It was a great week for the market as the S&P 500 continued to move up toward the 1,350 mark and closed the week up 2.2%. The Dow didn't fair so well but nevertheless closed the week up 1.6% and is looking to test the 12,800 high.
Our watch list contains 39 companies within 11% of their respective 52-week lows. The remaining 29 stocks can be found here.
|Symbol||Name||Price||% to Low||P/E||EPS||Div.||Yield||Payout Ratio|
|ANAT||American Nat'l Insurance||76.58||0.37%||12.96||5.91||3.08||4.02%||52%|
|MCY||Mercury General Corp.||38.7||1.45%||14.23||2.72||2.40||6.20%||88%|
|GBCI||Glacier BanCorp., Inc.||13.12||2.22%||22.24||0.59||0.52||3.96%||88%|
|TCB||TCF Financial Corp.||13.05||2.55%||13.18||0.99||0.20||1.53%||20%|
|HGIC||Harleysville Group Inc.||30.72||2.71%||11.01||2.79||1.44||4.69%||52%|
|SFNC||Simmons First Nat'l||25.15||2.72%||11.70||2.15||0.76||3.02%||35%|
Watch List Summary
There is a noticeably large number of insurance and financial companies on our list. This may be because of the foreign debt situation in Greece or the possibility of a debt ceiling impass. Further analysis would have to be done but it appears that this sector is out of favor and worth investigating.
On the top of our list is Meredith (MDP), a major player in the media sector. While the Murdoch scandal seems to casts a pall over the sector, Meredith has emerged to be in good shape financially. The company earned $2.85 in the last 12 months and is paying $1.02 in dividends. Next year earnings are expected to come in at $2.68 which would not jeopardize the dividend payment in our view. Historically, MDP is considered undervalued with a dividend yield of 1.3% thus the current yield of 3.47% suggests that the stock could double in due time. The company will report its quarterly earning on July 28th.
American National Insurance (ANAT) is no stranger to the NLO team. This life insurer trades at a 55% discount to its book value and offers a hefty 4% dividend yield. With the payout ratio at 50%, earnings will need to drop substantially for the company to consider cutting, halting or borrowing to pay the dividend. Anyone interested in this stock should be aware that it is a highly illiquid stock. The average volume based on the last three months is merely 21,000. Friday's volume for ANAT was 12,150. American National Insurance has been trading in a line formation or consolidation for a year and any move, up or down, could set the trend for the stock.
Another stock hitting our radar is Pepsico (PEP). Pepsi reported higher profits but scaled back on their guidance which took down the stock price. Pepsi's yield is slightly above 3% making the stock worth looking into. Historically, Pepsi trades between 2.2% and 1.2% so a 3% yield would imply that this company is undervalued by as much as 40%.
Stock Highlight: Greenhill & Co. (GHL)
Top Five Performance Review
|Symbol||Name||2010 Price||2011 Price||% change|
|(BEC)||Beckman Coulter, Inc.||47.26||83.5||76.68%|
|JNJ||Johnson & Johnson||57.63||66.72||15.77%|
|FRS||Frisch's Restaurants, Inc||19.99||22.4||12.06%|
|DJI||Dow Jones Industrial||10,424.62||12,681.16||21.65%|
Disclaimer: On our current list, we excluded companies that have no earnings. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and extensive due diligence. We suggest that readers use the March 2009 low (or the companies' most distressed level in the last 2 years) as the downside projection for investing. Our view is to embrace the worse case scenario prior to investing. A minimum of 50% decline or the November 2008 to March 2009 low, whichever is lower, would fit that description. It is important to place these companies on your own watch list so that when the opportunity arises, you can purchase them with a greater margin of safety. It is our expectation that, at the most, only 1/3 of the companies that are part of our list will outperform the market over a one-year period.