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We previously reported on the stock selection from Anand Chokkavelu, CFA, who is an editor and writer at The Motley Fool. He said that brilliant ideas can hide, but the truly, magnificently stupid ideas can't. He selected seven great stocks:

  • CMG (Chipotle Mexican Grill, Inc.)

  • MORN (Morningstar, Inc.)

  • BWLD (Buffalo Wild Wings Inc.)

  • RST (Rosetta Stone Inc.)

  • ISRG (Intuitive Surgical Inc)

  • WFM (Whole Foods Markets)

Now Eric Bleeker of the Fool puts in his seven stock selections based on another set of criteria:

He sought out companies that weren't only bargain priced, but also had strong recent earnings and revenue growth and a history of earnings growth rates that smashed market averages.

  • Normalized net income growth of at least 35% in the past year

  • Revenue growth of at least 25% in the past year

  • A normalized P/E of less than 10.

  • A five-year compounded net income growth rate of 15%.

7 stocks passing the test

Company

Quick Description

Normalized Trailing P/E

Central Fund of Canada (NYSEMKT:CEF)

Closed-end commodity fund

3.0

Grupo Financiero Galicia S.A. (NASDAQ:GGAL)

Argentinean bank

9.7

Suntech (NYSE:STP)

Chinese solar company

6.6

KKR Financial (KFN)

Emphasis on investment in corporate debt

7.8

Vale (NYSE:VALE)

Brazilian miner with high exposure to iron ore

7.9

MKS Instruments (NASDAQ:MKSI)

Components to the semiconductor equipment industry

9.7

Avnet (NYSE:AVT)

Technology distributor

9.0

Source: Capital IQ, a division of Standard & Poor's.

We entered these funds into our system and then compared it with a balanced portfolio of dividend producing ETFs as well as the other 7 equity portfolios.

Asset

Fund in this portfolio

REAL ESTATE

ICF (iShares Cohen & Steers Realty Majors)

CASH

CASH

FIXED INCOME

TIP (iShares Barclays TIPS Bond)

Emerging Market

VWO (Vanguard Emerging Markets Stock ETF)

US EQUITY

DVY (iShares Dow Jones Select Dividend Index)

US EQUITY

VIG (Vanguard Dividend Appreciation ETF)

INTERNATIONAL EQUITY

IDV (iShares Dow Jones Intl Select Div Idx)

High Yield Bond

HYG (iShares iBoxx $ High Yield Corporate Bd)

INTERNATIONAL BONDS

EMB (iShares JPMorgan USD Emerg Markets Bond)

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Strategic Asset Allocation Moderate 15% 152% 4% 21% 5% 25%
Retirement Income ETFs Tactical Asset Allocation Moderate 12% 123% 10% 82% 11% 80%
7 Great Stocks That Wall Street Is Missing 56% 249%
7 Stocks With Exploding Profits 33% 144% 3% 8% 11% 27%

Three Month Chart

click to enlarge

One Year Chart Three Year Chart Five Year Chart

The more detailed analysis gives you charts and other properties of the portfolio.

We noted before that the 7 great stocks that Wall Street is missing don't have enough history to be something that can have wholehearted support. For as long as it has been in existence, it has done well. We will continue to track it through this choppy period to see what happens. The 7 stocks with exploding profits has definitely suffered through the recent downturn and exhibits the unwelcome volatility of many stock portfolios all the while, the long term performance has been good.

The sentiment today is more conservative and neither of these portfolios are ones in which I would invest at the moment.

Source: Comparing 7 Stocks With Strong Profits to 7 Equity Portfolios and Dividend ETFs