In mid February Peter Ashton of Trading Central wrote an article about some companies which could based on past performance outperform the market. The idea was to search its data base for stocks with reasonable valuations, above average volume and strong short term price momentum hinting at possible future price gains.
He started with companies with a market capitalization of greater than $10 billion.
To find reasonable valuations, he was looking for trailing price-earnings ratios of 25 or less.
For those companies increasing revenues, compare revenues from the last quarter vs a year ago and the benchmark is greater than 7% growth.
To see above average stock volume, he used a 10 day average where the criteria is 110% of the 90 day average.
To check on price momentum, looking for stocks that have risen 5% or more in the past 5 trading days.
Company Recent Mkt P/E Revenue Vol Price Dividend
Price Cap $ bil Ratio Growth 10vs90 Perf Yield%
Conagra Brands 23.82 11.524 12.9 9.7% 1.23 7.4% 3.6
Electronic Arts 103.10 30.658 22.6 9.2 2.95 27.5 0
Masco 37.05 10.832 15.7 8.9 1.15 11.8 1.3
M&T Bank 168.11 23.555 15.2 8.1 1.10 5.5 2.4
Ametek 78.54 17.952 22.7 10.0 1.25 5.6 0.7
Tractor Supply 95.82 11.665 23.5 9.3 1.45 5.3 1.3
The idea of this strategy is to see what is moving higher and then you will need to do homework to see if it is a good stock to buy. In the case of Electronic Arts or EA – they released a game which people like much better than their last one. If you invest in it, determine if the growth rate for signing up remains high.
The other good thing about these lists is some of the companies you may not know or they are in industries which you either do not work in or generally do not follow, these lists help broaden your base, which is good.
Linking to dividend paying stocks, in the case of the list above, the idea is to continually to narrow the list so your criteria can change. Once you narrow the list you need to determine which one suits you or you can wait for the stocks to decline and pick them up later.
There are more questions than answers, till the next time – to raising questions.