Appreciated Growth Companies
With all of the interest in TA, I decided to run a
fundamental screen looking for stocks that are performing
well from both a technical and fundamental standpoint. I
figured that these would be good candidates for technical
analysis.
I did this by selecting companies whose price has been
steadily improving for the past year. The stock price had
to increase more in the past 6 months than the previous 6
months and faster in the past quarter than in the previous
quarter. I selected only stocks whose volume for the past
2 weeks was at least 125% of its average annual volume.
I looked for companies that were growing revenues and
earnings faster in the past year than in the past 5 years.
I also only selected companies that have a Return on Equity
of at least 15.
Here are the criteria that I used.
% Price Change Last Year >= 0
% Price Change Last 6 Mos. >= % Price Change Last Year-% Price Change Last 6 Mos.
% Price Change Last Qtr. >= % Price Change Last 6 Mos.-% Price Change Last Qtr.
% Price Change Last Month >= 0
Rev Growth Year vs. Year >= 5-Year Revenue Growth
EPS Growth Year vs. Year >= 5-Year Earnings Growth
EPS Growth YTD vs. YTD >= 0
Return on Equity >= 15
Avg. Daily Vol. Last 2 Weeks >= Avg. Daily Vol. Last Year*1.25
Here are the nine companies identified by this screen.
1-Yr 5-Yr 1-Yr 5-Yr
Symbol Company Name Industry Name Price P/E ROE RevGwth RevGwth EPSGwth EarnGwth
CHCS Chico's FAS, Inc. Apparel Stores 39 31.9 36.8 45.3 24.79 70.3 67.26
TARO Taro Pharmaceutical Industries Drug Manufacturers 18.75 30.6 16.2 25.6 12.25 139.1 16.35
PBT Permian Basin Royalty Trust Diversified Investments 5.44 10.8 825 74.1 5.31 77.9 5.51
EASI Engineered Support Systems Diversified Machinery 20.38 12.8 16.2 70.4 29.71 25.9 24.25
ENGL Engle Homes, Inc. Residential Construction 15.38 4.7 16.2 38.4 27.79 60.9 31.58
DRC Dain Rauscher Corporation Investment Brokerage 80.44 12.9 18.6 23.7 13.52 732.5 4.78
PPL PPL Corporation Electric Utilities 33.5 12 31.3 21.2 12.9 24.8 8.24
NTAI Nam Tai Electronics, Inc. Business Equipment 17.94 7.7 17.9 42.8 5.19 237.1 -2.6
SASOY Sasol Limited Independent Oil & Gas 8.03 11.4 17.5 14.4 1.11 18.8 -5.49
Here is some key fundamental data for these companies that
I retrieved from Silicon Investors.
Symbol P/S ROE ROA Yield AnalRec
CHCS 3.55 40.27 28.81 0 1 (6)
TARO 2.46 18.52 7.70 0 1 (2)
PBT 8.78 964.61 548.3 16 N/A
EASI 0.44 17.08 5.51 0.18 1.33 (5)
ENGL 0.20 17.50 6.53 1.67 1 (1)
DRC 0.95 21.40 3.18 1.1 2 (2)
PPL 0.95 31.10 5.17 3.12 2 (12)
NTAI 1.02 17.09 12.83 1.9 3 (2)
SASOY (no profile available)
AnalRec:
1 = Strong Buy
2 = Buy
3 = Hold
4 = Under perform
5 = Sell
(#) = Number of Analysts
Only a couple of things stand out here. Permian Basin
Royalty Trust (PBT) has a Return on Equity that is in the
stratosphere and a very high yield. Chico's FAS, Inc. and
PPL Corporation have above average ROEs.
All companies seem to be selling at a discount to their
one-year earnings growth. Also notice that Nam Tai
Electronics, Inc. (NTAI) and Sasol Limited (SASOY) both
have negative 5-year earnings growth. NTAI in particular
appears to have turned their fortunes around, but it looks
like analysts have not picked up on the turn around.
The good price performance of these companies seems
justified by their fundamentals.
Now, what do their charts look like?
Chico's FAS, Inc. (CHCS)
bigcharts.com
CHCS has been moving up on strong volume since it broke
through resistance of 25 in early July on heavy volume.
Institutes have been accumulating the stock and now hold
91% of the outstanding shares.
Chico's FAS, Inc. is a specialty retailer of exclusively
designed, private label casual to dressy clothing and
complementary accessories. Concerns about the retail
sector in general could have an adverse affect on CHCS. We
might see a small technical pull back here, but fundamental
and technically, this company looks strong.
Taro Pharmaceutical Industries Ltd. (TARO)
bigcharts.com
TARO shot up 25% in the past week. Stocks that climb more
than 25% in less than two weeks often pull back in a short
time period. Notice the up staircase that has been forming
since May. There hasn’t been a lot of selling since late
May. This is a thinly traded stock and institutions only
hold 8% of the outstanding shares.
TARO manufactures markets and distributes OTC and
prescription pharmaceuticals primarily in the United
States, Canada and Israel, offering topical corticosteroids
and antifungal cream products. They just made two
significant announcements (http://www.siliconinvestor.com/research/news.gsp?s=TARO)
regarding product approvals and distributor agreements.
These announcements are the probable cause of the stocks
sudden rise. There might be something significant here,
but this is out of my area of expertise.
Permian Basin Royalty Trust (PBT)
bigcharts.com
A few words about the company are in order before we
evaluate this chart.
Permian Basin Royalty Trust, an express trust, collects the
income from properties owned by Burlington Resources Oil &
Gas Company, including the Waddell Ranch properties
(containing 344 oil wells, 67 gas wells and 137 net
injection wells) and the Texas Royalty Properties. For the
6 months ended 6/30/00, total revenues totaled $15.4M, up
from $5.7M. Net income totaled $15.2M, up from $5.5M.
Results reflect higher royalty income due to higher
prices.
If you look at the chart, you will notice that it roughly
follows the price of oil and natural gas. Oil prices have
been going up and I have read that they could go as high as
$40 / barrel (extreme estimate). Natural gas prices have
been rising and are predicted to rise significantly more,
especially if we have a cold winter.
The stock has a high yield (15%) and pays a monthlydividend. The astronomical ROE, ROA and relatively
low PE are all very appealing. This looks like a good
candidate for a long position.
Engineered Support Systems, Inc. (EASI)
bigcharts.com
EASI has been in a trading range (11-15) for the past year,
until early August, when it started rising on increasing
volume. EASI rose 40% in a little over two weeks after
announcing outstanding earnings. The stock seems to be
consolidating between 19 and 21 with strong than usual
volume. It could be building a new base and a breakout
above $21 on strong volume would be a buying signal.
Institutions hold 39% of the outstanding shares.
EASI is a designer & manufacturer of military support
equipment and electronics for the U.S. armed forces. EASI
also engineers and manufactures air handling & heat
transfer equipment, material handling equipment and custom
molded plastic products for commercial and industrial
products.
Engle Homes, Inc. (ENGL)
bigcharts.com
ENGL has been trading in a 9 – 10.50 range since February.
Then in early August it broke out on strong volume. The
stock rose 20% the two weeks before earnings were released
and another 20% the two weeks after the earnings
announcement. Institutions were net sellers earlier this
year. That might have changed, they hold 53% of the
outstanding shares.
Engle Homes, Inc. designs, constructs markets and sells
single-family residences, townhomes, patio homes and
condominiums to entry-level and move-up buyers. I would
want to investigate ENGL’s industry and competitors before
making a decision to take a position in ENGL.
Dain Rauscher Corporation
bigcharts.com
DRC has been in an up trend all year. There was a lot of
volatility during April and May as DRC traded between 50
and 70 on heavy volume. In late August it broke out on
heavy volume and is now trading more than 10% higher. DCR
may have run out of steam and could be set for a pull back.
Dain Rauscher Corporation provides investment advice and
services to individual investors in the western U. S. and
investment banking services to corporate and government
clients nationwide. The recent price rise probably has
something to do with the flurry of press releases related
to DRC.
siliconinvestor.com
Nam Tai Electronics, Inc. (NTAI)
bigcharts.com
NTAI has run into strong resistance at $19 (½ point below
52 week high). The recent run up was on increasing volume
but institutional participation was minimal, they only hold
10% of the outstanding shares.
Nam Tai Electronics provides design & manufacturing service
to OEMs of consumer products. Nam Tai's products include
telecommunication products, palm-sized PC's, personal
digital assistants, and others. Sales for the 3 months
ended 3/00 rose 65% to $44.6M. Net income totaled $14.6M,
up from $2.8M. Revenues reflect increased units sold due to
increased market share. Earnings reflect the disposal of
an unprofitable subsidiary.
Sasol Limited (SASOY)
bigcharts.com
SASOY has been in a strong up trend since early August.
The stock is up 30% for the month of August. SASPOY is
currently trading at 8.125 and resistance is at 8.75.
-----------------------
There are some strong stocks in this list, but most look
like they might be reaching their peak. Permian Basin
Royalty Trust however, deserves a closer look.
B.K. |
