October 2, 2012
Written By Chloe Lutts Jensen
Running stock screens is a great way to find potential investment candidates, especially if you already have established requirements for new investments based on your investing system. But it can also be interesting to run stock screens just out of curiosity.
Checking on which stocks have the highest yields, or lowest P/E ratios, or fastest-growing institutional ownership can tell you something interesting–if somewhat anecdotal–about the day’s market.
Yesterday, out of curiosity, I looked up all the stocks–of any market cap–that have increased in price by at least 100% over the past 52 weeks. There were 37 results, with 52-week price changes from 101% (Westlake Chemical, WLK) to 248% (Homeowners Choice, HCII). Here’s the whole list if you’re curious:
I think the most interesting thing about this list is the number of stocks on it that are related to either the homebuilding or financial industries. From the former we have Eagle Materials (EXP, up 169%), which makes cement and gypsum wallboard; US Home Systems (USHS, up 156%), a home improvement company that was just acquired by Home Depot (HD); Georgia Gulf (GGC, up 145%), which makes vinyl building products like windows and siding, among other things; and homebuilder Lennar (LEN, up 144%), which was an Investment Digest Top Pick for 2012.
I think there are even more financials on the list, including First Financial Holdings (FFCH, up 231%), Parkvale Financial (PVSA, up 171% before being acquired), First M&F Corp. (FMFC, up 134%), Fidelity Bancorp (FSBI, up 130% and also acquired), Peoples Bancorp of North Carolina (PEBK, up 117%) and Heartland Financial (HTLF, up 114%), among others.
Even more interesting, the financials on the list are mostly regional banks, like First M&F Corp., which operates in and around Mississippi; First Merchants (FRME, up 106%), an Indiana and Ohio Bank; and Banner Corp. (BANR, up 107%), which has bank branches in Washington, Oregon and Idaho.
Clearly, regional banking and housing, two of the industries crushed most thoroughly by the 2008 collapse and subsequent recession, were excellent places to invest over the past year. But what about today? Are these two industries completely recovered, or are there more gains ahead for investors getting on board today?
Based on the recommendations I’ve seen coming from our Digest contributors lately, I’d say that it’s definitely not too late to ride the turnaround in housing and financials, as long as you pick the right stocks. Look for names that are still showing improvements in earnings numbers, whether they’re still below pre-recession levels or have surpassed them and are still growing. A good example is Fifth Third Bancorp (FITB), just recommended by Dow Theory Forecasts Editor Richard Moroney in the latest Dividend Digest:
“Fifth Third Bancorp (FITB) is being added as a Long-Term Buy. With its branches concentrated in the Midwest, the regional bank maintains a sturdy balance sheet and a big base of deposits. On pace to grow annual sales for the first time since 2008, Fifth Third has steadily improved its operating profit margins, and its return on assets has rebounded to pre-recession levels. The pipeline for commercial loans appears solid for the September quarter, and the bank could also get a lift from a housing rebound. In March, the Federal Reserve vetoed Fifth Third’s plan to raise the quarterly dividend, even though the bank passed the regulator’s stress test. In June, Fifth Third resubmitted its dividend proposal and expects a response later this month. Shares trade at 10 times trailing earnings, a 31% discount to the median regional-bank stock in the S&P 1500 Index. The price/book value ratio of 1.0 is well below the 10-year average of 2.0. The stock yields 2% and scores above 75 in Quadrix for five of six categories.” — Richard J. Moroney, CFA, Dow Theory Forecasts, August 20, 2012
In many cases, housing stocks were destroyed even more completely than financials, so there is still plenty of potential there too. Again, look for continued improvement in earnings and growth numbers. A good niche helps too: the next Investment Digest issue will include the stock of a paint company that’s seeing a boost from sales of foreclosed homes (paint is a great way to freshen up a lackluster place on the cheap).
Lastly, as a side note, the first thing I noticed about my stock screen was that the top-performing stock, property and casualty insurer Homeowners Choice (HCII), was a stock that was recommended in the Dick Davis Dividend Digest in May of this year. Interestingly, the company is at the intersection of the two trends discussed above, as a financial serving primarily homeowners. If you’d bought HCII on our recommendation in May and held until today, you’d be sitting on a 50% gain.
However, David Oberweis (The Oberweis Report), who recommended the stock, has already sold and no longer recommends buying HCII. Instead, you might buy a subscription to Investment Digest, so you hear about his next great idea.
Wishing you success in your investing and beyond,
Editor of Investment of the Week