Building On Strength

12/26/2011


In the last issue of every month, we present a stock screen. Today, on the cusp of the new year, we focus on stocks that have enjoyed a solid 2011 and seem capable of riding that momentum into a strong start for 2012. Listed below are six stocks with the following characteristics:

• They earn Quadrix Overall scores of at least 80 and have ended the last 11 months above that breakpoint.

• All six have topped the consensus profit estimate in every quarter reported in 2011, and market expectations for both this year and next year are on the rise.

• All six have posted higher total returns than the average for their peer group so far this year.

SCREEN OF THE MONTH: STRONG STARTERS
All six of the stocks below earn ratings of A (above average). Stocks recommended for purchase are presented in bold.
Curr.-Yr. Est.
Next-Yr. Est.
Company (Price; Ticker)
YTD
Total
Return
(%)
EPS
($)
3-Mo.
Revision
(%)
EPS
($)
3-Mo.
Revision
(%)
Avg. EPS
Surprise
(4 Qtrs.)
(%)
Quadrix
Overall
Score
AutoZone ($325; AZO)
19
23.11
2.6
26.43
2.4
6.0
94
Bed Bath & Beyond
($62; BBBY)
25
3.83
0.6
4.38
3.9
13.6
92
Dell ($15; DELL)
12
2.13
6.8
2.02
2.4
24.0
98
MasterCard
($374; MA)
67
18.64
5.4
21.66
4.2
9.8
90
UnitedHealth Group
($50; UNH)
40
4.57
4.5
4.78
0.7
20.5
95
Visa ($101; V)
45
5.85
2.9
6.79
1.6
2.2
93

In the following paragraphs, we discuss three stocks we expect to start strong in 2012.

AutoZone ($325; AZO) has delivered 12 straight quarters of higher same-store sales. While AutoZone's customers must manage tight budgets, their buying behavior has remained fairly consistent. Rising estimates project 20% higher per-share earnings in the February quarter, followed by 14% growth in the May quarter. AutoZone is a Buy and a Long-term Buy.


In the 12 months ended September, MasterCard ($374; MA) grew per-share profits 36% and per-share operating cash flow 99%. Along the way, MasterCard topped profit expectations in each quarter, averaging a surprise of 10%. The 2012 consensus earnings estimate has risen 5% over the last three months and now projects 16% growth. MasterCard is a Focus List Buy and a Long-Term Buy.


Despite a year-to-date total return of 35%, UnitedHealth Group ($50; UNH) trades at just 11 times trailing earnings, a 35% discount to its 10-year average P/E ratio. UnitedHealth also looks cheap based on price/sales and price/cash flow ratios. UnitedHealth is a Buy and a Long-Term Buy.


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