By Kevin Matras
Jan 06, 2009
Stocks featured in this article are: American Equity Investment Life Holding Co. (AEL), AMR Corp. (AMR), World Fuel Services, Inc. (INT), Steven Madden Ltd. (SHOO) and S1 Corp. (SONE).
Over the last few weeks, I’ve found myself screening for one of the most obvious items in determining whether or not a stock is ‘good’ – and that’s its recent price strength or, more specifically, its recent relative price strength. Is it performing better than the market?
Of course valuations are important. Earnings growth is just as important too. But if a stock is simply not responding – or worse, going down – then something’s wrong. Or at the very least, something is simply not ready to move higher.
I’ve talked about this kind of stuff in the past – what investors consider to be their best stocks — and the answer is the ones performing the best, i.e., moving higher. And it’s the same here.
The stocks I’ve been looking to add to my portfolio recently are indeed the ones moving higher, especially on good volume. And if they are moving higher, it’s likely because there’s a good reason for it, or else they probably wouldn’t be. Now, of course, this doesn’t mean you should only look at its price change. But by including those kinds of things in your screening tasks, some very interesting stocks will come up.
Some stocks might just miss your normal fundamental screening. But when you put your radar screen thru other measures (its price performance), you might find that these are just the kinds of companies you’ve been looking for.
You’ll notice too that I said relative price strength. Of course, there are periods where virtually everything is going down. So screening for absolute positive price changes will often times come up with zero results in these periods, just when you need them the most.
And when the market is doing nothing but going up, you want to get into the pacesetters and outperformers, not the laggards that are going up only because the rising tide is raising all the ships.
So using the relative price strength will always put the outperformers on your list.
In this week’s screen, I’m looking for relative price change winners that also have the fundamentals to potentially make these gains last and continue.
The screen starts off with:
Zacks Rank = 1
(Only Zacks Ranked Strong Buys)
Relative % Price change – 12 weeks >= 10
(I’m looking for stocks that are outperforming the S&P 500 by 10% or greater over the last 12 weeks.)
Projected Growth Rate (F1/F0) >= the S&P 500’s Avg. Growth Rate
(Not only do I want the price to be responding better than the market. I also want the growth rate to be better than the market.)
Current Price >= 5
(They all have to be trading at a minimum of $5 or higher.)
Average 20-Day Volume >= 100,000 shares
(And have enough volume to allow easy trading in and out.)
Here are 5 stocks that passed this screen for 1/6/09:
AEL American Equity Investment Life Holding Co.
AMR AMR Corp.
INT World Fuel Services, Inc.
SHOO Steven Madden Ltd.
SONE S1 Corp.
Learn how to find winning stocks in any market. Test this screen and others or build your own strategies and test them. It can all be done with the Research Wizard.
Filed under: Investing
