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In James O’Shaughnessy’s book, "What Works on Wall Street," he combined a variation of value and momentum investment strategies. One of the screens he designed first picks stocks with P/E ratios lower than 20, and then purchases those with the highest price appreciation in the last 52 weeks.

In a 52 year back testing, this strategy returned an average annual compound return of 17.9% vs. 13.0% for all stocks, beating the S&P 500 index by 4.9% per year. The downside risk of the strategy is nearly 10% less than that of all large cap stocks.

Below we compiled a list of 30 stocks that satisfy O’Shaughnessy’s screens:

Company name

Symbol

P/E ratio

52w price change (%)

Parkvale Financial Corp.

PVSA

16.14

201.76

Crawford & Company

CRD.B

6.7

145.02

HollyFrontier Corp

HFC

10.19

136.44

Sturm, Ruger & Company

RGR

19.59

133.84

Advance America, Cash

AEA

11.41

132.21

Newcastle Investment

NCT

0.57

110.04

Dillard's, Inc.

DDS

13.56

106.6

Buckeye Technologies

BKI

9.1

100.52

W&T Offshore, Inc.

WTI

11.53

96.13

Lithia Motors, Inc.

LAD

15.01

94.69

Terra Nitrogen Co

TNH

15.7

92.65

Alto Palermo

APSA

18.33

90.32

Cash America Intl.

CSH

15.62

87.22

Avago Technologies

AVGO

16.4

86.38

Telular Corporation

WRLS

2.35

86.25

Magic Software

MGIC

11.99

85.59

Weight Watchers

WTW

16.91

85.44

US Home Systems

USHS

10.75

77.86

Mueller Industries.

MLI

17.29

77.57

Central Vermont Public

CV

18.96

77.26

Federal Agricultural Mortgage

AGM

5.01

76.45

Internet Initiative Japan

IIJI

19.78

76.24

CF Industries Holdings

CF

12.2

75.33

Atlas Pipeline Partner

APL

8.38

74.62

Multi-Color Corp

LABL

14.93

73.07

RPC, Inc.

RES

13.98

72.4

DSW Inc.

DSW

13.99

72.06

Spreadtrum Comm)

SPRD

10.69

70.49

Primoris Services

PRIM

11.81

70.21

NL Industries, Inc.

NL

6.26

69.78

Parkvale Financial Corp is on the top of our list. The stock returned 201.76% during the past 52-weeks. Parkvale is a unitary savings and loan holding company. Cliff Asness had 404K shares of PVSA. Richard Schimel also had 50K shares of PVSA stocks.

Newcastle Investment Corp is another stock with a three digit 52-weeks return. Newcastle is a real estate related investment and finance company. It also has a high dividend yield of 10.62% and a low P/E ratio of 0.57. Seth Hamot invested over 2 billion shares of NCT. Michael Novogratz also had more than 1 billion NCT shares.

Lithia Motors, Inc. is an operator of automotive franchises, and a retailer of new and used vehicles and services. It returned 94.69% during the past 52 weeks and there is still significant interest in this stock by hedge funds and insiders. Directors and officers of the company have been buying since last year, especially in the recent two months. Chuck Royce had $16 million in this $466 million stock. John Murphy also had $10 million invested in LAD. There are nearly a dozen other hedge funds with moderate investments in LAD.

We believe that investors will be able to beat the market by constructing a 30-stock portfolio. Buying all of these 30 stocks should provide some diversification as well.

Source: 30 Stocks Expected To Beat The S&P 500 By 5 Percentage Points