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Alan Brochstein screens for stocks with price and earnings momentum

The recent sharp decline has pulled the S&P 500 down almost 12% since the end of June. Despite the broad-based selling, more than 10% of the index has actually increased in price. Interestingly, the strength has been spread across 9 of the 10 economic sectors (all but telecommunications services). Not surprisingly, many of the rallying companies are traditionally viewed as somewhat immune from economical cycles, like utilities and consumer staples, but some of the strong performers have been companies exhibiting strong growth. 

If you are like me and view the recent market action as a correction rather than the start of a new bear market, it might be worthwhile to pay attention to stocks that are performing well now despite a challenging market. Often the stocks that hold up during a correction are the ones that lead in the next advance. With this in mind, I attempted to reduce the 52 S&P 500 stocks up this quarter to those with growth characteristics rather than defensive ones.

Here are the constraints I used:

·         S&P 500 Member

·         QTD Price > 0%

·         YTD Price > 0%

·         2011 Expected EPS Growth > 15%

·         2012 Expected EPS Growth > 10%

Here is what we get:

[click on the image above to enlarge it]

Please remember that this screen is just an illustration for identifying stocks to research further. You should do a thorough investigation of any stock before deciding to invest.

Our screen resulted in stocks representing 7 different economic sectors. I have sorted within each sector by the percentage difference between the 50-day moving average and the 200-day moving average (last column) in order to point out that some of the stocks may be pretty extended already, according to market technicians. Still, 13 of the 18 are within 15% of those key moving averages, with several less than 10%. 

Additionally, I have included forward P/E ratios as well as their relationship to the five-year average to give a valuation perspective. Only a few are trading substantially higher than average, and those tend to be energy stocks, which usually trade less on P/E than other metrics.

Within the consumer discretionary category, there are a couple of themes: specifically, auto repair and online travel purchase. I would also note that these energy companies all have exposure to the Marcellus Shale formation. (This area, rich in natural gas, has been hotly contested lately as a possible domestic energy source.)

Hopefully I have given you a few ideas to investigate further. In this case, we have looked for stocks that have held up remarkably well during a tough market. Unlike typically defensive names, these companies have shown high growth and look, in my view, poised to continue growth next year.  Remember, screening is a starting point as part of a more thorough investment process. 


Alan Brochstein
Founder, Invest By Model and AB Analytical Services
TradeKing All-Star Commentator


Disclosure:  Alan Brochstein does not currently hold any positions in the securities mentioned above.

All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.

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Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. In reading content in the Trader Network, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs. 

Alan Brochstein maintains a business relationship with TradeKing.

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