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The pullback in the market is giving investors a chance to either get in if they have been on the sidelines or to reposition their portfolios otherwise. Last week's 1357 print on the S&P 500 (SPY) may have been the low, though I anticipate that we could perhaps test a bit lower. I remain constructive on the market and continue to expect 1600 on the S&P 500 in 2012, a forecast I first shared last October and reconfirmed in February.

In trying to find some new ideas to consider, I decided to screen for cheap stocks that are growing but that have technically corrected already. This "growth at a reasonable price" (GARP) screen I designed using Baseline is as follows:

  • Universe = Russell 3000
  • Market Cap: Between $1 billion and $10 billion
  • 50dma > 200dma (in an uptrend still)
  • Price = 75-90% of 52-week high (corrected)
  • 1-year price return > 4% (beating S&P 500)
  • 2-year price return > 15% (beating S&P 500)
  • Trailing PE < 20X
  • EV/EBITDA < 12X
  • Trailing Sales growth > 10%
  • Trailing EPS growth > 14%
  • 2013 Projected EPS Growth > 12%

Here are the 12 names that met the criteria, sorted by EV/EBITDA:

(click to enlarge)

Before I share a few thoughts, let me describe some of the other columns I included. The first shaded column is "net debt to capital", and I have highlighted in green those below 20% and in red those above 40%. I highlighted in green those stocks beating the S&P 500's 9% price return so far in 2012 and in red those lagging. I also included the 5-year return to give a perspective that these stocks are really working. Only one stock has lagged the S&P 500's 8% decline.

I included forward PE ratios, which range from 8 to 16. I also included the PE relative to the 5-year average - most are below the average, which is consistent with the overall market's current low valuation relative to the past five years. Finally, in the last column, I include the number of sell-side analysts, highlighting those with five or fewer (perhaps not so widely followed).

I will share some thoughts now on the entire list, but I want to point out that I follow closely only Men's Wearhouse (MW), EZCORP (EZPW), Albemarle (ALB) and World Fuel Services (INT). I have looked at a few of these names in the past or even recently, but I am not very familiar with Amerco (UHAL), Darling (DAR), Buckeye Technologies (BKI), Helen of Troy (HELE) or Chicago Bridge & Iron (CBI).

UHAL has pulled back from an all-time high set in February, when the stock gapped up. You may never have heard of the company, but you are probably familiar with its U-Haul business, which accounts for the vast majority of earnings, but the company also has insurance operations (P&C, Life and Health). As I said, I don't really know this company, but perhaps a stabilizing housing market could help them even further. Note that Chairman Edward Shoen and his family own almost 56% of the stock.

DAR recycles grease from restaurants and food by-products from meat and poultry processors and bakeries. It's been in business since 1882. In late 2010, it made a substantial acquisition (Griffin Industries). A quick look at the 10-K informed me that they are benefiting big-time from low natural gas prices. On the other hand, consolidation among their customer base (meat processors) is somewhat of a challenge. This sounds like an interesting "green" business.

I used to follow Jabil Circuit (JBL) very closely. The company has always been one of the best in the EMS industry, which is a tough one. In recent years, JBL has focused on improving margins by expanding what it calls "Diversified Manufacturing Services", which includes specialized services, Industrial & CleanTech and Instrumentation & Healthcare. In FY11, this segment represented 36% of sales, with "Enterprise & Infrastructure" and "High Velocity Systems" each accounting for 32%. Cisco (CSCO) and Research in Motion (RIMM) accounted for 28% of sales in FY11.

BKI (and its predecessors) has been involved in the specialty cellulose market for 85 years. The company has manufacturing operations in the U.S, Canada, Germany and Brazil. In FY11, 37% of sales were Chemical Cellulose (food casing, Rayon, wood acetate, cotton acetate), 14% Customized Fibers (filters, specialty cotton paper, cosmetic cotton), 20% Fluff Pulp (used in disposable diapers) and 29% Nonwoven Materials. 68% of sales are outside the U.S.

MW was slaughtered in the downturn due to the discretionary nature of their business, with earnings dropping by 2/3 roughly. They also struggled with a poorly-timed acquisition that vastly expanded their tuxedo rental business. I think that this is a great company that invests heavily in its salesforce and has been aggressive about reorienting the company towards a wider demographic (younger men). While the stock has been quite strong since the bottom in 2008, it's still well below the all-time high near 57 set in 2007. I think that this stock could trade to 46 over the next year (13PE plus $3 cash).

I just did some work on Celanese (CE) for a client and am impressed with their new CEO, who joined from ALB and has served on the Board of Directors since 2007. This company was taken private in late 2003 and then stuffed with debt before it was taken public again in early 2005. The Debt to EBITDA has dropped towards 2X, and the company is focused on attaining an investment-grade credit rating. The business has reasonably high margins, suggesting limited competition. One of their big investment areas has been in a new technology that they say will dramatically reduce the cost of making ethanol. The company is very diversified by product and geography, with more than 70% of sales outside of North America.

EZPW has been in my Top 20 Model Porfolio for most of the past four years, and I have written about the company frequently on Seeking Alpha. Most recently, we added it back in the fall after having previously exited in early 2011. Most of their business is pawn-related,with a small part providing payday loans, which have drawn regulatory scrutiny. The company stands to benefit from persistent tight credit to low-income consumers. EZPW is expanding rapidly in its core pawn business (acquisitions and newbuilds) and geographically (primarily Canada and Mexico). The management team has had some turnover in recent years, with a new CEO and CFO from the outside. So far, execution has been fantastic. The company reports its Q2 this Thursday. My one-year target is 48, based on achieving 13PE on one-year forward earnings.

HELE operates in three segments: Personal Care, Housewares (OXO) and Helathcare/Home Environment (KAZ, acquired in late 2010). The company recently added the PUR brand, paying $160mm to Procter & Gamble (PG). Note that the table above doesn't include the additional debt. Insiders (mainly Chairman/CEO Gerald Rubin) own over 8% of the company.

CBI provides engineering, procurement and construction services to energy and natural resources companies. Backlog surged in 2011, growing from $6.9 billion to $9 billion. The company trades is listed on the NYSE, but it is a Netherlands company.

ALB is another specialty chemical company, focused on flame retardants, stabilizers and curatives, catalysts, and performance chemicals. The company is a major supplier of bromine-related products. While many might consider the company cyclical, and it is to some degree, it is very focused on growth. They never produced a loss in the big downturn, which was quite impressive. Their products represent a very small amount of the total cost of goods for their customers, which has allowed the company to pass through input cost increases fairly easily. I did some work on the company in October, right near the lows, and was quite impressed by the culture and the R&D focus. Here is a link to their investor presentation from last May, and I see they have scheduled another one for this May. It's not the give away that it was six months ago, but I believe the company can trade to 71 over the next year (13PE), perhaps higher. The company has a plan to get to $9 a share roughly by 2015. The new CEO "owns" it, as he was instrumental in developing the strategic plan, though he was President at the time. If the company gets even close, the stock is likely a double over the next few years.

First Cash (FCFS) is the second pawn lender. I prefer EZPW, but some like the fact that this company has even less payday lending exposure and is expanding rapidly in Mexico. Insiders own over 5% of the company.

INT is a great company in my view, with a high ROIC and a good position in the markets it serves. It's not well understood at all, and investors who focus on revenues are likely to be somewhat misguided in their views. INT is an asset-light logistics company, focused on helping customers in marine, aviation and trucking all over the world. The insider ownership is substantial, and the company has steadily grown operating income despite wild swings in price of fuel over the past few years, a testament to their risk-control systems. I don't even think the analysts fully appreciate the story - some of them cover refineries, a totally different industry. The stock pulled back in Q1 after the company disclosed some headwinds related to a problem in Afghanistan. Additionally, higher energy prices have had the short-term impact of inhibiting cash flow from operations, but this will reverse out over time. I think this company can get to 16PE over the next year, which suggests the potential to reach 56.

So, if you are looking for new ideas, hopefully this list inspires you to investigate a few of the names. I shared my targets on the four that are on my own watchlist. Of the three not in my Top 20 Model Portfolio, INT looks most interesting to me at the current price, though EZPW offers an even higher return to my target. Among the other 8, CE and DAR look most interesting to me on the surface. As always, I look forward to your thoughts!

Source: Consider Grabbing These 12 'GARP' Stocks

Additional disclosure: EZPW is a member of the Top 20 Model Porfolio at