Swing Only At The Best Pitches

7/22/2013


In baseball, average hitters tend to have trouble with pitches that nibble around home plate, but even the weakest players usually make solid contact when they swing at a pitch down the middle.

Good hitters enjoy more choices. But no matter how skilled the batters, they hit for a better average when they swing at pitches down the middle.

As investors, we can afford to remain picky. In baseball, batters get penalized for letting good pitches go by without swinging, but investors face no such punishment. We can ignore the stocks that look pretty good and wait for that fat pitch too juicy to resist. Baseball players call that kind of discernment plate discipline, and such discipline can pay dividends far beyond the diamond.

The tables below serve up some of the sweetest pitches we can find, top selections from our buy lists based on three criteria — Quadrix Overall scores, valuation, and sector leadership.

Top Overall scorers. Back-tests since 1994 show that stocks with high Quadrix Overall scores tend to outperform those with lower scores, and the higher the better. We divided stocks in the S&P 1500 Index into 33 equal-numbered baskets based on Overall score (see Quadrix Spotlight for a chart of the results). Since 1994, the average Overall score for stocks in the top basket is 98; today, index stocks earning 96 or higher qualify. All three of the stocks at the top of the table at right qualify for that top-scoring basket and score at least 75 in Quadrix Momentum, Value, and Quality, the three most important category scores.

Genuine values. These stocks earn exceptional Quadrix scores for Value, plus price/earnings ratios cheap relative to their history, sector, and industry.

Sector leaders. These stocks have extremely high scores for 12-Factor Sector and Reranked Overall, which rank stocks relative to others in the same sector. We also required stocks to have lower P/E ratios and higher expected profit growth than the sector average.

TOP QUADRIX SCORERS
------------------------ Quadrix Scores -------------------------
Company (Price; Ticker)
Momentum
Value
Quality
Overall
Helmerich & Payne ($64; HP)
81
88
89
99
Kroger ($38; KR)
89
81
84
97
Magna Int'l ($73; MGA)
81
75
82
97
THE VERY BEST VALUES
----------------- Price/Earnings Ratio -----------------
-------------- Discount To --------------
Company (Price; Ticker)
Quadrix
Value
Score
Trailing
5-Yr.
Avg.
(%)
Sector
Avg.
(%)
Industry
Avg.
(%)
CF Industries ($181; CF)
98
7
(32)
(68)
(64)
DirecTV ($65; DTV)
92
13
(20)
(36)
(33)
J.P. Morgan ($55; JPM)
91
10
(35)
(57)
(45)
SECTOR LEADERS
Quadrix Sector-
---- Specific Scores ----
Trailing
P/E Ratio
5-Year
Annual.
Est. EPS
Growth
(%)
Sector
Company (Price; Ticker)
12-Factor
Sector
Reranked
Overall
Cognizant ($71; CTSH)
94
94
19
18
Technology
CVS Caremark ($61; CVS)
97
91
18
13
Cons. Staples
Expr. Scripts ($65; ESRX)
96
97
16
16
Health Care
Note: Quadrix scores are percentile ranks, with 100 the best.

 

 


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