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Each month I update a fundamental/technical screen at Scott's Investments and track the results real-time. June's list of 14 stocks is here and the top 10 rated stocks returned an average of 6.20% versus 5.08% for SPY. The entire list of 14 stocks last month returned an average of 5.87%.

The screen looks for the following:

  • Earnings growers still reasonably priced as judged by the PEG ratio
  • Low debt
  • A history of high return on equity and investment, and
  • Price momentum as gauged by the percentage the stock is trading to its 250 day high.
  • The stocks are then ranked based on fundamental factors as compiled by stockscreen123.

18 stocks qualified for this month's list. This tells us that limited individual stock momentum exists in the market and the fundamental factors on the list can still be found among the high momentum stocks. However, the number of qualifying stocks is substantially less than April's 34 stocks, which is not surprising given that overall equity momentum has waned in May and June, even after rebounding in early July.

Last month I profiled two stocks, EZCORP (NASDAQ:EZPW) which performed very well until a slight earnings miss slammed the stock last week. I also featured Applied Industrial Technologies (NYSE:AIT), which remains the number one stock on this month's list, two spots ahead of Apple (NASDAQ:AAPL). After purchasing some EZPW after their earnings miss, I was stopped out today for a small loss. Until the market is able to find a bottom in the stock, I'll be waiting on the sidelines. Long-term, I think the stock still has strong fundamentals and potential for more appreciation.

I have no current position in AIT and the stock has an earnings conference call scheduled for August 9th. It was down over 3% today and is now below its 50 day moving average, while still above its 200 day moving average. The short to intermediate picture for AIT looks weak, especially if it is unable to hold the $33 support level, at which point the stock would begin making lower lows, a bearish sign. A strong earnings report could bolster the stock, as well as some clarity in the overall equity markets (assuming a debt ceiling resolution is reached before August 9th). The stock yields 2.24% and has a price-to-earnings growth ratio (PEG) below 1, at .86. It also has no long-term debt and trades at a price to sales ratio of .67. It is a stock I am watching but will most likely stay on the sidelines until at least after August 9th.

Bed Bath and Beyond (NASDAQ:BBBY) is another stock to watch on this month's list. It reported earnings on June 22nd and has rallied fairly well since that date. It was on last month's list and was up 5.55%. It currently is in a trading range, so technically driven investors should watch support at $58 and resistance at the 52 week high around $60.50 as signals as to the stock's next big move. The stock is not overly cheap, but still trades at a modest forward P/E of 14, has no long-term debt, and has shown strong earnings growth in recent quarters.

(Chart courtesy of Finviz)


(Click to enlarge)

Ticker Name 7/27/11 Update Rank
AIT Applied Industrial Technologi Here 99.02
NSR Neustar, Inc Here 95.93
AAPL Apple Inc. Here 95.87
NSP Insperity Inc Here 94.78
TRLG True Religion Apparel, Inc. Here 94.46
NTES NetEase.com, Inc. (ADR) Here 93.86
BBBY Bed Bath & Beyond Inc. Here 93.63
VSEA Varian Semiconductor Here 92.99
MDF Metropolitan Health Networks, Here 91.93
WTSLA The Wet Seal, Inc. Here 89.99
DTV DIRECTV Here 86.41
CTCH Commtouch Software Ltd. Here 84.09
GOOG Google Inc. Here 82.59
TNDM Neutral Tandem Inc. Here 81.66
INTC Intel Corporation Here 77.44
PDLI PDL BioPharma Inc. Here 75.82
DECK Deckers Outdoor Corporation Here 72.67
TSM Taiwan Semiconductor Mfg. Co. Here 70.28
Source: 18 Fundamentally Strong Stocks With Positive Technicals