Seeking Alpha
ETF investing, CFA, portfolio strategy, long/short equity
Profile| Send Message|
( followers)

You probably have your own future price stock favorites. Are they still competitive with what is seen by the market pros AS helping the big-money-fund managers that are constantly adjusting their portfolios?

Those pros are called on hundreds of times a day, not for their advice, but to help the portfolio managers [PMs] get or get rid of stocks. To do that at the prices the PMs will accept, the pros usually have to put some of their own firm's capital at risk, temporarily.

These market-makers [MMs] hate risk and are skilled at avoiding it by hedging. What they will pay to get that protection, and the way they do it, tells just how far they think their clients are willing to go to see a stock's price go before piling in, or at the other extreme, kicking it out in favor of a better choice.

We translate the MMs' intelligent behavior into explicit price range forecasts on over 2500 stocks and ETFs every day, as we have for over a decade. Then we look into our actuarial records to see how well their past similar forecasts on each issue have performed. By screening that data we can see what kinds of opportunities are available, and what hazards may lie in wait.

Last year on Seeking Alpha, in 85 articles, we produced in real-time over 700 examples of such forecasts, identifying 240 as attractive buys at the time. By year end, 205 had reached fruition or their limits under our time-efficient sell discipline. Their average gain was +6½%, reached in 7 weeks, for an average annual rate of gain of +58%. Of the 205, 84% were profitable. The maximum price drawdown from cost of all 205 averaged -5¼% during the periods they were held. More details are available in our SA article here.

We sought "alpha" in 2013 and found some 2900 basis points of it, repeatedly enough through the year to strongly suggest that it was not in chance events. Here are some current updates of what the MMs are most guardedly optimistic about at present:

(click to enlarge)

Our screens of their forecasts (now, and the history data based on prior forecasts with similar upside-to-downside balance) were focused on a wealth-building investment objective, so dividend income was ignored. Similarly, since some 10% of our subjects are actively-traded ETFs of all kinds, and no ETFs whose holdings are focused on an income objective appear anywhere near the upper reaches of our most attractive list, we're inclined to minimize that purpose now in our general attitudes about asset allocations.

We include current data on the S&P500 index SPDR ETF (NYSEARCA:SPY) as a comparison-to-the-market alternative. This set of stocks averages an upside price potential of +9.4% compared to a market prospect of almost +6%. But prior forecasts for each stock similar to today's have had maximum price drawdown experiences (while held) of less than -4% while SPY's similar experiences have been higher at -4.4%.

Still, the SPY outlooks suggest a continuing positive and productive market outlook.

Likewise, those prior stock forecast experiences have averaged nearly +10% for the stocks and only 3+% for SPY. The average stock holding period of 35 market days (7 calendar weeks) generates an annual rate of gain of +95%, compared to SPY's parallel of but +21%. The Sample Size data helps provide reassurance that all these history averages are not one-off examples. Win odds tells what percentage of the sample produced a price gain. The Reward~Risk ratio compares forecast upside prospects to the adjacent column of past drawdown exposures. Credibility is measured in terms of prior Payoffs achieved at least equal to present upside prospects.

International Flavors & Fragrances (NYSE:IFF) does what its name implies, for a wide array of consumer and other products. It has been an institutional investment favorite for several decades. Its stock now sells at a PEG ratio of 1.9 based on EPS growth forecasts of +10% by 10 street analysts. Over 80% of the stock is held by institutions. The stock has had very small drawdowns during selected holding periods.

Viacom Inc. (NASDAQ:VIAB) is a diversified entertainment company, providing content for movies, television, mobile communication devices, social media and internet interactive games, among others. Its stock now sells at a PEG ratio of 1.19 based on EPS growth forecasts of +13% by 30 street analysts. Over 90% of the stock is held by institutions.

IAC/Interactive Corp. (NASDAQ:IACI) operates as a media and Internet company in the United States and internationally. Its Search & Applications segment operates Websites to provide search services and content. Its stock now sells at a PEG ratio of 0.93 based on EPS growth forecasts of +20% by 16 street analysts. Over 90% of the stock is held by institutions. Market-makers have been specially skilled in identifying profitable entry and exit points.

MWI Veterinary Supply Inc. (NASDAQ:MWIV) distributes animal health products to veterinarians in the United States and the United Kingdom. Its stock now sells at a PEG ratio of 2.11 based on EPS growth forecasts of +15% by 5 street analysts. Over 95% of the stock is held by institutions, but by less than 200 of them. The company is active in acquisitions and is expanding internationally in an industry with virtually no concentration.

United Therapeutics Corp. (NASDAQ:UTHR) a biotechnology company, focuses on the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening conditions worldwide. Its stock now sells at a PEG ratio of 2.05 based on EPS growth forecasts of +10% by 15 street analysts. Over 95% of the stock and some 118% of the float is held by institutions, with management and insiders owning 18%.

Every investor should pursue his/her own due diligence in making investments. We hope to offer some useful guidance as to the timeliness of exercising those choices, since time is an exceptionally important element in the investment return equation.

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.