Are you looking to go with the trend while positioning your portfolio with value stocks? If so, this may be an interesting starting point for your own analysis.
To compile this list, we looked for stocks with these characteristics:
- Market cap above $300M.
- 50-day moving average recently crossing above below the 200-day moving average (bullish technical signal called the "Golden Cross").
- Trading at a significant discount to the Graham Number.
The Graham Number was considered to be the maximum price an investor should pay for a stock, according to the formula developed by Benjamin Graham. It is calculated as follows:
Graham Number = Square Root of (22.5) x (Earnings per Share) x (Book Value per Share).
This equation is predicated on Graham’s belief that the price-to-earnings (P/EPS) ratio should be no more than 15, and the price-to-book value (P/BVPS) ratio should be no more than 1.5. Therefore, we only included companies that meet both of these criteria. As a result, the product of the two should not be more than 22.5. In other words, (P/EPS of 15) x (P/BVPS of 1.5) = 22.5.
We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.
Considering this data, which of these stocks do you find to be most attractive?
1. Spartan Stores Inc. (SPTN): Food Wholesale Industry. Market cap of $363.60M. SMA50 at $15.18 vs. SMA200 at $15.16. BVPS at $13.51, diluted EPS at $1.42. Graham number = sqrt(22.5 x $13.51 x $1.42) = $20.78. Given the current price at $16.53, this implies an upside of 25.69%. The stock is a short squeeze candidate, with a short float at 6.15% (equivalent to 16.55 days of average volume). The stock has lost 2.78% over the last year.
2. Ennis Inc. (EBF): Office Supplies Industry. Market cap of $480.18M. SMA50 at $17.22 vs. SMA200 at $16.87. BVPS at $13.46, diluted EPS at $1.72. Graham number = sqrt(22.5 x $13.46 x $1.72) = $22.82. Given the current price at $18.5, this implies an upside of 23.37%. The stock has gained 6.22% over the last year.
3. National Interstate Corporation (NATL): Property & Casualty Insurance Industry. Market cap of $421.85M. SMA50 at $21.04 vs. SMA200 at $20.95. BVPS at $16.38, diluted EPS at $1.97. Graham number = sqrt(22.5 x $16.38 x $1.97) = $26.95. Given the current price at $21.85, this implies an upside of 23.32%. The stock has gained 3.98% over the last year.
4. SCANA Corp. (SCG): Diversified Utilities Industry. Market cap of $5.36B. SMA50 at $39.95 vs. SMA200 at $39.85. BVPS at $29.59, diluted EPS at $2.97. Graham number = sqrt(22.5 x $29.59 x $2.97) = $44.47. Given the current price at $41.67, this implies an upside of 6.71%. The stock has gained 17.76% over the last year.
Data sourced from Yahoo Finance and Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.