Wall Street's Undercovered Winners

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 |  Includes: ANSS, ARII, BDE, CEDC, CEMJQ, CLF, CMLP, CNS, CRS, CRZO, CXG, DIOD, DRQ, GFIG, GWR, HEI, HL, HURN, IIVI, IMA, ITRI, KSU, MATK, MLI, MORN, NTG, NUAN, OII, PCR, PDCE, PKD, PLLL, SCMR, SPN, TNL, VLCM, VTIV, WEX
by: Alan Brochstein, CFA

Last quarter, I shared a simple screen that focused on stocks with encouraging attributes but little Wall Street coverage.

The results are in, and the list, which included names from several economic sectors, produced above-market returns.

Note in the results below that I omitted Laureate Education (Pending:LAUR), which I had mentioned in the article as in the process of being acquired as well as Hub Group (same reason, but I had neglected to mention it).

The group produced median returns well above the S&P 500, with two monsters helping, Perini Corporation (PCR) and Volcom (NASDAQ:VLCM).

Of the 24 names, 16 beat the market. Double-digit winners beat double-digit losers 9-2:

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Using the exact same parameters (and removing companies that have received merger offers), there are 18 names generated with StockVal that meet the criteria this quarter. I must profess surprise to see Martek Biosciences (MATK) on the list, as I have long been negative on the prospects for this company. With that said, if it can clear 27, the next stop is 32. I would also note that Inverness (IMA) has run up lately due to “highly accretive” acquisitions. In the past, this red flag has usually helped me to avoid blow-ups, though it has often alerted me a bit early. I closely follow Superior Energy (NYSE:SPN) and am doing some work on Natco Group (NYSE:NTG). Typically, I am averse to investing in cyclical companies, so I was late to appreciate the changing longer-term prospects for companies that can help solve our energy problems with technology and process control. Finally, Diodes (NASDAQ:DIOD) is a neat company that I have evaluated in the past. It has been consolidating for over 18 months now and bears attention to a potential break-out. Happy Hunting!

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Disclosure: I do not own any of the stocks mentioned in this report