3 Undervalued And Unloved Consumer Picks With Momentum

|
Includes: DOLE, HAS, ICON
by: Ong Kang Wei

Have you ever thought of buying stocks with potential for price appreciation with below average risk? If your answer for the above answer is yes, here are some stock ideas for you to consider. But first, here are the criteria for today's screen:

1. Undervalued

  • P/E < 15

A high valuation would mean that the stock is priced for perfection, with no space for failure. Many overpriced companies fall over small short-term disappointments like quarterly earnings or other such announcements. Therefore, I would normally stay away from stocks with really high valuations and companies which are losing money. This criterion will ensure that all the products of the screen are really undervalued and trading at cheap valuations. This also ensures an extra margin of safety protecting the investments, as downside is reduced.

2. Unloved

  • Float Short > 15%

This criteria makes it evident that the products of this screen have to be really unloved, with a lot of their float (above 15%) shorted by investors. This sounds bad for some at first read, but this could actually be beneficial to investors, as any short-term good news like quarterly earnings could cause a short squeeze which could push a stock's price higher.

3. Momentum

  • YTD > 11%

Momentum is also a need. There is a reason for every drop in stock price, and stocks on a downtrend for extended periods of time should be avoided (unless there is a special reason, eg. an overdone drop/misunderstanding, etc.). The criteria that a stock has to go up at least 11% Year-To-Date was set to ensure that the stock outperformed the general market (S&P 500 up 10.5%, NASDAQ up 10.13%, Dow Jones up 5.04% YTD). This confirms that these stocks are able to provide at least a return better than what the market can provide us with.

4. Other Criteria

  • Sector: Consumer Goods
  • Market Cap > US$900M

This article will be about only consumer companies, which are deemed by many to be much safer than sectors such as technology or financial, sectors which many view to be more volatile in the short-term and unreliable over the long run. This is one criteria that can ensure that the products of this screen will not be a high-risk investment.

The next criterion, that the companies' market cap must be above US$900M, was set to ensure that the companies listed in this article are not too small. Many small-caps and micro-caps are viewed to be extremely volatile investments and this criterion effectively eliminates the risk of extreme volatility.

Here are the stocks for today:

1. Dole Food Company (NYSE:DOLE)

Price (21.11.2012) $10.75
Market Cap 954.82M
Income 70.02M (P/E: 13.61)
Float Short 51.91%
Performance YTD Up 24.28%
Analyst Recommendation (avg.) Buy
EPS Growth Past 5 Years -13.40%
EPS Growth Next 5 Years 8.00%
Current Ratio 1.50
Click to enlarge

Pros:

  1. Extremely High Short Float: 52%
  2. Quarterly EPS Growth: 69%
  3. Consistent, Non-Growing Long-Term Debt:
  4. Long Term Debt 2002 1.80B
    Long Term Debt 2005 2.00B
    Long Term Debt 2008 1.80B
    Long Term Debt 2012 1.64B
    Click to enlarge

Cons:

  1. High Debt/Equity Ratio: 1.88
  2. Diluting Shares:
  3. Shares Outstanding 2002 51.71M
    Shares Outstanding 2012 88.95M
    Click to enlarge

Click to enlarge

Dole Food Company, Inc. engages in sourcing, growing, processing, marketing, and distributing fresh fruits and vegetables, and food products to wholesale, retail, and institutional customers worldwide. It operates in three segments: Fresh Fruit, Fresh Vegetables, and Packaged Foods and its principal customers include mass merchandisers and supermarkets. The company was founded in 1851 and is headquartered in Westlake Village, California.

2. Iconix Brand Group (NASDAQ:ICON)

Price (21.11.2012) $18.94
Market Cap 1.29B
Income 110.48M (P/E: 12.54)
Float Short 13.65%
Performance YTD Up 16.27%
Analyst Recommendation (avg. ) Buy
EPS Growth Past 5 Years 18.40%
EPS Growth Next 5 Years 9.05%
Current Ratio 2.59
Click to enlarge

Pros:

  1. Steadily increasing EPS:
  2. EPS 2002 ($-0.17)
    EPS 2007 $0.98
    EPS 2011 $1.61
    Click to enlarge

    It had staged a good turnaround from losses to profits; the company has been profitable since 2004.

  3. Assets grew faster than liabilities:

    Assets: Grew 1988.2% over past 10 years
    Liabilities: Grew 1206.2% over past 10 years

  4. Good Value: 12.54X trailing earnings, 9.97X forward earnings, 1.08X book value

Cons:

  1. Diluting Shares:
  2. Shares Outstanding 2002 24.79M
    Shares Outstanding 2012 72.69M
    Click to enlarge
  3. Rapidly Increasing Long Term Debt:
  4. Long Term Debt 2002 28.51M
    Long Term Debt 2012 310.97M
    Click to enlarge

Click to enlarge

Iconix Brand Group, Inc. engages in licensing, marketing, and providing trend direction for a portfolio of consumer brands. The company licenses its brands through approximately 1,000 direct-to-retail and wholesale licenses for use in a range of product categories. Iconix Brand Group, Inc. was founded in 1978 and is headquartered in New York.

3. Hasbro Inc. (NASDAQ:HAS)

Price (21.11.2012) $37.68
Market Cap 4.90B
Income 344.83M (P/E: 14.44)
Float Short 13.54%
Performance YTD Up 22.78%
Analyst Recommendation (avg.) Hold
EPS Growth Past 5 Years 16.85%
EPS Growth Next 5 Years 7.40%
Current Ratio 2.32
Dividend $1.44 (3.82%)
Click to enlarge

Pros:

  1. Steadily Growing EPS:
  2. EPS 2002 $0.43
    EPS 2012 $2.82
    Click to enlarge

    This is an impressive 18.71% growth annually over past 10 years

  3. Buying Back Shares:
  4. Shares Outstanding 2002 173.17M
    Shares Outstanding 2012 128.63M
    Click to enlarge
  5. High ROE: 23.71%
  6. Good Value: 14.4X trailing earnings, 12.7X forward earnings
  7. Steadily Increasing Dividends: $0.12 per share in 2002, $1.15 per share in 2011.

Cons:

  1. High Debt/Equity Ratio: 1.09
  2. Increasing Long Term Debt:
  3. Long Term Debt 2007 709.72M
    Long Term Debt 2012

    1.40B

    Click to enlarge
  4. Liabilities Are Increasing Faster Than Assets.

    Liabilities: 38.9% growth over past 10 years
    Assets: 31.5% growth over past 10 years

Click to enlarge

Hasbro engages in the provision of children's and family leisure time products and services worldwide. The company was founded in 1923 and is headquartered in Pawtucket, Rhode Island.

The Takeaway

The companies listed here had been screened under fairly strict criteria and are all good companies with quite a lot of potential in my opinion. Additionally, these investment choices carry less risk than many others and may just be the right addition to your portfolio. Nevertheless, please still do your due diligence before investing any money into these stocks.

All information were sourced form Finviz, MSN Money, Gurufocus, Stockcharts.com and Yahoo! Finance. All prices are based on the 21 November 2012 closing price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.