Seeking Alpha
Newsletter provider, fund holdings, insider ownership
Profile| Send Message|
( followers)  

The three most common stock market anomalies are investing in small cap stocks, value stocks, and momentum stocks. Investors usually follow one or the other. James O'Shaughnessy combined value and momentum investing strategies in his book "What Works on Wall Street." One of the screens he devised first picks the stocks that have price-to-book ratios below one, and then buys the ones with the highest one-year price appreciation.

In a 52 year back testing this strategy returned an average annual compound return of 18.3% vs. 13% for the entire market. This strategy beats the market by more than 5 percentage points. Of course, this is based on average returns and annual performance of the strategy may significantly deviate from these values. We obtained the list of value stocks from Google Finance and ranked these stocks based on their 1-year returns. We included stocks with price-to-book ratios below 1.2 and eliminated illiquid stocks. Here are 30 momentum stocks with margin of safety:

Company name

Symbol

Market cap

52w price change (%)

Price to book

Lithia Motors, Inc.

LAD

384.21M

107.3

1.14

Dillard's, Inc.

DDS

2.41B

63.62

1.11

TICC Capital Corp.

TICC

347.56M

54.3

1.06

Valero Energy Corporation

VLO

17.06B

53.04

1.15

BreitBurn Energy Partners LP

BBEP

1.28B

46.04

0.96

Abington Bancorp, Inc.

ABBC

247.59M

44.59

1.12

Domtar Corp. (NYSE:USA)

UFS

3.89B

39.07

1.2

Allied World Assurance Co

AWH

2.39B

37.49

0.76

Market Vectors Gold Miners ETF

GDX

6.82B

31.9

0.95

Rockville Financial New Inc

RCKB

308.47M

29.81

1.18

Brookfield Infrastructure Partners

BIP

2.51B

29.26

1.03

American Water Works Co., Inc.

AWK

4.92B

29.12

1.17

Royce Value Trust Inc

RVT

135.08M

28.35

0.91

Vodafone Group Plc (ADR)

VOD

148.41B

27.04

1.06

XL Group plc

XL

7.63B

26.74

0.71

Protective Life Corp.

PL

2.49B

26.61

0.68

Aircastle Limited

AYR

963.64M

26.5

0.71

iShares MSCI Malaysia ETF

EWM

950.87M

25.93

1.12

RAIT Financial Trust

RAS

281.51M

25.52

0.28

Meadowbrook Insurance Group

MIG

555.42M

24.88

0.97

Endurance Specialty Holdings

ENH

1.93B

24.61

0.76

Fresh Del Monte Produce Inc.

FDP

1.54B

24.27

0.95

FNB Corporation

FNB

1.27B

24.04

1.11

Portland General Electric

POR

1.80B

22.32

1.11

American Equity Investment Life

AEL

777.91M

21.98

0.79

Capital One Financial Corp.

COF

23.78B

21.95

0.9

American Financial Group

AFG

3.68B

21.51

0.82

ACE Limited

ACE

21.72B

21.48

0.93

Reinsurance Group of America

RGA

4.61B

20.56

0.9

Legg Mason, Inc.

LM

5.49B

20.31

0.97

Some of these stocks are also favored by prominent hedge fund managers. Seth Klarman’s Baupost had $87 Million in BBEP stock. John Paulson and Eddie Lampert are among the Capital One (NYSE:COF) investors. John Paulson, Bill Miller, and George Soros have also XL in their portfolios. Ken Fisher and David Dreman have Protective Life (NYSE:PL) in their portfolios.

One of the most popular stocks among hedge fund managers is GDX. John Griffin’s Blue Ridge, David Einhorn’s Greenlight Capital, Roberto Mignone’s Bridger, Brevan Howard, and Craig Effron’s Scoggin are among hedge funds that are bullish about gold miners.

Source: 30 Momentum Stocks With a Margin of Safety