Shared Research Screens:
Value Line Top 100 Highest Growth
I’ve always seen excerpts in books touting Value Line as a valuable source of research analysis, but had never looked at subscribing. They’d always mentioned it was available at local public libraries free of charge. I don’t pay for investment advice like I don’t pay for women, so off to the library I went. I was shocked when the librarian showed me the giant binders of already crunched numbers of everything I’d ever wanted and more!
I said I was going to start sharing research screens weekly, but due to the backlog, I need to spit a few out a little quicker while valuations are still accurate & relatively attractive.
This first list started with a list of Value Line growth companies, 100 of them. I had to narrow the list somewhat, without my bias, so I used their provided statistics to cull the best investable options from the original list of their Top 100 Highest Growth Stocks.
The reason this quality growth screen jumped out at me in the first place was the qualifying criteria, eliminating most of the risk of making a bad decision (based on emotion or hype).
Value Line quote: “To be included, a company’s annual growth of sales, cash flow, earnings, dividends, and book value must together have averaged 10% or more over the past 10 years and be expected to average at least 10% in the coming 3-5 years.”
That says a lot about the stability, strength, & trajectory of a company and that’s the type of near zero risk, sleep well at night (SWAN) stocks I like to own. Especially when they’re undervalued or out of favor, just reported a bad quarter, or trading at historically low valuation multiples for any other myriad reasons.
Statistical categories included in this Value Line table include 1) Timeliness Rank, 1 being best time to buy, 5 being the worst, 2) Safety Rank, 1 being safest, 5 being the riskiest, 3) current P/E ratio, 4) estimated 3-5 year price appreciation, and 5) the company’s industry rank. I’ve chosen to personally eliminate all fortune telling/future predictions/economic forecasts, etc. from my analysis, therefore will exclude forward looking estimates whenever possible. To narrow the list from the top 100 to a more manageable list of the cream of the crop, I chose to look for company’s with a Timeliness & Safety rank of 1-2 to ensure highest quality & fair value/positive outlook, a P/E ratio below 30 to ensure I’m not paying too high a price, and top 10 rank in their industry to hopefully provide additional quality/moat/competitive advantage strength to the final contestants on #INVESTWITHDEEBO. Ensuring quality first, and value second, hasn’t failed me yet.
Turns out, only 2 companies met such high standards, so I had to relax criteria just a tad. Those two companies were Google and Microsoft ($MSFT just barely, with a P/E of 30.xx) Google was the sole company with an absolutely perfect score; 1 on Timeliness & Safety, P/E ~20, ranked #3 in their industry. And had +100% 3-5 year estimated price appreciation to boot.
So, relaxing the standards, I was able to get almost 25 company’s I think provide higher probability of outperformance going forward, although I don’t believe there’s a bad company on the list.
Value Line Top 100 Highest Growth Stocks; additionally screened for my 4 additional quality & valuation hurdles (timeliness, safety, P/E, industry rank) produced the following:
Hitting a perfect 4/4 parameters:
An exceptional 3/4 Parameters:
Still great 2/4 Parameters:
Couple Honorable Mentions that narrowly missed the expanded standards:
The reason I love screens like this is because every one of these 100 companies is a strong company. Starting with a high quality list, then further screening for quality & valuation from there, has drastically reduced the probability of making a bad investment. Unless I get my emotions involved, then I take an L occasionally. So I try to keep it as near 100% mechanical as possible. I understand the voting machine vs the weighing machine; price will always follow performance, may just take a bit for the herd to catch up😉
Sorry again for the forward looking estimates, I’m keeping them at a minimum, promise.
After doing this for hours today, I wanted to score them to give more of an idea on which I thought might provide the most upside. So I spent hours today developing a point system based on the quality & valuation metrics already discussed, plus quality, profitability, valuation metrics & margin of safety estimates from 3 of my most trusted & accurate data sources. The primary reason I wanted to do this, was because to take advantage of the most irrationally priced stocks, doesn’t always require us buying the best companies. So this scoring system gives points ranging from 5-25 per category, for 6 additional categories of quality, value, & MoS. Higher quality rank= more points, larger margin of safety=more points. This scale (admittedly with 100% personal emotion and bias) was intended to reward the companies that 1) hit the most parameters, and 2) had the largest margin of safety, therefore minimizing downside risk to an absolute minimum, while simultaneously increasing the probability of outperformance. So here is the same list, in order of points scored, on my totally made up point scale, to hopefully provide some context as to the level of undervaluation.
The points for all criteria equaled a possible total of 165 points. This would be a dream stock at a dream price. Google is the ONLY company to pass every single criteria every single step of my analysis today. Taiwan Semiconductor only scored slightly higher because the estimates for MoS were much deeper for $TSM than $GOOG. So even though they got 0 points on one indicator, they made up for it with more points for MoS. Google scored points as a top ranked candidate (top 25% of companies at time of comparison) in every single category. I’d have to dig through an entire notebook to count the data points that went into this 10 hour waste of a day, but Google scored perfect at every step. But with MoS estimates of only 6%-16%, this is a classic Buffet, “wonderful company at a fair price”. So here is my totally biased list of quality companies trading at fair or below fair value.
Remember, this is not a quality ranking. This list weights margin of safety equally with other metrics. The companies at the bottom of this list are great, just not as much probability of upside compared to more undervalued/out of favor stocks at the top of the list.
Hope this provides some SWAN stocks for other value, or growth at value, investor’s out there🤙
PS: Craziest part of seeing the results of this list, since it was just made today, is that I have actually opened positions in $TSM, $GOOG, $NFLX, $MSFT, $AVGO, $NVDA, $KLAC, & $LRCX in the last 30 days, based on my own analysis of what’s important. I don’t feel 100% confident just because any specific source agrees; but I feel comfortable trusting my outside data sources as 2nd opinions based on the experience I’ve had using them over the last few years. Never hurts to find more reasons to want to buy, or maybe avoid, a specific company.
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This is one impressive post! Really appreciate all the time and effort you put in. Nice to see $GOOG make it to the top list but also there any a few companies that I need to check out since I never seen this tickers and maybe there some hidden gems for myself to explore more on!
Appreciate all the work you put into this
Comments on Inflation from Company Executives
Inflation is not slowing down. Last week, the BLS reported a 0.6% rise in the CPI during January, well over analyst estimates and bringing the annual rate of inflation to 7.5%.
The latest Fincredible MacroTalk goes over company earnings calls to analyze what executives are saying about inflation. Here are a few quotes from the post regarding cost inflation drivers as well as planned price increases by companies.
- $CLX "For us, commodity is still about 2/3 of the inflation, about 1/3 transportation, and resin, obviously, is the biggest component of the commodity inflation."
- $TSN ". Labor costs have been up 20%, cattle costs are up 22%. Grain has been up 29%. This year in freight, I mentioned earlier, is up 32%."
Future Price Increases:
- $PG "Just yesterday, we announced to retailers that we are increasing pricing on certain personal health care brands in the U.S. effective mid-April."
- $SBUX "We have already taken pricing actions this fiscal year, 1 in October 2021 and another in January 2022. And we have additional pricing actions planned through the balance of this year..."
- $LEVI “We have plans to take additional price increases in 2022 and beyond, helping us to offset inflationary pressures..."
If you'd like to read the whole post, here's the URL: Fincredible MacroTalk February 9th: Inflation
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Good morning contrarians! Another day of gains yesterday was followed with Google ($GOOG) beating earnings estimates and announcing a 20-for-1 stock split. AMD ($AMD.X) also beat estimates and issued a strong sales outlook for the year. Those stocks rallied big time overnight, both up over 10%.
On the losing side of last night’s earnings were Starbucks (SBUX) and PayPal ($PYPL), the latter down 17%.
It’s another major day for earnings. It’s another major day for earnings. ThermoFisher Scientific ($TMO), Boston Scientific ($BSX), Humana ($HUM), and Marathon Petroleum ($MPC) have already reported. All but HUM beat on top- and bottom-line estimates and those stocks are moving higher in the pre-market. Later this morning we will hear from AbbVie ($ABBV) and DR Horton ($DHI).
After the close at 1600 we’ll get T-Mobile ($TMUS), Qualcomm ($QCOM), Meta Platforms, the company formerly known as Facebook ($FB), and Spotify ($SPOT). MetLife ($MET) and McKesson ($MCK) also report at some point today.
What else we’re watching today:
Upcoming Earnings Calendar (Jan 31st- Feb 4th)
Here's the earnings calendar for next week! Here's what I'm interested in:
- $XOM - Insights on the global oil market.
- $GOOG - Strength of the digital ad market + growth of YouTube (since $NFLX slowed down).
- $FB - Comments on their strategy to monetize Whatsapp (I don't expect any, but one can hope).
- $SPOT - They recently expanded to other markets, so maybe they can maintain accelerated growth, unlike Netflix.
- $AMZN - AWS and Advertising segment growth + impact of the increase in 3P fees.
What are you looking forward to next week?
If you'd like an easier way to track earnings dates, you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.
I think upcoming earnings are going to be really important in this volatile market. Companies will likely get punished (further) on even slightly bad results or outlook, and I'm hopeful strong earnings like we saw with $TEAM or $AAPL will buoy the overall market or at least software sector that I'm playing close attention to.
Personally, I have a handful of companies on my buy list including $CRM, $COUP, $ESTC, $SMAR, $POSH, but will only do so once they make it past earnings either scathed (lower price) or unscathed (peace of mind) :)
So we've put together our most anticipated earnings for all of Feb!
Keep an eye out!
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Great graphic, this is cleaner than Earnings Whipers and more tailored to the companies I'm interested in as well.
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Fincredible MacroTalk: Omicron
The latest wave of Covid-19 is in full swing.
The rising number of cases is certainly worrisome, but since this variant appears to be less harmful than previous variants, and a big portion of the world is vaccinated, it should result in a lower number of deaths and less disruptions to the world economy.
The latest Fincredible MacroTalk explores how the current COVID wave is impacting corporations. Here are some of the most relevant quotes from the post:
- $MSM "While it's still early days with the presence of the Omicron variant and a related rise in COVID case counts, so far, customers and suppliers are working through it. There is a different tone from the early stages of the pandemic in 2020. And while we're seeing increases in the number of cases in our own facilities, those who are infected are returning to work more quickly."
- $CTAS "At this point, we haven't seen a change in our customer base as a result of Omicron. It's a little early to tell, certainly. But nevertheless, I would say it's business as usual at this point with our customers."
- $MU "These costs that we're seeing in terms of COVID mitigation and some inflationary pressure. Those are likely to continue through the year. Hard to say when they abate, but we do expect that they will continue through the year."
The current COVID-19 wave appears to be less disruptive than previous waves, but the ripple effects from the latter continue to have an impact on the economy.
If you'd like to read the whole post, here's the link: Fincredible MacroTalk
Big Week Ahead! (Oct 25-29 Earnings Calendar)
Next week will probably be the most interesting week for the stock market this quarter. The largest companies in the world are all reporting and we'll get a lot of very valuable insights.
Here's what I'm interested in:
- More context on the slowdown in ad spending from $FB $GOOG and $TWTR. Let's see if these companies are experiencing similar issues to the ones $SNAP mentioned yesterday.
- Comments on the global supply chain issues from $KMB $MMM $GLW $LOGI and others.
- A general update from $AMD $TDOC $SHOP and$AMZN.
- Perspectives on the energy market from $XOM $CVX
Comment below what earnings call you're looking forward to!
Remember you can automatically sync your portfolio's earning dates to your personal calendar with just a couple of clicks here.
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