Skip to main content

Ten stocks with strong charts and reasonable valuations

I ran a simple screen against my database today and came up with ten companies. The screen looks for stocks with a reasonable valuation but also charts that are strongly trending up. Here are the criteria:
  • PE between 0 and 20
  • PEG between 0 and 1.3
  • Price-to-Sales less than 2
  • Debt-to-Equity less than 1
  • New addition to the most recent Trend Leaders list - this requires that Aroon, MACD and Wilder's DMI are all bullish
Here is the list of ten stocks that made the grade:

Symbol
Name
CHOP
China Gerui Advanced Materials Group Limited
HSIC
Henry Schein, Inc.
ALGT
Allegiant Travel Company
WBD
WIMM-BILL-DANN FOODS OJSC ADS'S (EACH REP ONE SHARE OF C/S)
HQS
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
CAB
CABELA'S INCORPORATED
ACN
ACCENTURE LTD.
AFG
AMERICAN FINANCIAL GROUP
JOSB
Jos. A. Bank Clothiers, Inc.
RRGB
Red Robin Gourmet Burgers, Inc.

With so much attention focused on healthcare stocks lately, it's worth taking a deeper look at one of the stock picks on the list: Henry Schein, Inc.

Henry Schien is a distributor of healthcare products and services primarily to office-based healthcare practitioners in the North American and European markets. The company operates through two segments, Healthcare Distribution and Technology. The Healthcare Distribution segment provides all kinds of consumables including pharmaceuticals and diagnostic materials as well as dental equipment, X-ray equipment, etc. to dentist and doctors offices. The Technology segment offers software and related products that primarily include practice-management software systems for dental and medical practitioners and animal health clinics; and financial services and continuing education services for practitioners.

The company has over half a million customers and is the largest company serving the market of small dental, medical and animal health practitioners.It has expanded beyond North America and Europe into the People's Republic of China, Saudi Arabia, and the United Arab Emirates.

Henry Schein is $5 billion company. Financially, by virtue of being on this screen, it maintains reasonable valuation (PE of 17, PEG of 1.18, Price-to-Sales of 0.8, very little debt) and has been able to show steady earnings growth. Click around on the chart below. Quarterly results are a little erratic but in general, annual earnings have been on a nice up-trend. 2009, though, a year that has been so tough for many companies, looks to be a bit disappointing.


Explore more HSIC Data on Wikinvest

In any case, the company will be reporting fourth quarter earnings soon and investors will be looking for continued sequential improvement. In the most recently reported quarter, international sales grew about 8% though domestic sales were slightly negative. The Technology segment turned in 5% growth and, though it is significantly smaller than the Healthcare Distribution segment, the company benefits from gross margins over 70% in the Technology segment.

The company's stock price has been quite strong up until the last week or so. Here is the chart:



You can see that all three of the trending indicators we screen for are currently bullish. Unfortunately, investors appear to be getting cold feet as we approach the earnings report.

In any case, we have a company that is by no means expensive and has the opportunity to benefit from the surge in healthcare stocks. The company is well positioned to benefit from several trends in the industry. Management is projecting increasing consolidation in its niche and, as the largest company in its sector, they believe they will be able to acquire smaller players that will allow Henry Schein to expand its footprint and market share. Trends toward cost containment will favor the company as it is big enough to achieve economies of scale that are unavailable to smaller competitors. As with most healthcare companies, they point to the aging population as a source of increasing revenue. On the other hand it is hard to predict what the unintended consequences of government-driven healthcare reform could be for the company.

In summary, it appears we have a conservative company at a reasonable valuation with a strong stock chart whose price is faltering slightly prior to an earnings report.  This seems the perfect candidate for a watch list. Even if the company beats earnings expectations, it looks like investors will have an opportunity to catch the stock at a lower entry point.

Disclosure: no positions in any stocks mentioned

Comments

Anonymous said…
Keep posting stuff like this i really like it

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Free stock alerts, Trend Leaders, Bollinger Band Breakouts and Cash Flow Kings for Jan 16, 2009

This post is to announce that the latest list of free stock alerts is up and available at Alert HQ. Each week we scan over 7400 stocks and ETFs looking for fresh BUY and SELL signals. We apply a combination of proprietary and standard technical analysis techniques to identify those stocks that are beginning to move. Our goal is to identify stocks or ETFs that are undergoing reversals, either to the upside or to the downside.

Wait, there's more...

We also use the Alert HQ process to generate more free lists of stocks and ETFs

The first byproduct of the Alert HQ process is the Trend Leaders list, our collection of stocks in strong up-trends. These stocks are registering strong signals using Aroon analysis, DMI and MACD. They are also above their 50-day exponential moving average. This week's list is now available at the TradeRadar site on the Trend Leaders page.

As another byproduct of the Alert HQ process we have generated a list of stocks that have broken either above their upper…