Four Stocks To Buy Today

9/5/2016


Sometimes the simplest ideas make the most sense.

We consider a number of factors when we analyze a stock. No stock looks good in every category, and the buy decision revolves not around finding perfection, but on determining how far from perfection we can afford to stray.

With that reality in mind, we decided to screen our own buy lists. We tested the 29 stocks we recommend, using some of our favorite factors, hoping to identify companies that check a lot of boxes. Here's how the exercise went:

1) Operating momentum. We insisted that stocks deliver at least 5% growth in sales and earnings in their last quarter, a feat only one-fourth of S&P 500 Index stocks have managed. That screen knocked out 10 of our stocks, or 34%, leaving us with 19 candidates.

2) Profit-estimate trends. Plenty of companies tease investors with decent growth, then slap them down with a warning about lower-than-expected results to come. To avoid these warnings, we required a 1% increase in the consensus profit estimate for both this year and next year. Before you ask "Why set the bar so low," we should explain that few stocks see such positive revision action. Fewer than one in five S&P 500 stocks meet our criteria. With our recommended stocks, stage two of the screen invalidated another nine stocks, leaving us with 10.

3) Quadrix improvement. Our research suggests stocks with increasing Overall scores tend to outperform. We screened for stocks with Overall scores higher
than those from six and 12 months ago. Only six of our recommended stocks satisfied the first three screen criteria.

4) Attractive valuations. So far, our screens have focused on growth, analyst optimism, and broad fundamental strength; plenty of expensive stocks might clear those hurdles. A value overlay (trading at a price/earnings ratio at least 10% below the three-year average and the industry average) trimmed the list to just four of our recommended stocks.

Are the four stocks that passed this four-part screen our very favorites? Not necessarily. But all four offer an appealing mix of growth, value, and the potential to top expectations. The four stocks are:

• Amgen ($170; AMGN).
• Biogen ($306; BIIB).
• Owens Corning ($55; OC).
• Shire ($187; SHPG).

Check out the table below for more on the four winners, as well as runners-up that made it through three of the four parts of our screen.

SCREEN SURVIVORS
The four champions below survived all four parts of our screen. Two of the runners-up made it through the first three stages of our screen but got knocked out because they weren't cheap enough. The third runner-up failed to qualify because its Quadrix Overall score hasn't increased over the last six months.
Part 1
Growth,
-- Last Quarter --
Part 2
Chg. In Profit
Est., Last
--- 90 Days ---
Part 3
Quadrix
-- Overall Score --
Part 4
----- P/E Ratio -----
Comany (Price; Ticker)
Sales
(%)
Earnings
(%)
Curr.
Year
(%)
Next
Year
(%)
Recent
6-Month
Change
Trailing
Discount
To Industry
Average
(%)
Champions
Amgen
($170; AMGN)
6
13
2
3
94
4
15
(34)
Biogen ($306; BIIB)
12
24
5
3
98
4
16
(31)
Owens Corning
($55; OC)
10
65
12
5
98
6
16
(38)
Shire ($187; SHPG)
56
40
2
5
81
5
15
(37)
Runners-up
Alphabet
($790; GOOGL)
21
42
2
2
87
3
25
(4)
EQT Midstream
($79; EQM)
19
13
3
5
97
0
14
(63)
Mohawk
($213; MHK)
13
26
2
1
96
13
18
(5)
Note: Quadrix scores are percentile ranks, with 100 the best. 

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