In this week's update to the Balance Sheet Bargain strategy, we have four new names and one repeater.
The purpose of this screen is to identify strong companies with stocks that may have already, or very soon will be, bottoming. Trading stocks near the 52 week low carries higher risk, so this screen attempts to filter to the firms with solid financial foundations and therefore lowers risk. It might be loosely considered a value strategy. A full description of the strategy can be found here
Starting with our repeater, American Tower Corporation (AMT) continues to make appearances on the list. After an impressive 8.1% gain in the first week the screen identified AMT, it has come back down below price that starting point.
AMT is a real estate investment trust that owns and operates a wireless and broadcast communications infrastructure. The 52 range is $68.03 to $85.26 and it yields a rather small 1.5%. This is small because it operates as a Real Estate Investment Trust so it is passing along 90%+ of the profits to shareholders which indicates the margins are very thin here. AMT has been growing long term debt steadily of the last few years and while it has a positive quick ratio at 1.2. AMT may have been caught in the massive recent REIT selloff and could present a real opportunity because it owns and operates real property and does not just trade paper based on interest rate arbitrage.
However, given that AMT continues to push down the 52 week low price and the continued appearance on this screen, it does not appear to fit the model of quick turnaround value stocks. If AMT is interesting, it would be for a longer term investment rather than a quick trade.
And now for our four new stocks, starting with American Eagle Outfitters (AEO) which is an apparel and accessories retailer lines primarily aimed at 15 to 25-year olds under the American Eagle Outfitters brand name. It operates over 1,000 stores in the US & Canada. AEO has a healthy 2.0 quick ratio, a 2.5% dividend yield and a 52 week range of $16.60 - $23.94. It closed Friday at $16.86, which gives this stock room to move up.
Chico's (CHS) is a specialty retailer of private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items aimed at women over 35 years old. Chico's brands include Chico's, White House|Black Market (WH|BM), Soma Intimates (Soma) and Boston Proper. The company sells primarily through retail stores, catalogs and the web. It operated 1,357 stores in 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. CHS has a 1.1 quick ratio, pays a 1.3% dividend and has a 52 week price range of $15.50 - $19.95. CHD closed at $16.55 on Friday so there is some room to move to the upside within the range.
The Mosaic Company (MOS) produces phosphate and potash crop nutrients for the agriculture industry worldwide. It operates in two segments, Phosphates and Potash. The phosphates are used for animal feed ingredients and the potash is used for fertilizers and animal feed ingredients, as well as for use in various industrial applications. It has a good 2.4% dividend yield and a quick ratio of 3.0. In addition to the quick ratio, Mosaic's short current assets are large enough to cover both the short term and long term liabilities with the current assets. The 52 week range is $39.75 - $64.65 and with Friday's close at $42.51, this stock plenty of room to run.
Xylem (XYL) designs, manufacture and application of engineered technologies for water and wastewater applications. Xylem's Water Infrastructure segment offers a range of products, including water pumps, test equipment, systems, controls and filtration, disinfection and treatment equipment under the Flygt, Wedeco, Godwin Pumps, WTW, Sanitaire, YSI, and Leopold names for transportation, treatment, and testing of water and wastewater applications in public utilities and industrial facilities. The Applied Water segment provides pumps, valves, heat exchangers, controls, and dispensing equipment under the Goulds Water Technology, Bell & Gossett, AC Fire, Standard, Flojet, Lowara, Jabsco, and Flowtronex names for residential and commercial building services, industrial water, and irrigation applications. Xylem pays a 1.8% dividend yield and has a strong 1.77 quick ratio. The 52 week range is $23.41-$29.79 and with Friday's close of $24.98, there is some small room for this one to run.
Additional disclosure: I have no business relationship with any company whose stock is mentioned in this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is only my opinion based on personal research and offered for informational purposes. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any equity, do your own research and reach your own conclusion. Investing includes risks, including loss of principal.