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Summary

  • The S&P 500 closed at a record high last Wednesday.
  • We looked for stocks on winning streaks, which have outperformed the S&P 500 in 2014.
  • We narrowed our search by looking for stocks that are undervalued relative to earnings growth, with a price/earnings to growth ratio below 1.

The S&P 500 closed at a record high on Wednesday after Federal Reserve Chair Janet Yellen expressed her confidence in the state of the economic recovery, as well as the central bank's intention to keep interest rates low until next year.

The S&P gained 0.8% following Yellen's comments, ending the day at 1,956.98 in its 20th all-time high of the year.

Since mid-May, the S&P 500 has achieved several important milestones. The index crossed 1,900 for the first time ever on May 14 for a brief period, then closed above the 1900 benchmark again on May 23. Then, on May 30, the S&P closed at an all-time high of 1,940.46, marking the 17th closing record of the year.

This inspired us to run an S&P-centric screen to create the following list of stocks. We began by screening for stocks on winning streaks, which means that they've been outperforming the S&P 500. Winning streaks are measured by a persistence of consecutive days during which a stock earned a greater return than the index and little persistence of days in earning a smaller return.

We then narrowed down that group by screening for stocks that are undervalued relative to earnings growth, with a price/earnings to growth (PEG) ratio below 1. This valuation ratio incorporates expectations of future earnings into its calculations, and is calculated by dividing a stock's price-to-earnings (P/E) ratio by its annual earnings per share (EPS) growth. The higher the earnings growth, the lower the PEG ratio. And when a stock has a PEG under 1, it can be considered undervalued.

We were left with four stocks on our list. Do you think these stocks on winning streaks will continue to outperform the S&P 500? Use this list as a starting point for your analysis, and let us know what you think in the comments.

1. Approach Resources, Inc. (NASDAQ:AREX): Engages in the acquisition, exploration, development, and production of oil and gas properties in the United States. Market cap at $869.62M, most recent closing price at $22.09.

The stock's average daily alpha vs. the S&P 500 index stands at 0.78% (measured close to close, over the last month). During this period, the longest winning streak lasted 7 days (i.e. the stock's daily returns outperformed the S&P 500 for 7 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 3.5).

PEG at 0.65.

2. Gruma S.A.B. de CV (NYSE:GMK): Engages in the production, marketing, distribution, and sale of tortillas, corn flour, wheat flour, and related products. Market cap at $5.07B, most recent closing price at $46.28.

The stock's average daily alpha vs. the S&P 500 index stands at 0.77% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.19.

Click here for the full, interactive chart.

3. Micron Technology Inc. (NASDAQ:MU): Engages in the manufacture and marketing of semiconductor devices worldwide. Market cap at $33.89B, most recent closing price at $31.81.

The stock's average daily alpha vs. the S&P 500 index stands at 0.78% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.68.

4. Triangle Petroleum Corporation (NYSEMKT:TPLM): Engages in the acquisition, exploration, and development of unconventional shale oil resources in the Bakken Shale and Three Forks formations in the Williston Basin of North Dakota and Montana. Market cap at $1.03B, most recent closing price at $11.93.

The stock's average daily alpha vs. the S&P 500 index stands at 0.77% (measured close to close, over the last month). During this period, the longest winning streak lasted 5 days (i.e. the stock's daily returns outperformed the S&P 500 for 5 consecutive days). The longest losing streak lasted 2 days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.29.

Click here for the full, interactive chart.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Kapitall is a team of analysts. This article was written by Mary-Lynn Cesar, one of our writers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.

Source: 4 Stocks On Winning Streaks Have Outperformed The S&P 500 Over The Last Month