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Jelly Roll Capital Equity Research |
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Market Analysis, Education, and Wall Street-Quality Stock Reports |
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Top Stocks to Buy for August |
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About twice per month I rerun a data model that does a quantitative evaluation of about 1,500 stocks. The model gathers the names, prices, and latest financials, does some calculations, and then generates a power ranking from (for this update) stock #1 to stock #1477. While not perfect, this model is very useful for generating leads into some excellent and potentially under-priced businesses. The 25 stocks are: 1. NVR 2. FreightCar America (ticker: RAIL) 3. Vaalco Energy (EGY) 4. Avatar Holdings (AVTR) 5. Aspreva Pharmaceutical (ASPV) 6. Nucor (NUE) 7. Patterson-UTI (PTEN) 9. Grey Wolf (GW) 10. US Physical Therapy (USPH) 11. American Eagle (AEO) 12. Advance America (AEA) 13. Steven Madden (SHOO) 14. Microstrategy (MSTR) 15. Marathon Oil (MRO) 17. AMREP (AXR) 18. Tesoro (TSO) 19. Exxon Mobil (XOM) 20. CPI Corp. (CPY) 21. Pre-Paid Legal Services (PPD) 22. New Frontier Media (NOOF) 23. Lamson Sessions (LMS) 24. Accenture (ACN) 25. Valero (VLO)
Given that we just had a slew of earnings releases - 67% if S&P 500 companies have reported - combined with a big sell-off in the last week and a half (not that I know anyone who called the top on the Nasdaq to the day), several of the names haven’t had much if any mention here on the site so far. Over the next several days, I plan to fill in more information and analysis regarding many of these stocks. Additionally, if the S&P 500 finishes down more than 0.5% tomorrow, I am going to add Part III to the “Because Everyone Hates Housing and Credit” series (see Part I or Part II).
A couple ways to approach the stocks here: obviously, the housing stocks (NVR and AVTR) have gotten killed lately. NVR has gotten hammered down from the top at $850 that came after I broke the shorts and right now is obviously not a bright and sunny time to be in housing. NVR is far and away the best housing stock though, so I’m surprised to see it get hit harder than other homebuilders like Toll (TOL), Pulte (PHM), and even D.R. Horton (DHI). The charts show they mostly trade together, but I find the direct correlation to be a bit much. Still, taking a stand on housing here isn’t smart for the volatility-averse investor. The housing stocks have been pretty consistent in hurting the results of this portfolio, but I do not edit out picks. The only thing I do know about timing housing is that we won’t be seeing the stocks drop 30% every three months indefinitely. One stock that has held up well recently is Accenture (ACN). The stock remains just 5% off its 52-week high, and although this means the stock is relatively more expensive than it has been previously, I still think it is undervalued. For a double-digit grower with one of the best returns on capital of any company in the world to be trading for 9.2x free cash flow seems to be a serious case of mispricing. ACN should go 20% higher to at least $50, if not more, and at that time a more precise valuation estimate can come into play.
A quick look at sector concentration here again shows materials stocks are overweight; given that and the hit industries like steel and energy have been taking, that is probably worth re-evaluating where the winners, if any, are going to come from. |