Here is a couple of stocks that might be worth your attention this week. They were selected using a couple of criteria – most of them heavily rely an the company’s fundamentals; the analysts recommendations are only provided as a kind of support for the hand-picked names. This is why I’m calling the approach a consensus strategy. The stocks I’m going to present you below are generally believed to outperform the stock market in the coming months, they have a consensus recommendation of Buy, their fundamentals are scored considerably better than most stocks and their average target price by stock analysts is above current market valuation.

In order to consider buying the stock’s shares, the following criteria need to be satisfied:

  • TheStreet score: A+, A or A-
  • Zacks Rank: 1 (Strong Buy), 2 (Buy) or 3 (Hold)
  • Weiss Ratings recommendation: A or B
  • Yahoo Finance recommendation: at least mixed Buy/Hold
  • Yahoo Finance target price: min. 5% higher than current price
  • Piotroski F-Score: min. 4
  • InvestorsObserver Overall Score: min. 50
Note: Descriptions of those criteria are provided at the end of this post as well as HERE.

 

If you decide to buy any of the below stocks, you might want to consider the following selling conditions (at least one of them should be satisfied):

  • price is higher or close to target
  • profit is in range 20% – 30%
  • loss is higher than 50%
  • TheStreet recommendation is changed to Sell
  • Weiss Ratings recommendation is changed to Sell
  • Yahoo Finance recommendation is changed to Sell

 

Let’s now take a look at the stocks I’ve identified with this strategy today.

 

BLACKROCK INC (BLK)

Sector: Finance
Industry: Investment Managers
Description: BlackRock, Inc. engages in providing investment management, risk management, and advisory services for institutional and retail clients worldwide. Its products include single and multi-asset class portfolios investing in equities, fixed income, alternatives, and money market instruments.
Dividend: BlackRock pays an annual dividend of $16.52 per share, with a dividend yield of 1.78%. BLK’s next quarterly dividend payment will be made to shareholders of record on Wednesday, September 22. The company has grown its dividend for the last 1 consecutive years and is increasing its dividend by an average of 13.24% each year. BlackRock pays out 48.85% of its earnings out as a dividend.
Current valuation: $927.5

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Hold
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy
Yahoo Finance target price: $1000.45
Piotroski F-Score: 6
InvestorsObserver Overall Score: 72
Yahoo Finance 1 year change: 7.87%

 

CSW INDUSTRIALS INC (CSWI)

Sector: Process Industries
Industry: Industrial Specialties
Description: CSW Industrials, Inc. provides performance solutions to customers. It operates through the following segments: Industrial Products and Specialty Chemicals. The company was founded on November 6, 2014 and is headquartered in Dallas, TX.
Dividend: CSW Industrials pays an annual dividend of $0.60 per share, with a dividend yield of 0.46%. CSWI’s most recent quarterly dividend payment was made to shareholders of record on Friday, August 13. CSW Industrials pays out 17.80% of its earnings out as a dividend.
Current valuation: $131.68

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Buy
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy
Yahoo Finance target price: $152.50
Piotroski F-Score: 5
InvestorsObserver Overall Score: 54
Yahoo Finance 1 year change: 16%

 

DOVER CORP (DOV)

Sector: Producer Manufacturing
Industry: Industrial Machinery
Description: Dover Corp. engages in the manufacture of equipment, components, and specialty systems. The firm also provides supporting engineering, testing, and other similar services. It operates through the following segments: Engineered Products, Fueling Solutions, Imaging and Identification, Pumps and Process Solutions, and Refrigeration and Food Equipment. 
Dividend: Dover pays an annual dividend of $2.00 per share, with a dividend yield of 1.15%. DOV’s next quarterly dividend payment will be made to shareholders of record on Wednesday, September 15. The company has grown its dividend for the last 59 consecutive years and is increasing its dividend by an average of 2.67% each year. Dover pays out 35.27% of its earnings out as a dividend.
Current valuation: $172.98

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Buy
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy/Hold
Yahoo Finance target price: $181.18
Piotroski F-Score: 8
InvestorsObserver Overall Score: 77
Yahoo Finance 1 year change: 5.2%

 

GENPACT LTD (G)

Sector: Commercial Services
Industry: Miscellaneous Commercial Services
Description: Genpact Ltd. engages in the business process management, outsourcing, shared services and information outsourcing. The company operates through the following segments: Banking, Capital Markets and Insurance (BCMI), Consumer Goods, Retail, Life Sciences, and Healthcare (CGRLH) and High Tech, Manufacturing, and Services (HMS).
Dividend: Genpact pays an annual dividend of $0.43 per share, with a dividend yield of 0.83%. G’s next quarterly dividend payment will be made to shareholders of record on Friday, September 24. The company has grown its dividend for the last 1 consecutive years and is increasing its dividend by an average of 17.57% each year. Genpact pays out 23.24% of its earnings out as a dividend.
Current valuation: $51.50

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Buy
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy
Yahoo Finance target price: $54.70
Piotroski F-Score: 7
InvestorsObserver Overall Score: 82
Yahoo Finance 1 year change: 6%

 

HAWKINS INC (HWKN)

Sector: Distribution Services
Industry: Wholesale Distributors
Description: Hawkins, Inc. engaged in the distribution, blending, and manufacture of chemicals and specialty ingredients for a wide variety of industries. It operates through the following segments: Industrial, Water Treatment, and Health and Nutrition. The company was founded by Howard Hawkins in 1938 and is headquartered in Roseville, MN.
Dividend: Hawkins pays an annual dividend of $0.52 per share, with a dividend yield of 1.45%. HWKN’s most recent quarterly dividend payment was made to shareholders of record on Friday, August 27. The company has grown its dividend for the last 1 consecutive years and is increasing its dividend by an average of 2.64% each year. Hawkins pays out 26.94% of its earnings out as a dividend.
Current valuation: $35.53

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Buy
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy
Yahoo Finance target price: 44.0
Piotroski F-Score: 8
InvestorsObserver Overall Score: 58
Yahoo Finance 1 year change: 23.9%

 

JOHNSON CONTROLS INTL PLC (JCI)

Sector: Producer Manufacturing
Industry: Office Equipment/Supplies
Description: Johnson Controls International Plc engages in the provision of buildings products, energy solutions, integrated infrastructure and next generation transportation systems. Its technology and service capabilities include fire, security, HVAC, power solutions and energy storage to serve various end markets including large institutions, commercial buildings, retail, industrial, small business and residential. The company was established in 1885 and is headquartered in Cork, Ireland.
Dividend: Johnson Controls International pays an annual dividend of $1.08 per share, with a dividend yield of 1.45%. JCI’s most recent quarterly dividend payment was made to shareholders of record on Friday, July 16. The company has grown its dividend for the last 1 consecutive years and is increasing its dividend by an average of 0.98% each year. Johnson Controls International pays out 48.21% of its earnings out as a dividend.
Current valuation: $73.95

 

Valuation of entry parameters:

TheStreet score: Strong Buy
Zacks Rank: Hold
Weiss Ratings recommendation: Buy
Yahoo Finance recommendation: Buy
Yahoo Finance target price: $79.75
Piotroski F-Score: 8
InvestorsObserver Overall Score: 54
Yahoo Finance 1 year change: 7.84%

 

 

Now, a few words on the criteria I’m using and sources of data.

1. TheStreet score

The first filtering step is to get stocks with Buy recommendation at TheStreet stock screener (https://www.thestreet.com/r/ratings/reports/ir-screener.html). I’m only keeping stocks with A+, A or A- rating (top ones), although A-, B+, B and B- are Buys as well.

From thestreet.com:

A (Excellent) – The stock has an excellent track record for maximizing performance while minimizing risk, thus delivering the best possible combination of total return on investment and reduced volatility. It has made the most of the recent economic environment to maximize risk-adjusted returns compared to other stocks. While past performance is just an indication — not a guarantee — we believe this fund is among the most likely to deliver superior performance relative to risk in the future as well.

And about the methodology (source: https://www.thestreet.com/r/ratings/reports/detail/T.html):

TheStreet Ratings’ stock model projects a stock’s total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows.

2. Zacks Rank

It is required that the Zacks Rank is Hold, Buy or Strong Buy (so we’re avoiding stocks with Sell and Strong Sell recommendations). The Zacks Rating utilizes a completely different system, based on company earnings-related data, in particular earnings estimate revisions and earnings surprises, to predict profitability of holding the company’s shares. More from https://www.zacks.com/education/stock-education/zacks-rank-guide-6:

The Zacks Rank is a proprietary stock-rating model that uses trends in earnings estimate revisions and EPS surprises to classify stocks into five groups:

Zacks

A portfolio of Zacks Rank #1 (Strong Buy) stocks has beaten the market in 26 of the last 31 years with an average annual return of +24.3% a year; more than double that of the S&P 500’s +10.6% .

3. Weiss Ratings recommendation

We’re only keeping stocks with Buy (B) or Strong Buy (A) recommendation.

Wjat are these scores? This is what I found at their website (https://weissratings.com/help/rating-definitions):

“A” Rating: Excellent. The company’s stock has an excellent track record for providing strong performance with lower-than-average risk, and it is trading at a price that represents good value relative to the company’s earnings prospects. While past performance is no guarantee of future results, our opinion is that this stock is among the most likely to deliver superior performance relative to risk in the future. Of course, even the best stocks can decline in a down market. But our “A” rating can generally be considered the equivalent of a “Strong Buy“.

“B” rating: Good. The company’s stock has a good track record for delivering a balance of performance and risk. While the risk-adjusted performance of any stock is subject to change, our opinion is that this stock is a good value, with good prospects for outperforming the market. Although even good investments can decline in a down market, our “B” rating is considered the equivalent of a “Buy“.

4.  Yahoo Finance  recommendation and target price

It is required that the Yahoo Finance stock recommendation is at least mixed Buy/Hold from experts. Additionally, the predicted target price (average, from experts) should be at least 5% higher than the current one.

5. Piotroski F-Score

The Piotroski score is a number between 0-9 that reflects nine criteria used to determine the strength of a company’s financial situation, including profitability, leverage or operating efficiency. Zero is the worst value and nine is the best. As we can read in Piotroski’s paper from 2000:

In addition, an investment strategy that buys expected winners and shorts expected losers generates a 23% annual return between 1976 and 1996, and the strategy appears to be robust across time and to controls for alternative investment strategies.

It is required that the score is 4 or higher. The values were retrieved from https://www.gurufocus.com.

6. InvestorsObserver Overall Score

The rank has a value in between 0 and 100. It takes into account both technical analysis and fundamental stock data. An Overall Rank of N means that a given company is rated above N% of stocks, therefore the higher the number, the better. My requirement is that the company has InvestorsObserver Overall score of at least 50.

More detailed explanation from https://www.investorsobserver.com/learning-center/what-the-scores-mean/what-does-the-overall-score-mean:

The Overall Score combines our two technical scores (Short Term and Long Term) with our Fundamental Score into one metric. This makes our overall score a great place to start when evaluating stocks, regardless of your investing style.

A low score doesn’t necessarily mean a stock is likely to go down, just that our system doesn’t think there’s much of a bullish case for it.

Please note that the company profile data (short description) was taken from  https://www.tradingview.com (sometimes I shortened it) and dividend data was retrieved from MarketBeat.

I hope you enjoyed the reading. What do you think about this stock selection and the strategy? Feel free to leave a comment below.

Michael

 

Disclosures:

  • What you see here is my personal opinion, my own investments and should not be treated as investing advice
  • I’m an amateur investor

 

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>