With the overall stock market's return over the past year, deep value stocks with positive long-term price momentum have seemingly become extinct. While hundreds, if not thousands, of stocks were considered attractively valued at the March low in 2009, upward price momentum has priced out much of that value over the past year. Using Finviz.com, I searched for value stocks that traded at a 52 week high as of Friday, March 19th. The criteria to identify stocks are below:
- Traded (not necessarily closing) at 52 Week High on Friday March 19th
- Price/Book < 1
- Total Debt/Equity < 1
- Positive Return on Assets
- Positive Return on Equity
- Positive Return on Investment
- Market Cap > $100 million
Three stocks met this criteria last Friday. This is not necessarily the only or best way to search for value stocks. An investor could look for "beaten down" stocks that have had poor recent price performance in order to find value, which is typically the most common method for searching for value. The point of this search is to find value stocks which have shown strong price momentum but may not yet be fully valued.
One of the 3 names which appeared on this screen is Gladstone Capital (GLAD) which is a difficult company to evaluate using traditional valuation standards. It is a closed-end non-diversified management investment company which invests in debt and equity securities of small and medium-sized private United States businesses. It recently extended a revolving line of credit but was downgraded earlier this month by Janney Montogomery Scott to "neutral" due to valuation concerns. GLAD's yield is 7.45%, however, dividends for a closed-end investment company can be very volatile/inconsistent and much of their return is dependent on the overall health of the economy and the debt or equity of the businesses in which they invest. If the US economy faces a 'double dip' recession, then GLAD would most likely face diminished returns on their investments.
The other two names on the list, Alamo Group (ALG) and QLT (QLTI) have appeared on multiple value screens performed this year. To review those previous articles and their rationale, please visit the articles featuring them on my blog here, here, and here.