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Wednesday, March 17, 2010

Value stocks getting harder to find

One of the things I do at Alert HQ is scan the Trend Leaders list for stocks that not over-valued. I use a simple screen to identify those stocks that, while trending strongly upward, are showing what I call "reasonable value."

Here are the criteria used for my reasonable value determination:
  • PE between 0 and 20
  • PEG between 0 and 1.3
  • Price-to-Sales less than 2
  • Debt-to-Equity less than 1
The following table shows the results of this screen after it was run against those stocks that were added to the Trend Leaders list after the close on Tuesday, March 16. The Last Price column is also as of the close on Tuesday.

Symbol Name Last Price Market Cap PE PEG Price To Sales Price To Book Debt To Equity
COP CONOCO PHILLIPS $52.17 $76.84B 15.81 0.59 0.56 1.22 0.431
GGAL Grupo Financiero Galicia S.A. $5.50 $661.7M 10.88 1.2 1.14 1.22 N/A
AIRM Air Methods Corporation $32.24 $389.7M 11.46 0.57 0.67 1.79 0.4601
HGG HHGREGG, INC. $22.50 $872.6M 19.11 1.17 0.59 3.6 0.3773
EME EMCOR GROUP, INC. $26.19 $1.668B 10.61 0.72 0.3 1.37 0.1234
ANDE The Andersons, Inc. $34.87 $625M 16.15 1.06 0.2 1.51 0.7582

Given the fact that there are over 900 stocks and ETFs on the Trend Leaders list this week, it is a sad comment for a value investor to see so few stocks pass this rather loose value screen.

Be that as it may, today's list does have some interesting selections. Here are a few comments:
  • Conoco Phillips (COP) is expected to sell half of its stake in Lukoil which could raise roughly $4.6B. The stock has been steadily advancing since the beginning of March. The PE is reasonable but PEG and Price to Sales are very low, indicating deep value.
  • Grupo Financiero Galicia S.A. (GGAL) is a good way to play the dynamic economy of Argentina. The company is a significant player in commercial banking and consumer banking in the country. The company has struggled to grow earnings over the last few quarters, as have so many financial companies, but they have remained solidly profitable.
  • Air Methods (AIRM) stock price has shot up recently and it threatens to close the bearish gap that occurred in late January after reporting poor earnings. The stock was beaten down so badly its PEG and Price to Sales numbers are now well within value territory. The company supplies medical air transport services. Management says expectations are high. Who knows, maybe the new health care bill will help them out.
  • hhgregg (HGG) operates retail electronics stores in nine states. Here is a company that is doing pretty well as you can see in this chart of company financials and below that the chart of price action:

  • Emcor Group (EME) is primarily involved in electrical distribution systems and HVAC equipment for commercial buildings and municipalities. The company's numbers show that it is still waiting for the construction industry to recover; however, a patient investor will probably be rewarded by this company.
  • The Andersons (ANDE) may have an unusual name but they are in the somewhat mundane businesses of grains, ethanol, railcars, fertilizer, warehousing, seeds and chemicals. In any case, this mix of businesses seems to be working for the company. Their most recent quarter showed solid sequential growth but our screen shows the company is not over-valued. Below is the chart which shows a beautifully steady upward trend:

Conclusion --

It may be getting harder to find value stocks that are showing good price performance but these six show that there are still a few out there. In digging into them, it looks some are better than others. My personal favorite from today's list is hhgregg but I do find The Andersons to be a pretty interesting company. And with its 50-DMA about to cross above the 200-DMA, there is probably further upside to be had.

Disclosure - no positions in any stocks mentioned in this article

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