12 Top Stocks Based on PEG and Price Momentum
by: Scott's Investments September 27, 2010 | about: AZO / COH / CPRT / CTCM / FCFS / FOSL / FSLR / IDCC / JOSB / SH / SHOO / SPY / TXN / USNA
I conduct the following screen on a monthly basis. Early out-of-sample results have been mixed, performing well during bullish environments and poorly during bearish/choppy markets. Last month's list here. The screen looks for the following:
o earnings growers still reasonably priced as judged by the PEG ratio
o low debt
o a history of high return on equity and investment, and
o price momentum as gauged by the percentage the stock is trading to its 250 day high.
Last month's list returned a whopping 16.17% versus 7.87% for SPY. It is worth noting last month's list had very few stocks that qualified for the list, three in total. (Here's how previous months fared: January's list returned 1.39% vs .57% for SPY. February's list returned a solid 11.78% vs. 6.77% for SPY. March returned 7.91% vs. 4.23% for SPY, April was a down month, nearly matching SPY in returning -11.57% vs -11.52% for SPY, May's list returned -6.55% vs -.56% for SPY, June's list returned -1.74% vs. 3.27% for SPY, July returned a sour -10.36% vs -5.55% for SPY.)
When the screen results in more than 5-10 stocks I have also started tracking returns of the top 5 or 10 stocks at the beginning of each list (when more than 5 stocks qualify). The top stocks are selected based on fundamental factors. For the full list of stocks and results, please see the right hand side of Scott's Investments.
The screen has tested well historically in bullish periods so strategies an investor could use to avoid drawdowns would be to either a) abandon this type of strategy entirely when the S&P 500 or another major index is below a long term moving average, or b) hedge positions with a position in ProShares' Short S&P ETF (SH) or write a short option strategy on an equity index or ETF like SPY.
This month's list contains 12 stocks,and two of the three stocks on last month's list remain on this month's list.
Ticker Name Trend Rank MktCap Industry
TXN Texas Instruments Incorporate Here 96.29 32186.61 Semiconductors
JOSB Jos. A. Bank Clothiers, Inc. Here 96.17 1172.07 Retail (Apparel)
FOSL Fossil, Inc. Here 95.53 3559.52 Jewelry & Silverware
IDCC InterDigital, Inc. Here 94.03 1261.24 Communications Equipment
SHOO Steven Madden, Ltd. Here 93.5 1095.05 Footwear
FCFS First Cash Financial Services Here 90.16 800.21 Retail (Specialty)
USNA USANA Health Sciences, Inc. Here 88.77 630.43 Personal & Household Prods.
COH Coach, Inc. Here 87.09 12621.91 Retail (Apparel)
AZO AutoZone, Inc. Here 81.86 10182 Retail (Specialty)
CTCM CTC Media, Inc. Here 72.53 3323.15 Broadcasting & Cable TV
CPRT Copart, Inc. Here 63.93 2860.06 Retail (Specialty)
FSLR First Solar, Inc. Here 43.36 12584.28 Semiconductors
Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123.
Disclosure: No positions in stocks mentioned
