Auto, life-insurance and specialty-retailer stocks could be set for a bout of outperformance, according to our analysis of sector and industry charts. The trifecta of potential winners are in what we call the emerging phase where near-term "Buy" signals are in their infancy.
iStock pulled out the trusty stock screener to see which company with the trio of sectors stands out as our favorites based on fundamental and technical analysis.
There are 135 publicly traded companies within the three sub-sectors, based on BigCharts.com's sector constituent breakdown. That might be a reasonable set of holdings for a sizeable mutual fund or ETF, but way too many for a retail investors.
For us, growing the top and bottom line is the minimum requirement for consideration. Of the original list, only 70 are forecasted to grow EPS for the rest of this year and next. Fifty-six are projected to do the same with sales. That cut the list quickly.
[Related -Seven Stocks That Could Outperform In the Year Ahead]
It is important, in our view, for Wall Street analysts to be advocates for the companies under consideration. We've all witnessed the price benefits of upgrades and revisions; only 26 of the 56 have an average recommendation of "Buy" or "Strong Buy."
Although iStock wants Wall Street to rate the candidates highly, paying too much is a no-no in our view. So, we want companies with 2015 earnings growth projections that exceed forward P/E ratios for next year. Well, that didn't do too much, only one gets chopped.
Sticking with our not paying too much meme, how many trade for one times sales or less? Answer: 15.
[Related -GameStop Corp. (GME): GameStop Premiums Reflect Worries]
Warren Buffet prefers, or so we have read, a return-on-equity (ROE) of at least 14%, and the screener says… 6 and all life insurance companies are eliminated. And only three are use based, they include:
CarMax, Inc. (NYSE:KMX) GameStop Corp. (NYSE:GME) Penske Automotive Group, Inc. (NYSE:PAG)
KMX just made a huge, one-day move, toss it aside. Between GME and PAG, iStock prefers the chart of GameStop over Penske automotive; although, both show the potential for more upside.
GameStop operates as a multichannel video game, consumer electronics, and wireless services retailer. The company sells new and pre-owned video game hardware; physical and digital video game software; pre-owned and value video game products.
The specialty-retailer stumbled since hitting its 52-week high $57.47 in the middle of November 2013. Shares look as if they may have bottomed out and our in the process of lost price recovery.
GEM's price recently bounced above the 50-day moving along with the 12 and 26-day averages. This is typically a bullish sign on the short-term. With 32% of GameStop's float (stock available for trading), a short squeeze could propel the stock higher if/when shares close above resistance at $44; perhaps, as high as $50. On the downside, fall below $35 and retest of the 52-week low of $33.10 is highly likely.
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