We Want It All

10/17/2016


When it comes to selecting stocks, we make no apologies for being greedy. Give us a little of everything, please. Growth, valuation, strong fundamentals, the whole schmear.

The table below compares our Focus List stocks to the large-cap S&P 500 Index. All 14 of our top buys exceed the index average for sales and profit growth over the last year, expected profit growth in the current year and next five years, and Quadrix Overall score. While not all of the stocks are dirt cheap, our stocks average price/earnings and PEG (price/earnings-to-growth) ratios at least 25% below the index average.

Our growth-at-a-good-price investment approach, coupled with our Quadrix stock-rating system that weeds out companies with weak fundamentals, has served us well. Since the Focus List's launch in late 1994, the list has gained 522.9% excluding dividends and transaction costs, trouncing the S&P 500's 365.2% rise.

Will we win every year? No. But the Focus List outgained the S&P 500 in five of the last seven calendar years.

Growth-oriented investors should start their search with Lam Research ($99; LRCX) and Owens Corning ($53; OC). Value-focused investors should find Lear ($119; LEA) and Southwest Airlines ($40; LUV) particularly appealing.

FOCUS LIST VERSUS S&P 500
-- 12-Month Growth --
Expected Profit
----- Growth -----
Company (Price; Ticker)
Sales
($)
EPS
(%)
Oper.
Cash
Flow
(%)
Curr.
Year
(%)
5 Years
(Annual.)
(%)
P/E On
Year-
Ahead
Estimate
PEG
Ratio
Quadrix
Overall
Score
Alphabet
($812; GOOGL)
17
28
12
16
17
22
1.3
85
CDW ($45; CDW)
11
14
37
13
8
13
1.6
88
Centene ($61; CNC)
52
36
(97)
44
16
13
0.8
82
Citrix Systems
($83; CTXS)
7
71
31
17
14
16
1.1
93
Comcast
($65; CMCSa)
7
5
6
8
11
18
1.6
69
D.R. Horton
($29; DHI)
14
23
487
16
13
11
0.9
94
Lab Corp. ($137; LH)
32
8
63
11
11
15
1.3
89
Lam Research
($99; LRCX)
12
31
72
10
17
14
0.8
94
Lear ($119; LEA)
3
22
45
22
11
9
0.8
99
LKQ ($33; LKQ)
13
19
20
29
19
17
0.9
92
Mohawk ($195; MHK)
10
30
44
22
10
15
1.5
96
Owens Corning
($53; OC)
5
52
55
34
12
15
1.2
98
Southwest Airlines
($40; LUV)
7
59
54
7
11
11
1.0
93
Zions Bancorp
($31; ZION)
9
35
NA
16
8
15
1.8
97
Focus List average
14
31
29
19
13
15
1.2
91
S&P 500 Index
average
2
4
4
4
9
19
1.8
60
Notes: Quadrix scores are percentile ranks, with 100 the best.   PEG ratio measures P/E on estimated current-year earnings divided by the estimated five-year annual growth rate.   Averages exclude some outliers.   NA Not available.

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