4 Stocks With Consistent Summer Returns

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 |  Includes: CAB, CVS, EBAY, MRK
by: George Kelly
After a 5 day down trend in the broader market I am looking for stocks that have a seasonal pop to beat the summer slump. I am also screening for value, growth, liquidity, recommendations from the Street crowd and a recent history of beating the Street’s EPS consensus.
To identify stocks that represent value and growth I utilize a simple comparison of P/E ratio and 1Year EPS growth versus that of their peer group, industry or sector. In terms of liquidity, I’m looking for companies that have a quick ratio of greater than 1 and/or inventory turns of greater than 3.
The Quick Ratio:

QR can assure investors that a company has sufficient liquid assets to meet short term operational costs.
Inventory turnover:
Inventory turns can inform investors how efficiently companies turn goods into cash. In some cases, as with CVS below, I am willing to overlook a low Quick Ratio in exchange for high inventory turns.
Cabela’s (NYSE:CAB)
Cabela’s is an outdoor sporting goods retailer operating 30 stores in the US and one in Canada. Cabela’s vision is to become the best multi-channel outdoor retail company in the world by the end of 2012. Cabela's also mails more than 135 million catalogs each year, sells magazines and merchandise online, and produces an outdoors show on television.
Cabela’s suffered a 5-day-slide of -9.36% to close at $22.26 on Monday. The company is trading at 13.1x earnings, compared with the retail specialty sector average of 20.2x earrings. Cabela’s has turned in 5 consecutive EPS beats. The company has 1Year EPS growth of 17.29% against an industry average of 0.53%. Cabela’s has a First Call Consensus Recommendation of BUY with 11 analysts reporting. The company has Quick Ratio of 1.67 and Inventory Turns of 3.32. Since 2006, the company has posted an average monthly return of 5.09% in July-September.
Average Return By Month (2006-2010)
July August September
7.27% 5.63% 2.37%
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eBay (NASDAQ:EBAY)
eBay provides online marketplaces for the sale of goods and services, as well as other online commerce, platforms, and online payment solutions to individuals and businesses in the United States and internationally.
eBay fell -5.17% over the last 5 trading days to settle at $29.56 Monday. The company is trading at 21.3x earnings, compared with a peer average of 37.3x earnings. eBay has beat EPS consensus in 5 consecutive quarters. The company has 1Year EPS growth of 14.25%. eBay has a First Call Consensus Recommendation of BUY with 26 analysts reporting. The company has a Quick Ratio of 2.39. Since 2006, the company has posted an average monthly return of 3.9% in July-September.
Average Return By Month (2006-2010)
July August September
1.13% 7.03% 3.55%
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CVS Caremark (NYSE:CVS)
CVS Caremark is the largest pharmacy health care provider in the United States. CVS Caremark is a market leader in mail order pharmacy, retail pharmacy, specialty pharmacy, and retail clinics,and is a leading provider of Medicare Part D Prescription Drug Plans. As one of the country's largest pharmacy benefits managers (PBMs), they provide access to a network of more than 64,000 pharmacies, including approximately 7,000 CVS/pharmacy stores.
CVS endured a five day slide of -3.72% to close at $37.25 on Monday. The company is trading at 15.4x earnings, compared with an industry P/E of 20.2. CVS has beat EPS consensus in the last three consecutive quarters. The company has 1Year EPS growth of 7.6% compared with an industry average of only 0.53% annual EPS growth. CVS has a First Call Consensus Recommendation of BUY with 25 analysts reporting. The company has a Quick Ratio of 0.57 and Inventory Turns of 7.24. Since 2006 the company has posted an average monthly return of 1.31% in July-September. Average Return By Month (2006-2010)
July August September
1.02% 2.05% 0.88%
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Merck & CO (NYSE:MRK)
Merck is a pharmaceutical company with prescription brands that include asthma medication Singulair, anti-inflammatory Remicade, hypertension fighters Cozaar and Hyzaar, and cholesterol combatants Vytorin, Zetia, and Zocor. The company also makes vaccines and an assortment of OTC offerings including Claritin allergy pills and Dr. Scholl’s foot care products.
Merck fell -3.24% over the last five days to close at $35.56 on Monday. The company is trading at 16.5x earnings vs. an industry average of 21.3x earnings. Merck has turned in 5 consecutive EPS beats. The company has 1Year EPS growth of 8.77% and sports a First Call Consensus Recommendation of BUY with 23 analysts reporting. Merck has a Quick Ratio of 1.29 with Inventory turns of 1.52. Last year Merck posted an average return of 1.75% in July-September.
Average Return By Month (2010)
July August September
-1.45% 2.03% 4.69%
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.