Seeking Alpha
Profile| Send Message|
( followers)  

The days of big families aren't over. Putting growth investing and value investing criteria together produces 45 offspring -- stocks that look interesting for both types of investors.

A Thomson Reuters StarMine analysis searched for companies with earnings and revenue growth rates 50% above current market rates, but also with forward 12-month P/E ratios at or below the S&P 500 long-term average of 15.

In a slowly growing U.S. and global economy, market leadership has come from the more conservative, lower growth sectors such as consumer staples and health care. So does growth investing make sense today?

For 45 U.S. companies with market caps over $1 billion, the answer is yes. Not only do these companies offer superior growth, they come at an average forward 12-month P/E of 12.4, compared to that long-term S&P 500 average of 15. It's perhaps the perfect marriage between growth investing and value investing, and each side may well feel they are gaining an additional edge in the process. Here's the screening method:

(click to enlarge)

With all these criteria met, view the list in alphabetical order by sector, that emerged.

  1. Consumer discretionary names include DirecTV (NASDAQ:DTV), PulteGroup (NYSE:PHM), GNC Holdings (NYSE:GNC) and MDC Holdings (NASDAQ:MDCO).
  2. Energy is the sector most represented on the list, including the likes of big names like Halliburton (NYSE:HAL), Devon Energy (NYSE:DVN) and Transocean (NYSE:RIG), but also smaller companies such as Tidewater (NYSE:TDW) and helicopter services company Bristow Group (NYSE:BRS).
  3. Among the Industrials group are Chicago Bridge & Iron (NYSE:CBI), Terex (NYSE:TEX), capital goods maker Manitowoc (NYSE:MTW) and Spirit Airlines (NASDAQ:SAVE).
  4. Information Technology is represented by five companies, including LAM Research (NASDAQ:LRCX), IAC/Interactive Corp (IAC) and communication equipment maker Finisar (NASDAQ:FNSR).
  5. The materials sector sports five names too, including chemicals producers FMC Corp (NYSE:FMC) and Cytec Industries (NYSE:CYT), specialty metals firm Carpenter Technology Corp (NYSE:CRS) and adhesives, sealants and specialty chemicals H Fuller (NYSE:FUL).

GICS Sector

Ticker

Company Name

Market Cap (MM $US)

Forward P/E (SmartEstimate) F12M

Consumer Discretionary

DTV

Directv

36,149

12.2

Consumer Discretionary

PHM

Pultegroup Inc

9,048

14.6

Consumer Discretionary

GNC

Gnc Holdings Inc

4,454

15.0

Consumer Discretionary

HAR

Harman Intl Inds Inc

3,397

13.7

Consumer Discretionary

TEN

Tenneco Inc

2,476

10.2

Consumer Discretionary

MDC

Mdc Holdings

1,864

14.7

Consumer Discretionary

AXL

American Axle & Mfg Holdings

1,191

7.6

Energy

SLB

Schlumberger Ltd

100,068

14.9

Energy

HAL

Halliburton Co

40,870

12.4

Energy

DVN

Devon Energy Corp

23,641

13.9

Energy

RIG

Transocean Ltd

19,722

10.8

Energy

CLR

Continental Resources Inc/Ok

15,602

14.5

Energy

CHK

Chesapeake Energy Corp

13,256

11.8

Energy

WFT

Weatherford International Ltd

10,675

14.3

Energy

NE

Noble Corp

10,106

11.9

Energy

DO

Diamond Offshore Drilling

9,788

12.6

Energy

RDC

Rowan Cos Inc

4,326

12.5

Energy

OAS

Oasis Petroleum Inc

3,481

12.4

Energy

ATW

Atwood Oceanics Incorporated

3,465

9.2

Energy

ROSE

Rosetta Resources Inc

2,954

10.7

Energy

TDW

Tidewater Inc

2,806

13.6

Energy

BRS

Bristow Group Inc

2,357

14.6

Energy

CRZO

Carrizo Oil And Gas Incorporated

1,069

11.3

Financials

BX

Blackstone Group Lp

26,302

9.3

Financials

FIG

Fortress Investment Group Llc

3,579

11.2

Financials

SIGI

Selective Ins. Group Inc.

1,356

14.6

Health Care

JAZZ

Jazz Pharmaceuticals Plc

3,432

8.7

Health Care

HNT

Health Net Inc

2,468

12.9

Industrials

HTZ

Hertz Global Holdings Inc

10,079

11.9

Industrials

CBI

Chicago Bridge & Iron

6,377

13.0

Industrials

TEX

Terex Cp

3,560

11.1

Industrials

MTW

Manitowoc Inc

2,543

14.3

Industrials

SAVE

Spirit Airlines Inc

2,082

12.4

Industrials

JBLU

JetBlue Airway Corp

1,839

11.9

Industrials

TWI

Titan International Inc

1,285

10.2

Information Technology

LRCX

Lam Research Corp

7,736

13.7

Information Technology

IACI

IAC/InterActiveCorp

4,504

11.9

Information Technology

ARRS

Arris Group Inc

2,263

10.4

Information Technology

FNSR

Finisar Corp

1,240

14.6

Information Technology

WWWW

Web.com Group Inc

1,023

9.4

Materials

FMC

FMC Corp

8,440

14.6

Materials

CYT

Cytec Industries Inc.

3,056

14.2

Materials

CRS

Carpenter Technology Corp

2,490

14.1

Materials

FUL

HB Fuller Co

2,005

14.0

Materials

CDE

Coeur D Alene Mines Corp Id

1,375

11.8

Source: Thomson Reuters StarMine

Attribution Analysis

Compared to the sector weights of the S&P 500 index, the 45 names that made the list are heavily tilted toward consumer discretionary at a 52% portfolio weight -- 40 percentage points above the S&P weight for that sector in the diagram below. Likewise, the energy sector's 26% weight is 16 percentage points higher than the S&P 500's weighting. Note at the bottom of the table that there are no consumer staples stocks at all in the portfolio, and only three financials names (see above list), although they only make up about 1% of the total market weight of that list.

(click to enlarge)

The consumer discretionary and energy sectors carry an identical average 12-month forward P/E ratio of 12.6. The cheapest sector by that measure is health care at 10.8, though it contains only two companies: JAZZ Pharmaceuticals (NASDAQ:JAZZ) and Health Net Inc. (NYSE:HNT), with 8.7 and 12.9, respectively.

Other Growth/Value Characteristics

(click to enlarge)

  1. The best year-to-date price performance (through May 16, 2013) comes from the financials sector, where three stocks are up an average of 50%. The worst performer is materials with a -5% average price return, due mostly to the 45% drop in Coeur Mining (CDE -- formerly Coeur D'Alene Mines). The other four stocks in the materials sector only managed a 4% price increase over the same period.
  1. Small and midcap names make up the majority of the list, with large companies making up only 24% of the list (11 companies, including $100 billion in market cap Schlumberger (NYSE:SLB) as the list's heavyweight. That's 100 times larger than the smallest member, Web.com Group (NASDAQ:WWWW), at just over $1 billion. The median market cap is found at $3.5 billion with Atwood Oceanics Industries (NYSE:ATW).
  1. Compared to StarMine's ranking method according to Relative Valuation, 29 firms (62% of the list) rank in the top half of all U.S. companies, with top 10% honors for Hertz Global Holdings Inc (NYSE:HTZ) and JetBlue Airway Group (NASDAQ:JBLU). The six popular ratios considered here use a rolling 24-month (trailing 12 and forward 12) time frame, including enterprise value/sales, enterprise value/EBITDA, P/E, price/cash flow, price/book and dividend (or buyback) yield.

Summary

If equity investing is becoming more of a stock picking contest, then the list of stocks above should find appeal for both growth and value investors -- but significant declines in forward valuations and/or earnings might make that family a lot smaller.

Source: When Growth Investing And Value Investing Get Married