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If you prefer to invest in companies with strong cash flows, you may find our approach in this article an interesting starting point for your own research.

To construct this list we looked for stocks that meet all the following criteria:

- Market cap above $300 million
- Operating at, or within 0 to 3% below, their 52-week high.

Finally, each stock was evaluated for a significant levered free cash flow to market cap ratio (LFCF/MC).

When a company maintains significant free cash flow relative to their market cap it implies that the market cap is too low, and that the company may be undervalued.

Furthermore, a relatively high amount of cash ensures that the company will be able to pay its operating expenses, at least in the near term, lowering the risk around it.

Additionally, reaching a 52-week high is a significant indicator of momentum.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


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.



Given this information, do you think the names listed below will climb higher? Use the data below as a starting point for your own analysis.

1. White Mountains Insurance Group, Ltd. (WTM): Property & Casualty Insurance Industry. This stock is currently operating 2.17% below their 52-week high. TTM levered free cash flow at 1.43B and market cap at $3.21B implies a levered FCF/market cap of 44.55%. The stock has gained 10.69% over the last year.

2. National Beverage Corp. (FIZZ): Beverages Industry. This stock is currently operating 3.4% below their 52-week high. TTM levered free cash flow at 142.58M and market cap at $659.20M implies a levered FCF/market cap of 21.63%. The stock is a short squeeze candidate, with a short float at 5.23% (equivalent to 20.11 days of average volume). The stock has gained 3.84% over the last year.

3. Ameristar Casinos Inc. (ASCA):
Resorts & Casinos Industry. This stock is currently operating 2.86% below their 52-week high. TTM levered free cash flow at 124.93M and market cap at $735.31M implies a levered FCF/market cap of 16.99%. The stock has gained 37.15% over the last year.

4. PH Glatfelter Co. (GLT): Paper & Paper Products Industry. This stock is currently operating 2.27% below their 52-week high. TTM levered free cash flow at 105.65M and market cap at $691.97M implies a levered FCF/market cap of 15.27%. The stock is a short squeeze candidate, with a short float at 7.41% (equivalent to 10.7 days of average volume). The stock has gained 23.47% over the last year.

5. Broadridge Financial Solutions Inc. (BR):
Information & Delivery Services Industry. This stock is currently operating 0.84% below their 52-week high. TTM levered free cash flow at 424.04M and market cap at $2.90B implies a levered FCF/market cap of 14.62%. The stock has had a couple of great days, gaining 6.16% over the last week.

6. RLI Corp. (RLI): Property & Casualty Insurance Industry. This stock is currently operating 0.66% below their 52-week high. TTM levered free cash flow at 167.65M and market cap at $1.26B implies a levered FCF/market cap of 13.31The stock is a short squeeze candidate, with a short float at 9.21% (equivalent to 23.28 days of average volume). The stock has gained 7.39% over the last year.

7. Northrop Grumman Corporation (NOC): Conglomerates Industry. This stock is currently operating 1.81% below their 52-week high. TTM levered free cash flow at 2.55B and market cap at $19.37B implies a levered FCF/market cap of 13.16%. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.02%, current ratio at 1.47, and quick ratio at 1.33. The stock is a short squeeze candidate, with a short float at 8.95% (equivalent to 12.36 days of average volume). The stock has gained 8.02% over the last year.

8. Advance America, Cash Advance Centers Inc. (AEA):
Credit Services Industry. This stock is currently operating 1.49% above their 52-week high. TTM levered free cash flow at 51.96M and market cap at $418.17M implies a levered FCF/market cap of 12.43%. This is a risky stock that is significantly more volatile than the overall market (beta = 3.0). The stock has had a couple of great days, gaining 14.96% over the last week.

9. ProAssurance Corporation (PRA): Property & Casualty Insurance Industry. This stock is currently operating 1.18% below their 52-week high. TTM levered free cash flow at 244.87M and market cap at $2.12B implies a levered FCF/market cap of 11.55%.The stock has gained 11.03% over the last year.

10. CACI International Inc. (CACI): Technical Services Industry. This stock is currently operating 1.13% below their 52-week high. TTM levered free cash flow at 216.79M and market cap at $1.92B implies a levered FCF/market cap of 11.29%. The stock is a short squeeze candidate, with a short float at 10.75% (equivalent to 13.71 days of average volume). The stock has gained 4.79% over the last year.

11. Innophos Holdings Inc (IPHS): Chemicals Industry. This stock is currently operating 0.39% above their 52-week high. TTM levered free cash flow at 117.46M and market cap at $1.05B implies a levered FCF/market cap of 11.19%. The stock has had a good month, gaining 11.73%.

12. Warner Music Group Corp. (WMG):
Entertainment Industry. This stock is currently operating 0.85% below their 52-week high. TTM levered free cash flow at 134.12M and market cap at $1.24B implies a levered FCF/market cap of 10.82%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.73). The stock has gained 40.17% over the last year.

13. Telecom Corp. of New Zealand Ltd. (NZT): Telecom Services Industry. This stock is currently operating 0.79% below their 52-week high. TTM levered free cash flow at 415.80M and market cap at $3.88B implies a levered FCF/market cap of 10.72%. The stock has had a couple of great days, gaining 5.43% over the last week.

14. Cephalon Inc. (CEPH):
Biotechnology Industry. This stock is currently operating 1.5% below their 52-week high. TTM levered free cash flow at 631.75M and market cap at $6.09B implies a levered FCF/market cap of 10.37%. The stock has gained 39.55% over the last year.

15. Lockheed Martin Corporation (LMT):
Aerospace/Defense Products & Services Industry. This stock is currently operating 2.24% below their 52-week high. TTM levered free cash flow at 2.86B and market cap at $27.59B implies a levered FCF/market cap of 10.37%. The stock is a short squeeze candidate, with a short float at 5.07% (equivalent to 7.72 days of average volume). The stock has lost 0.41% over the last year.

16. PRIMEDIA Inc. (PRM):
Publishing Industry. This stock is currently operating 0.14% below their 52-week high. TTM levered free cash flow at 32.36M and market cap at $315.09M implies a levered FCF/market cap of 10.27%. The stock has gained 43.61% over the last year.

*Levered free cash flow data from Yahoo Finance! All other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 16 Undervalued Stocks Reaching New Highs