Top Stocks in Top Industries

6/1/2009


Looking for new investment ideas? So are we.

The process of seeking new buys never ends. One tool we use to find stocks with the potential to outperform the market is our Industry Group Studies report, which provides data on about 4,000 stocks broken down into 114 groups. Using this data, you can identify groups that score well in our Quadrix® stock-rating system or have generated particularly high total returns.

You can find more detailed Quadrix and total-return numbers for the industry groups on our Web site. Visit the Subscriber Area of www.DowTheory.com and follow the “Sector And Industry Analysis” link in the right column. The table is updated every time we calculate Quadrix scores, or at least once a week.

OUR FAVORITES
Listed below are 22 recommended stocks from industry groups with average Quadrix Overall scores of 60 or higher. Industry data are averages, excluding returns and growth rates of more than 100%, dividend yields of more than 15%, and P/E ratios below 0 or above 75.
Total
— Return —
Company (Price; Ticker)
Industry
Div.
($)
Div.
Yield
(%)
Trail.
P/E
Ratio
YTD
(%)
12
Mos.
(%)
12-Mo.
Sales
Growth
(%)
Quadrix
Overall
Score *
National Oilwell Varco
($37; NOV)
0.00
0.0
7
50
(55)
38
97
Oceaneering Int’l
($50; OII)
0.00
0.0
14
71
(30)
8
94
Schlumberger
($54; SLB)
0.84
1.6
13
28
(46)
11
78
Oil & Gas —
Equip. & Services
1.1
9
37
(55)
18
75
Wal-Mart Stores
($50; WMT)
1.09
2.2
15
(10)
(10)
4
78
Retail — Super Centers
1.5
15
0
(19)
10
74
General Dynamics
($56; GD)
1.52
2.7
9
(1)
(36)
9
95
Lockheed Martin
($83; LMT)
2.28
2.7
11
0
(21)
1
88
Precision Castparts
($82; PCP)
0.12
0.1
11
37
(30)
1
92
United Technologies
($53; UTX)
1.54
2.9
11
0
(23)
2
75
Aerospace/Defense
1.5
14
3
(32)
11
73
Transocean
($74; RIG)
0.00
0.0
5
57
(52)
55
94
Oil & Gas — Drilling
1.9
4
28
(60)
13
70
Energen
($37; EGN)
0.50
1.3
9
28
(50)
5
86
Questar
($34; STR)
0.50
1.5
9
4
(47)
20
76
Utilities — Gas
5.3
12
1
(16)
5
68
Accenture ($31; ACN)
0.50
1.6
11
(6)
(17)
9
94
Cognizant Technology
($26; CTSH)
0.00
0.0
17
43
(18)
26
96
Technology Consulting
& Svcs.
0.5
7
18
(30)
19
64
BMC Software
($33; BMC)
0.00
0.0
15
24
(14)
8
77
Microsoft ($20; MSFT)
0.52
2.6
11
6
(27)
6
79
Oracle ($19; ORCL)
0.20
1.0
13
8
(16)
12
89
Software — Systems
0.5
31
33
(12)
19
64
Chevron ($66; CVX)
2.60
4.0
7
(10)
(32)
1
72
Exxon Mobil ($70; XOM)
1.68
2.4
10
(12)
(21)
(3)
62
Oil & Gas — Integrated
4.8
5
30
(33)
7
64
Comcast ($15; CMCSA)
0.27
1.8
15
(14)
(35)
9
93
DirecTV ($24; DTV)
0.00
0.0
19
6
(12)
12
79
Cable & Satellite
3.2
8
30
(30)
11
62
Airgas ($43; ARG)
0.72
1.7
14
10
(27)
8
78
Industrial Gases
2.2
21
60
(45)
16
61
CVS Caremark
($30; CVS)
0.31
1.0
12
5
(28)
6
90
Retail — Drugstores
2.2
21
60
(45)
16
61
* Quadrix scores are percentile ranks, with 100 the best.

Since the Forecasts uses Quadrix as its first screen for stock selection, it is not surprising that we recommend several stocks in high-scoring groups. Those stocks are listed above, and three of our favorites are reviewed in the following paragraphs:

Despite losing some customers to consolidation, Cognizant Technology Solutions ($26; CTSH) continues to grow sales faster than the industry, lifted by market-share gains. Spending on outsourcing remains weak, though the rate of decline slowed in April and May. This year, Cognizant expects to pick up additional market share and expand geographically, possibly through acquisitions. The consensus projects per-share profits will grow 7% in 2009 and at a 20% clip over the next five years. With a Quadrix Overall score of 96, Cognizant is a Buy and a Long-Term Buy.


National Oilwell Varco ($37; NOV) continues to chew through a $9.6 billion backlog, equivalent to almost nine months of sales, that has supported strong revenue growth in recent quarters despite weak orders. But the backlog will only take National Oilwell so far. Long-term growth depends on a sustained recovery in oil prices to levels that make producers more comfortable spending on drilling. The economy is showing hints of stability, and oil has moved above $60 per barrel, both trends potentially beneficial for National Oilwell Varco. The stock is a Buy and a Long-Term Buy.


Two of Precision Castparts’ ($82; PCP) biggest customers, Boeing ($44; BA) and Airbus, each have about seven years of production on backlog, though both are experiencing order cancelations and deferrals. Aircraft production could slow this year, and suppliers such as Precision are sure to feel the effects. While the consensus projects just 1% growth in per-share profits in the year ending March, Precision seems poised to deliver double-digit annualized growth over the next five years. Precision Castparts earns an Overall score of 92 and is a Buy and a Long-Term Buy.


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