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"My momma told me, 'You better shop around.'" -- Smokey Robinson

Independent research allows investors to go beyond the stocks featured in the news and shop lesser-known alternatives. As simple as it sounds, you are better off shopping around than using the media as a filter that selects for familiar or popular stocks.

Allegheny Technologies Inc. (NYSE:ATI) is one of the more heavily researched stocks on the web. But internet investors should not focus their research on a small number of stocks like ATI.

On the contrary, investment returns are ultimately dictated by financial performance, not fame. Regardless of web interest in ATI, its earnings and future cash flows will determine its value. The future financial potential of a stock can be gauged by using financial metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.

As alternatives to ATI, consider the following stocks with strong track-records and solid credit scores:

Ticker

Company

Industry

10-Year Average ROE

Altman Z-score

ANF

Abercrombie & Fitch Co.

Apparel Stores

24.0%

4.96

GGG

Graco Inc.

Diversified Machinery

45.3%

5.60

KRO

Kronos Worldwide Inc.

Specialty Chemicals

19.9%

3.75

NUE

Nucor Corporation

Steel & Iron

17.1%

3.65

RES

RPC Inc.

Oil & Gas Equipment & Services

17.2%

7.24

VLO

Valero Energy Corporation

Oil & Gas Refining & Marketing

12.5%

3.96

WSTG

Wayside Technology Group, Inc.

Computers Wholesale

10.3%

5.61

These alternative stocks are all categorized as "safe" according to the Altman Z-score,* indicating that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that ANF, GGG, KRO, NUE, RES, VLO, and WSTG have grown shareholder wealth at a respectable annual rate. It is clear from these two metrics that each of these seven alternative stocks is a high-quality stock capable of weathering bad times and delivering positive long-term results.

What's more, these stocks are cheaper and have better growth prospects than ATI:

Ticker

P/E

EPS growth next 5 years

Div Yield

ANF

20.15

21.8%

1.6%

GGG

18.55

20.2%

2.2%

KRO

9.39

20.5%

2.7%

NUE

21.35

24.9%

3.5%

RES

10.16

23.5%

2.1%

VLO

5.36

21.3%

2.9%

WSTG

10.64

22.0%

5.5%

ATI

27.3

45.8%

1.4%

Based on lower price-to-earnings ratios and higher dividend yields, these stocks are cheaper than ATI at current market prices. Better yet, they have better growth prospects according to analyst projections. Rather than restrict yourself to concentrated investments in one notable stock like ATI, consider a diversified mix of these seven securities as a more attractive alternative.

*The Altman Z-Score is a measure of bankruptcy risk that is not based on stock price volatility. This score places companies into three groups: "safe" (Z-score > 2.99), "grey" (Z-score between 2.99 and 1.81), and "distressed" (Z-score < 1.81), and is surprisingly useful for identifying bankruptcy risk in the coming year. This method of segmenting companies uses of fundamental (financial statement) data and market capitalization only, not on price volatility. Beyond credit risk prediction, companies with higher Z-scores have historically outperformed companies with lower Z-scores, in aggregate. One sector has not been accurately modeled: Altman's Z-score has not accurately predicted the bankruptcy risk of financial companies.

"Distressed" was a label coined by researchers, and should not be taken to mean that any company is bankrupt or in default on the basis of this calculation alone. Credit scoring is not fate, only prediction based on relative past performance of companies grouped by key variables. Time will tell.

Disclaimer: This research is not a guarantee. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner.

Source: 7 Stocks To Outperform Allegheny Technologies