Stocks on Sale
Market downturns can provide great buying opportunities. Let’s look at a time-tested method to find some attractive companies with lots of upside potential.
When looking for reasonably priced growth stocks, I often use the PEG ratio as one of my key metrics. According to investopedia, a PEG ratio is “A stock’s price-to-earnings ratio divided by the growth rate of its earnings for a specified time period.”
I like the PEG ratio more than just using a P/E ratio (price to earnings) because the PEG ratio also takes a company’s earnings growth into account.
Here is a three-step process I use to find growth stocks on sale:
- Look for stocks with a PEG ratio under 1.00. These are stocks selling a deep discount compared to their growth potential
- Look for stocks with 1 year expected earnings growth above 33%. I love fast growing companies expected to grow quickly over the next 12 months.
- Look for stocks with 3-5 year expected annualized earnings growth above 17%. I also want companies that are expected to grow over the next 3-5 years and 17% would allow earnings to double within six years or less
Using these key metrics, here are three cheap growth stocks as of 2-18-15:
1 Yr Projected
3-5 Yr Projected
Avago Technologies Limited (AVGO)engages in the design, development, and supply of analog semiconductor devices with a focus on III-V based products. Its product portfolio comprises RF amplifiers, RF filters, RF front-end modules, ambient light sensors, light emitting diodes, low noise amplifiers, mm-wave mixers, optical finger navigation products, diodes, fiber optic transceivers, serializer/deserializer ASICs, motion control encoders and subsystems, optocouplers, and optical mouse sensors. The company’s products are used in cellular phones, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, renewable energy and smart power grid, factory automation, displays, optical mice, printers, voice and data communications, keypad and display backlighting, backlighting control, base stations, storage area networking, in-car infotainment, lighting, motor controls, power supplies, and optical disk drives applications.
Akorn, Inc. (AKRX) manufactures and markets diagnostic and therapeutic pharmaceuticals in specialty areas such as ophthalmology, rheumatology, anesthesia and antidotes, among others. They also market ophthalmic surgical instruments and related products. Customers include physicians, optometrists, wholesalers, group purchasing organizations and other pharmaceutical companies. They also provide contract manufacturing services.
Skyworks Solutions, Inc. (SWKS) is the industry’s leading wireless semiconductor company focused on radio frequency (RF) and complete semiconductor system solutions for mobile communications applications.
Bottom Line: The PEG ratio is not an end all solution, but it does help you find attractively priced growth stocks that could help your portfolio outperform the markets over the long-haul.
Want more growth ideas?
Join our VIP Program and get access to all of our top picks!
Gain Exposure to 5 Fast Growing Sectors through One Stock
This fast growing innovative company gives investors 5 strong reasons to consider investing in its future.
When I look for investments I primarily look for companies that are innovators and industry leaders. When I find a company that has a stronghold in many different industries it really gets me excited.
Last year, I found a company that was doing some exciting things in some of my favorite fast growing sectors.
Consider this, the company has exposure to:
- Materials Science: Innovative materials play essential roles in clean energy, transportation, human health, and industrial productivity.
- Electronics: A revolution in high productivity TEM imaging, analysis and metrology. Consumer demand is driving the electronics market to produce faster, smaller, cheaper, more power efficient portable devices. Device manufacturers must place a high premium on both time-to-market and device performance.
- Life Sciences: Basic life processes start in the cell. To understand how cells function and respond to disease or genetic variations, life scientists engage in cellular and structural biology research.
- Natural Resources: This company automate mineralogy workflows to transform productivity for mining and oil and gas customers by delivering relevant answers when, where, and how they are needed.
- Industrial Manufacturing: Optimize quality control with automated, industrialized processes. It has a collection of scanning electron microscopes for industrial microscopy solutions, which help to improve quality control, production capacity, and profitability.
The company I am referring to is FEI Company (NASDAQ: FEIC). It was founded in 1971 and is now a leading diversified scientific instruments company. The company has over 60 years of experience that enables them to set the performance standards of its industry. FEI has sales and service operations in more than 50 countries.
FEI Company is a leader in the design, manufacture, sale and service of products based on focused charged particle beam technology. By combining a focused ion beam and an electron microscope, the company has developed a dual beam system that allows the company’s equipment to provide three-dimensional imaging. The DualBeam and other company products deliver a range of structural process management applications for the Semiconductor integrated circuits, Data Storage and Industry and Institute markets. The major markets that FEI services (electronics, material sciences, natural sciences, and life sciences) all currently present opportunities for revenue growth and increase in market share.
From a 5 point-stock inspection point of view, FEI looks strong:
Financial Strength: Positive – Very strong balance sheet
Momentum: Positive – Showing strong relative strength
Valuation: Positive – Good buy up to $100
Earnings: Positive – Rated in top 10% currently
Risk: Neutral – Medium risk 1.4 beta
Bottom Line: FEI Company (FEIC) is a good buy up $100/share. My 12-month price target is $125, representing a 30% potential gain from current levels.
Following the Trends Can Be Profitable
You know me I love trends. Over my nearly two decades as an investor, I have made many profitable investments simply by following what’s going on in the world around me. The rise of electric cars helped me find Tesla Motors (TSLA) at just $37/share. The emergence of 3D printing (DDD) helped me find 3D systems years before it became a viable industry. And the aging population has helped me find many profitable ways to play that trend including companies that focus on senior housing, senior care, cancer research, and medicines to advance human life.
Now one trend I have been following closely over the years is the global impact of the emerging markets. Fast growth can also bring growing pains as we have seen a lot of volatility in these markets. However I believe there are some great opportunities there if you are willing to be disciplined and patient.
China is one of my favorite emerging economies. Right now, it is facing a critical economic structure adjustment following ten years of double-digit growth. This makes it a prime opportunity for investors who know which sectors to focus on in China. The recent slow down in growth is allowing its citizens to catch up to China’s amazing historic growth.
China is on the paths of urbanization and in the process of an industrial revolution. Currently, more than half of its population lives in rural areas and it is expected that at least 700 million Chinese will change its lifestyle. This presents opportunities to capture changes in eating, drinking, dressing, traveling, housing, and technology. This presents many potential investment opportunities for diligent investors.
Vipshop Holdings Ltd. (VIPS) is a great way to cater to this rising trend!
Vipshop is an online discount retailer for brands. The Company offers branded products to consumers in China through flash sales on its vipshop.com website. It offers a wide selection of various famous branded discount products including apparel for women, men and children, fashion goods, cosmetics, home goods and other lifestyle products, through its website. Vipshop Holdings Ltd. is headquartered in Guangzhou.
5 Reasons to consider VIPS:
- As Chinese incomes rise, spending will increase and should favor Vipshop earnings as shopping online has an uptrend.
- Compared to conventional on-line marketplaces or large-scale multi-category online retailers, Vipshop has successfully created an innovative e-commerce model that provides impressive scale and profitability.
- Through special offers and deep discounts on branded products, Vipshop has revolutionized online discount retail in China. By getting there first it is viewed as both the expert and trusted leader.
- VIPS’ balance sheet is free from long-term debt placing it in solid financial condition.
- It is currently trading above its 21-day, 50-day and 200-day moving averages.
Financial Strength: Positive
Valuation: Positive – Buy up to $165
Earnings Trend: Positive
12-month price target: $200
Bottom-Line: Vipshop (VIPS) is a great way to gain exposure to the rising Chinese middle class. It offers impressive growth at a reasonable valuation. My 12-month price target is $200/share representing a potential 30% gain from current levels.
Want to more trend trading ideas? Cosider our VIP Program for just $197 per year or $19.99 per month you will gain access to our premium research and monthly VIP Newsletter.
Supporting Israel with your investment dollars
“I will bless those who bless you, and whoever curses you I will curse; and all peoples on earth will be blessed through you.” –Genesis 12:3
At Wall St Renegade, we have portfolio strategies for investors of all shapes and sizes, from all walks of life – from conservative options for the investor who recently retired to aggressive for the investor seeking to maximize growth. We believe in prudent planning in attempt to get the highest possible returns with the lowest amount of risk. We believe in diversification, asset allocation, tax efficiency, and using low cost investment vehicles.
Many of our clients come to us so we can help them incorporate their faith and values into their financial plans. Many people have never had the opportunity to support Israel& profit at same time. That is why we created the Genesis 12 Portfolio. As Christian investors, seeking out pro-Israeli companies is one way we can put our money into companies that support our biblical values and potentially get strong financial returns in the process.
The Genesis 12 Portfolio is based on Genesis 12:3 and consists of twelve companies based in Israel that have met our moral and financial criteria.
These 12 Israeli companies offer an exciting way for an investor to support Israel with their investment dollars. It is a way to put your money where your values are.
One of the greatest reasons to support Israel is found in God’s Word as God has blessed Israel: “The Lord spoke to Moses: ‘Tell Aaron and his sons, “This is the way you are to bless the Israelites. Say to them: ‘The Lord bless you and protect you; the Lord make his face to shine upon you, and be gracious to you; the Lord lift up his countenance upon you and give you peace.’”’ So they will put my name on the Israelites, and I will bless them” –Numbers 6:22-27.
Israel has been a “miracle” economy with steady economic growth. Since Israel was created in 1948, it has been in a constant state of war. There have been numerous wars where its enemies whose threats promised to “wipe Israel off the map” outnumbered Israel. Despite its small size & population and its vulnerability from all sides, Israel has triumphed in all of these wars like David slaying the Giant. It has also survived several “intifadas” imposed on it by the Palestinians. It has taken in millions of refugees from all over the world and has over one million Muslim Arab citizens, who are openly hostile toward their country. Despite these challenges, Israel has developed into an economic and industrial powerhouse admired by most of the world.
Take a look at some of these amazing statistics:
- Israel ranks #3 in entrepreneurship in the entire world
- # 2 in venture capital availability
- And #1 in research & development investments
That is pretty miraculous for a country of its size. I mean think about it. How can a country with just 7.7 million people, with only 60 years of history that is surrounded by its enemies, in a constant state of war, be thriving? It produces more start up companies than larger more peaceful nations like China, Japan, India, Canada, and the United Kingdom.
Go to www.genesis12portfolio.com to get our SPECIAL REPORT on 12 reasons to Invest in Israel
This PACE Stock Can Help Boost Your Income and Provide Inflation Protection
Many investors look to gain income but also want inflation protection. The PACE portfolio looks to do exactly that as we build in precious metals, agriculture, commodities, energy, and world dominating businesses that pay a dividend.
One of my favorite areas in the PACE investing philosophy is energy. Energy has been and will continue to be one of the fast growing areas of demand.
The growing need for energy is a trend that will last for a long time:
- New techniques for extracting natural gas and crude-oil from the earth have helped ease concerns about the inability of U.S.-based energy producers to grow domestic supply and offset the country’s heavy dependence on foreign sources for these commodities.
- These unconventional new drilling techniques have lowered the overall cost structure for companies engaged in the exploration of traditional energy sources, such as crude oil and natural gas.
- More-productive drilling techniques have led to an overall increase in mid-continent U.S. oil production, which has led to lower pricing for refiners. (source: Fidelity.com)
Recently we added Helmerich & Payne, Inc. (NYSE: HP) to the PACE Portfolio. It is primarily engaged in the exploration, production, and sale of crude oil and natural gas and in contract drilling of oil and gas wells for others. These activities account for the major portion of its operating revenues. The company is also engaged in the ownership, development, and operation of commercial real estate.
Here are three reasons I like the stock:
- Its FlexRigs command a substantial premium while still completing wells at a lower total cost than the competition.
- Horizontal wells are more than 60% of the wells drilled in North America. Helmerich’s rigs are well designed to drill the more demanding horizontal wells and will likely continue to take industry market share from conventional drilling rigs.
- It recently hiked its dividend from $0.15 per share to $0.50 per share, showing it has strong free cash flow and a commitment to investor returns. It now pays nearly 2% in dividends.
The stock scores favorable upon my five-point stock inspection:
5-Point Stock Inspection on HP:
Financial Strength: Positive
Valuation: Positive – Buy up to $105
Risk: Positive – Moderate Risk
Earnings Trend: Positive
12-month price target: $125-$130
Take a look at its current chart:
Bottom line: Helmerich & Payne, Inc. (NYSE: HP) is a good buy up to $105/share. My 12-month price target is $125-$130, representing a potential 25-30% gain from its current levels. It also pays a 1.8% dividend.
How to gain an edge
Many investors try to gain an edge any way they can. They look for easy ways to beat the market, yet most investors significantly underperform the benchmarks. Why? They get in and out of the markets at the wrong times and buy the wrong kind of stocks.
My Dueling Duo strategy seeks to find high momentum blue chip stocks (stocks with a market capitalization of $10 billion or more that can rise quickly). The strategy is up almost 4% this year while the market is down over 2%. It has outperformed the market significantly over the past 5 years.
To find these stocks the Dueling Duo Portfolio relies heavily on relative strength (RS) to find buying opportunities. To explain this indicator, think about a horse race. I’m not a gambler, but imagine you are watching the Kentucky Derby and 20 horses are set to race. Now if you were betting on the race you could have spent time studying each horse and its jockey looking at past performance and a number of other factors. Maybe you found one that was a top competitor and won the majority of its past races so that is where you place your bets. Or maybe there is one that never won before and you see a potential turnaround and big gains so you bet on a long shot.
However once the race starts it is a brand new day and anything could happen. The winner could stumble and the loser could have the race of a lifetime. Now let’s say you had the opportunity to bet halfway through the race and you just need to pick one of the top three winners. Would you still look at past performance?
Probably not! Many would bet on the current leader, a few might still bet on a long shot, but if you want the odds in your favor you would side with one of the horses already in the lead. You are saying I want the horse that has shown the most strength mid way through the race and has the greatest potential to win the race. It is the same way with the relative strength index.
If we want to beat the market over the next year, we look at how its done over the past six months. Numerous studies have shown that these stocks are most likely to be among the stocks that outperform over the next six months. When we apply RS we use four steps:
- I start with stocks over $10 billion market caps and calculate how the stock has performed over the past 6 months.
- I sort the stocks from highest to lowest rank
- I then look at stocks within a variety of sectors (i.e. health care, energy, technology, etc). I then assign various ranks based on this sort.
- I then assign buy and sell ratings based on the RS rankings.
Numerous studies have shown that this relative strength process works to deliver market-beating results over the long term and we have seen just that with the Dueling Duo Portfolio. For example we bought Green Mountain Coffee (GMCR) in January and the stock is up nearly 50% over the past month. Look at the chart:
This doesn’t always happen, but it helps to find stocks with strong momentum that could continue to be big winners.
Recently we added Alexion Pharmaceuticals (ALXN) to the Dueling Duo Portfolio. Alexion Pharmaceuticals develops pharmaceutical products for the treatment of heart disease, and inflammation, diseases of the immune system and cancer in humans. The company’s lead product candidates are genetically altered antibodies that target specific diseases which arise when the human immune system induces undesired inflammation in the human body. These candidates are designed to block components of the human immune system which cause undesired inflammation while allowing beneficial components of the immune system to remain functional
Here are three reasons I like the stock:
- It s key drug Soliris garners one of the highest price tags in the rare-disease market and has high market share and should continue to grow strong.
- It should also be able to leverage its rare-disease expertise and infrastructure to efficiently expand and launch new pipeline drugs. This should significantly boost profit margins over time.
- It has a solid balance sheet with growing cash flow, which will give it the ability to expand and spend money funding its pipeline and potentially acquiring smaller competitors.
Take a look at its current chart:
Bottom line: Alexion Pharmaceuticals (ALXN) is a good buy up to $185/share. My 12-month price target is $230, representing a potential 30% gain from its current levels. Want more ideas like this? Check out the Dueling Duo Portfolio.