We ran a screen for liquid stocks that have shown recent strength amid the recent market weakness - September 14 was the recent SandP 500 Index intra-day peak of 1474.51. These are names that are optionable and shortable, with stock price over $10, average daily volume over 2 million shares, and market capitalization over $2 billion.
Finally, we added a couple of simple performance to the screen in the form of basic technical analysis indicators - stocks had to be within 5% of their 52 week high and have recently had a bullish crossover of the simple 20 and 50 day Moving Averages.
This came up with a nice short list of 6 names:
- CenterPoint Energy (CNP)
- CVS Caremark (CVS)
- Johnson and Johnson (JNJ)
- Merck (MRK)
- NiSource (NI)
- Verizon (VZ)
Here is a table of the names, sorted by Year-To-Date (YTD) performance:
(Data from finviz.com )
With the SPY up 16% YTD even after the recent pullback, these names aren't notable outperformers - in fact 3 of them have underperformed the broad market ETF this year. However, they all have outperformed during September - something to keep in mind if we experience continued broad market weakness.
Here are quick analysis and stripped-down daily charts of these 6 big names over 2012, with 20 and 50 day simple moving averages and Williams Percent R (the BigTrends way):
CenterPoint Energy is a utility and energy company based out of Texas and the surrounding region. It has a nice dividend, currently around 3.8%. Profit margins and ROE look healthy, all being 15%+. However, CNP's forward P/E ratio is over 16 currently (according to Yahoo Finance), which seems a bit high for a company in the Utility sector and considering that its revenues actually fell 17% last quarter. The chart on CNP is attractive in our analysis, as it's making new highs, simple moving averages are in a positive crossover and support mode and Percent R is in bullish territory -- this current area has marked resistance and a top in both October 2011 and more recently in August. This is a fairly quiet, non-volatile, high dividend yield stock chart -- the 20 area would be a good low-risk entry point for long positions in our analysis.
CNP Daily Chart
CVS Caremark operates near 8000 retail drugstores and other pharmacy outlets. The company was founded way back in 1892. CVS has nicely growing revenues and earnings over 15% in recent quarter, with a forward P/E ratio around 13. Dividend yield is around 1.3%. Profit margins and ROA/ROE are all under 10%, which is somewhat consistent with many retail type names but isn't eye-openingly strong. CVS and other pharmacies obviously benefit from the consistent aging and prescription growth demographic trends in America. The CVS chart is attractive, but the resistance around the previous July 2012 highs is a concern, as is the big gap down and plummet seen in July. For a long entry point, the 46 level looks to be a good low-risk entry point in our analysis.
CVS Daily Chart
Johnson and Johnson (JNJ) is a globally known health care and consumer firm. JNJ is another stock on the list with a nice yield currently (something all of these names have in common) -- current yield around 3.4%. The company has nice profit margins and effective ROA and ROE. Forward P/E is a low 12.6, but Trailing P/E shows a fairly high 21.9, so investors should do so more research on what may be going in a particular quarter or year on JNJ's earnings/revenues flow. Again, this is another chart where it's overall bullish -- but overhead resistance around the 70 level is a concern here. 67 is a key downside support level for those looking for a low-risk entry point on a pullback, in our view.
JNJ Daily Chart
Merck is the well-known pharmaceutical company. It has similar PE (forward and trailing) to JNJ. In fact, many of its snapshot fundamentals look similar to JNJ -- nice profit margins, decent ROE and ROA, questionable revenue and earnings growth. Strong dividends here yet again at 3.7% yield. The MRK chart again leans bullish, and is more attractive than JNJ in our view because it's taken out the 2012 previous highs. The 44 area looks a good entry point on a pullback -- MRK was as high as 60 in 2008, so there is certainly upside recovery potential left in it.
MRK Daily Chart
NiSource is another utility company, based out of Indiana and handling 2.2 million customers mostly in the Middle part of America. Here again we see fairly high P/E ratios of 16x forward and 24x trailing, given its industry. The Natural Gas aspect of some of these utilities may be giving them an added kick to valuations. The profit margins for NI are lower than CNP -- both hold a lot of debt vs cash, which is common in that industry. Another good dividend yield of 3.7%. Some inconsistency in revenues and earnings here. NI stock had been very consistently moving higher until recently -- it's broken down a bit on a technical basis. May be consolidating for another leg higher, but the 24 level must hold pullbacks for the bull trend to remain intact.
NI Daily Chart
Verizon is a leading telecommunications company in the US -- 94 million retail customers. Forward PE ratio around 16 -- profit margins and return on assets are kind of mixed. Growing both revenues and earnings -- only 4% growth on revenues last quarter, however. Again here we see a strong dividend yield -- 4.4%. Personal analysis note: VZ certainly benefits from the popularity of the latest smart phones from Apple (AAPL) and Samsung and a very strong market position -- however, on an anecdotal basis they may be losing retail customers to Sprint's (S) unlimited data plan (as far as I can tell, VZ doesn't currently offer such an unlimited plan or one with cheaper pricing). Something to keep an eye on going forward, although VZ would seem to be able to match/beat any competitor's pricing plan if need be. VZ is another similar chart that's in bullish mode but had a recent pullback. It did make "lower lows" in July and August which could be a concern -- holding above the 45 level looks to be key to the bullish case.
VZ Daily Chart
My quick summary evaluation on these 6 names using different charting platforms, multiple indicators, and a snapshot purview of the fundamentals: All of these stocks look fairly bullish on the charts and have what I would call very attractive dividend yields. Many are very quiet movers and won't provide a lot of day-to-day excitement or volatility.
The 2 most attractive bullish chart setups among this group in my view are CNP and MRK -- while JNJ looks the safest value and most sound on a fundamental basis -- but do your own research before investing/trading in any of these names.