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19 Stocks to Bring in the New Year

|Includes:AAPL, AIT, AMAT, CKSW, CNU, CTCM, DECK, EZPW, FCFS, Humana Inc. (HUM), IDCC, LRCX, MNK, NVEC, QCOM, SNHY, TSM, TSRA, VSEA

 I update the following portfolio/screen on a monthly basis onScott's Investments. October's list of 22 stocks is here and returned an average of 15.45% for the top 5 stocks on the list versus .59% for SPY. The entire list of 22 stocks last month returned an average of 7.82%, led by Questcor Pharmaceuticals, Inc which returned over 39% for the 1 month period and Deckers Outdoor which returned over 36%.

Last month's portfolio of 23 stocks returned an average of 6.91% and 7.01% for the top 5 on the list. SPY returned 5.99% during the same period.  The leader for last month was InterDigital (NASDAQ:IDCC) returning 26.58%.


The screen looks for the following:

  • earnings growers still reasonably priced as judged by the PEG ratio 
  • low debt 
  • a history of high return on equity and investment, and 
  • price momentum as gauged by the percentage the stock is trading to its 250 day high. 

This strategy of screening stocks has produced stellar returns since this summer. For example, August's list returned a whopping 16.17% versus 7.87% for SPY and July's top 5 stocks returned over 19%.

When the screen results in more than 5-10 stocks I have also started tracking returns of the top 5 stocks at the beginning of each list. The stocks are ranked based on fundamental factors.

The rational for this screen is based on backtests showing stocks with low PEG ratios, debt, and high returns on equity and price momentum have produced good historical returns. The screen has tested well historically in bullish periods and has suffered during significant market drawdowns. Strategies an investor could use to avoid major drawdowns would be to either a) abandon this type of strategy entirely when the SP 500 or another major index is below a long term moving average, or b) hedge positions with a position in SH or write a short option strategy on an equity index or ETF like SPY.

Below are 1, 3, and 5 year test results if an investor were to invest in the top 5 stocks in this screen every 4 weeks. Test results exclude commissions and dividends but include .5% slippage:
 




This month's list contains 19 stocks versus 23 last month.  The top stock on the list is once again Metropolitan Health Networks, MDF, which has made multiple appearances on this stock list.  Apple, AAPL, remains on this month's list. Two new additions of note for this month are two large cap technology stocks, Qualcomm (NASDAQ:QCOM) and Applied Materials (NASDAQ:AMAT). 

Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123. For the full list of stocks and results, please see the right hand side of Scott's Investments.
 
 
 
No positions in stocks mentioned



Ticker Name Trend Rank MktCap Industry
MDF Metropolitan Health Networks, Here 99.27 184.45 Healthcare Facilities
AIT Applied Industrial Technologi Here 99.23 1387.45 Misc. Capital Goods
AMAT Applied Materials, Inc. Here 99.03 18587.59 Semiconductors
LRCX Lam Research Corporation Here 98.49 6408.42 Semiconductors
EZPW EZCORP, Inc. Here 97.5 1399.02 Consumer Financial Services
VSEA Varian Semiconductor Here 95.97 2760.3 Semiconductors
FCFS First Cash Financial Services Here 94.62 958.53 Retail (Specialty)
CNU Continucare Corporation Here 93.29 289.51 Healthcare Facilities
AAPL Apple Inc. Here 89.84 296840.59 Computer Hardware
IDCC InterDigital, Inc. Here 87.41 1897.28 Communications Equipment
TSRA Tessera Technologies, Inc. Here 85.65 1117.22 Semiconductors
TSM Taiwan Semiconductor Mfg. Co. Here 85.11 63849 Semiconductors
SNHY Sun Hydraulics Corporation Here 83.86 638.53 Misc. Fabricated Products
QCOR Questcor Pharmaceuticals, Inc Here 83.42 949.33 Biotechnology & Drugs
DECK Deckers Outdoor Corporation Here 79.51 3225.78 Footwear
NVEC NVE Corporation Here 78.92 272.21 Semiconductors
CTCM CTC Media, Inc. Here 77.07 3580.94 Broadcasting & Cable TV
QCOM QUALCOMM, Inc. Here 70.44 79979.74 Communications Equipment
CKSW ClickSoftware Technologies Lt Here 60.57 241.05 Software & Programming