

After running the test over the entire universe of stocks on Google Finance, only 6 stocks were left.

Here are my favorite 3 from that list:

Seagate Technology (STX)
Seagate are a leading provider of electronic data storage products including hard disk drives, solid state hybrid drives, solid state drives and more. Interestingly, Seagate is not the only data storage company in this list as it appears we could be entering a new phase for flash and NAND memory that could see these type of companies do well.

Most importantly, however, Seagate has performed extremely well on the rules based test. The company trades with a PE of just 11.16 and has a PEG less than 1. Both factors are low considering the high growth nature of the industry.

Indeed the industry median for PE comes in at a much higher 19.58 and one of Seagate's biggest competitors, Western Digital Corporation (WDC), bears a PE of 19.59. As well as this, Seagate has a current ratio of 2.07 and a healthy price to sales ratio of 1.17. Dividend yield is respectable at 3.47% and the company has a return on equity of 59.9%.
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http://seekingalpha.com/article/2012621-10-reasons-to-buy-these-3-stocks?source=nasdaq

STX