Alan Brochstein Screens for Stocks Approaching $100 for the First Time
Earlier this year, I noticed a lot of excitement over several extremely high-priced stocks performing very well, including Apple (AAPL), Intuitive Surgical (ISRG) and Priceline (PCLN) and shared a screen to identify high-priced stocks to consider buying. I identified five different stocks approaching $100 for the first time ever, each with some favorable characteristics. As I stated in that prior article:
One odd thing I have noticed over the years is that stocks tend to stall as they approach a “century” level, like $100. I think that it makes sense that there is some natural resistance, with $99 sounding a lot cheaper than $101, even if it’s the same 2% difference as that between $9.90 and $10.10. Often, this quirk can create a great entry.
The five stocks that made my cut have performed reasonably well, with one, Sherwin Williams (SHW), moving as high as 133. The others have at least held in while the overall stock market is roughly unchanged, with each of them clearing the $100 barrier following publication of the list.
I decided to run the screen again (using Baseline) and was quite surprised to see 9 new names in the Russell 3000 meet the criteria. Again, here are the parameters we used:
· > $500mm market cap
· Stock price > $90 but < $100
· Within 4% of its 52-week high
· 5-year High < $100
· EPS Growth (last 4 quarters) > 10%
Here are the nine that made the cut:
Keep in mind that these are not recommendations. You should do your own thorough investigation of any investment you make.
I sorted the list by economic sector, and we have choices in five different ones. I included a few other columns, including the 52-week and 5-year price ranges, the return over the past year (three up more than 20% in red, one up less than 10% in green), the forward PE, the average PE over the past 5 years (one extremely above the average, most near average) and projected earnings growth for 2012 (one expected to decline, the rest to grow double-digit).
Several of these companies are well-known, including Philip Morris International (PM), Costco (COST) and Whole Foods Market (WFM), all in the Consumer Staples sector. I am somewhat cautious on WFM for technical and valuation reasons.
ProAssurance (PRA) is an insurance company focused on medical liability and isn’t widely followed by Wall Street. The company has been making small acquisitions recently and trades at just 30% above its tangible book value.
McKesson (MCK) is a leading pharmaceutical distributor with a healthcare information technology division as well. DaVita (DVA) treats kidney failure in its dialysis centers. Idexx Labs (IDXX) sells lab equipment and consumables to veterinarians and also sells diagnostics for the water and livestock industries.
Stericycle (SRCL) is a leading supplier of medical waste removal services. While the stock has a high PE ratio, I believe this is a very consistent and profitable business with high barriers to entry.
Stepan (SCL) is a chemical company, making surfactants, polymers (primarily for foam for thermal insulation used in the construction industry and other construction materials) and other specialty products used in food, flavoring and pharmaceutical applications. Part of why the company has done so well is the plunge in natural gas prices, as it is a major input. Insiders own 22% of the company.
As I said in February that the idea is to “buy low and sell high”, but sometimes a stock with a high price can have a low (or at least reasonable) valuation. Through our screen, we were able to find some stocks that are approaching the $100 psychological level for the first time ever. Remember, screening is only a first step. Before investing, you should do your own investigation to identify risks and potential opportunities.
Founder, Invest By Model and AB Analytical Services
TradeKing All-Star Commentator
Disclosure: OMI and WSM are held in one or more model portfolios at InvestByModel.com, a service operated by the author
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