Fave Five: What Works Best? (So Far)

This Week’s Fave Five is brought to you by Pittsburgh’s own Pat Donnelly. Pat stopped me in the hall at the National Association of Investors annual conference and said, “You know what — among many things — I wonder about? Which Fave Five selection mode has delivered the best performance?” That’s a really, really good question. Pat is the chair of the NAIC volunteer advisory board.

Fave Five (5/24/2019)

We started the Fave Five as something of a whim. It was sort of the answer to the question, “Is it possible to highlight 3-5 companies a month, let alone a week?” After a few years, the results are becoming compelling and provocative. If you’ve been around here for more than a little while … you know that we treasure skepticism and critical thinking about the challenges and potential of investing.

It’s time to refine our characterization of the “Fave Five.”

Our Fave Five essentially represents a listing of stocks with favorable long term total return forecasts and good/excellent quality rankings. We basically screen on Manifest Ranking (equally-weighted PAR and Quality). This is the primary screening criteria every single week. The only variation is how “deep” we go into the percentile rankings. Sometimes we stop at 99.44% … other times sticking to the top 2% … or 5% … and when in a bottom fishing mode as low as top 50% or even “deeper.”

Selections

Keep in mind that a repeat appearance among the Fave Five for a given DOES NOT result in “accumulation.” Once a stock is “in”, it’s in until it’s “out.” So the accompanying image of results is measuring the performance of the tracking portfolio.

And speaking of “out”, we’ve been using this demonstration portfolio to deploy (1) Rule-of-5 “time outs” for companies that lag the market by more than 20 percentage points, (2) celebrate success as measured by a stock price soaring to the extent that the return forecast (PAR) approaches low single digits. These are fun. (3) We’ll be adding a quality degradation algorithm. Stay tuned.

Second Screens

So the real difference is the secondary screening criteria each week. The default setting is the highest 1-year total return forecast by analyst consensus. Hence the 112 selections. We’re elated to see a premise hold as the relative return for this most frequent criterion is beating the market.

But the most compelling results come from three secondary screening criteria: (1) High Growth, (2) Irish Spring and (3) Triple Play. High Growth is just what you think it is. It’s compliant with our search for excellent smaller and faster-growing companies. The elevator speech is GREAT companies growing in double digits — with top line growth of 10% or 12% or more.

Irish Spring resonates with real “risk” reduction as our resident Irishman, Hugh McManus, has guided us to find GREAT companies available near their 52-week lows.

And Triple Play is a powerful nod to the legacy of the modern investment club movement and George Nicholson’s nudge to seek companies with (1) depressed stock prices, that (2) have the potential for margin enhancement and (3) P/E ratio expansion.

“Most Oversold” is simply the qualifiers with the lowest Relative Strength Index (RSI) courtesy of StockCharts.com. Yes, Virginia, it’s a technical indicator. But it could prove to be something that heeds Ralph Acampora’s advice in Chicago last weekend to “Go ahead and do all the wonderful things you do to study companies but before you press the BUY button, do Ralphie a favor and check the price trends. Is your discovery gaining or falling in stock price?” There’s only two selections in this category so far. That will change. Soon.

We’re also optimistic about Owner ROC. (More to follow on this) Anecdotally, we think it will remain faithful to virtually all of the foundational concepts while raising the awareness and emphasis on debt capital. Stay tuned here, too.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (May 24, 2019) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. MANIFEST Ranking: Equally weighted ranking of Return Forecast (PAR) and Quality. 52-Week Position: Position on scale between 52-week low price and 52-week target price. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via www.morningstar.com ACE P/FV: based on analyst consensus for fair value. Owner’s Return On Capital: Return (Profitability, long term estimate) vs. Total Capital (equity + debt). S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +2.4% since inception.

The absolute annualized rate of return is 11.8%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Fave Five (5/11/2018): Triple Play

Fave Five (5/11/2018)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings. The median 1-year ACE total return forecast is 14.8%.

This week we return to the triple play screening method for our five favorites. The triple play possibility occurs when you find a stock that is very depressed in price and also appears to be on the verge of substantially boosting its profit margins. The triple play effect is possible in that:

(1) The depressed price of the stock can return to normal levels;

(2) increased profit margins can produce increased EPS and a higher price;

(3) may also cause higher P/E ratios, or P/E expansion.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (May 11, 2018) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. 52-Week Position: Position on scale between 52-week low price and 52-week target price. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via www.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +2.3% since inception.

The absolute annualized rate of return is 16.7%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Fave Five (9/29/2017)

Fave Five (9/29/2017)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings. The median 1-year ACE total return forecast is 11.1%.

This week we return to the triple play screening method for our five favorites. The triple play possibility occurs when you find a stock that is very depressed in price and also appears to be on the verge of substantially boosting its profit margins. The triple play effect is possible in that:

(1) The depressed price of the stock can return to normal levels;

(2) increased profit margins can produce increased EPS and a higher price;

(3) may also cause higher P/E ratios, or P/E expansion.

The Fave Five This Week

  • Alliance Data Systems (ADS)
  • Coach (COH)
  • CVS Health (CVS)
  • General Electric (GE)
  • Ulta Beauty (ULTA)

The Long and Short of This Week’s Fave Five

The Long & Short. (September 29, 2017) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via www.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

Fave Five Legacy (Tracking Portfolio)

The rate of return for the tracking portfolio is 21.6% since inception.

The relative/excess return for the Fave Five tracking portfolio is +6.1% since inception.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Fave Five (1/29/2016)

Fave Five (1/29/2016)

This week’s Fave Five is a tribute to the letter “A”. Apple, Aunt Annie’s Alligator, A, A, A. (Can you tell we have a 15-month-old grandson?)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings. This week’s Top One Percenters are Akamai Tech (AKAM), Apple (AAPL), Astronics (ATRO), Alliance Data Systems (ADS), and PRA Group (PRAA).

Context: The median 1-year total return forecast (via ACE) for the Value Line 1700 is 26.4%. The median 5-year return forecast (MIPAR) is 9.5% (annualized).

The Long and Short of This Week’s Fave Five

Weekend Warriors

The relative return for the Weekend Warrior tracking portfolio is +2.2% since inception. 57.6% of selections have outperformed the Wilshire 5000 since original selection.

Here are some links to fairly recent monthly stock features, Round Table discussions and/or analysis updates for companies in the tracking portfolio:

  • Apple (AAPL)
  • Forward Air (FWRD)
  • Stericycle (SRCL) Feb-2014 Round Table nomination by Nick Stratigos (starts at 18:33 of session)

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Stuffing Stockings With Eddy

Crossing Wall Street: Buy List for 2016

Source: http://www.crossingwallstreet.com/archives/2015/12/cws-market-review-december-18-2015.html

by Eddy Elfenbein

The five new stocks are Alliance Data Systems (ADS), Biogen (BIIB), Cerner (CERN), HEICO (HEI) and Stericycle (SRCL). I’ll have more to say about them next week. Don’t worry, I’ll go into full detail. I’ll also explain why I’m removing the deletions.

The six deletions are Ball, eBay, Moog, Oracle, PayPal and Qualcomm. Remember that we have an extra stock leaving this year due to the PayPal spinoff.

To recap, I assume the Buy List is equally weighted among the 20 stocks. The buy price for each stock will be the closing price as of December 31, 2015. The new Buy List goes into effect on January 4, 2016, the first day of trading of the new year.

The Buy List is now locked and sealed, and I won’t be able to make any changes for the entire year. I’ll have a complete recap of 2015 at the end of the year. I’ll also have more to say about our new buys, and I’ll give you new Buy Below prices.

As far as this year’s Buy List goes, there are only nine trading days left in 2015, and it appears that our Buy List will return to its market-beating ways. Through Thursday, our Buy List is up 4.09% while the S&P 500 is down 0.83% (not including dividends). This will be the eighth time in the last nine years that we’ve beaten the S&P 500.

The Manifest Investing “Take Away”

For now, here’s the preliminary tracking dashboard. (The “contributions” will be reset to $50,000 each at the beginning of the new year.) The overall return forecast is projected to outpace the market over the long term.

The newcomers bring considerable strength to the portfolio, bolstering the overall return forecast, quality and sales growth forecast. Overall quality is good and although we’d like to see a little higher average growth forecast — it’s above average and hunkered down for potential persistent doldrums.

All but one of the Buy List entries (Signature Bank) hail from the Value Line Standard Edition.

Bed Bath & Beyond (BBBY) was featured as a 5-star stock via www.morningstar.com just this morning.

The 1-Year total return forecast (ACE) for the Buy List 20 is a robust 16.3%.

Sector distribution and Size/Growth Diversification can be checked and continuously monitored using the tracking portfolio at: https://www.manifestinvesting.com/dashboards/public/crossing-wall-street-2016-buy-list

Speaking Of Tracking Portfolios

As Eddy mentioned, as the 2015 Buy List comes “spinning out of the turn” and heading to the finish line — it looks like the CWS Buy List will beat the market for the 8th time in the last nine years! Congratulations, Eddy.

Through 12/17, the S&P 500 (VFINX) is up 1.1% (including dividends) and the 2015 Buy List is up 5.2%.

https://www.manifestinvesting.com/dashboards/public/crossing-wall-street-2015-buy-list

Take us home, Eddy. Seasons Greetings and Merry Christmas, Everyone!

Gone Shopping With Eddy (2016)

If you’re not familiar with Eddy Elfenbein and http://www.crossingwallstreet.com, you should be. Eddy thinks like us and it looks like his “Buy List” of stock selections is well on track to beat the market for the 8th time in the last nine years!

This excerpt is from his Thursday update (blog … go ahead, subscribe for FREE) and we’ll rake these around the holiday coals … same thing we do every year, Pinky. See: CWS Market Review for 12/4/2015

Ten Possible Additions for Next Year’s Buy List

For next year’s Buy List, I’m going to add five new stocks. Here are ten stocks I’m strongly considering for next year’s Buy List:

  • Alliance Data Systems (ADS)
  • Cerner (CERN)
  • Church & Dwight (CHD)
  • FactSet Research Systems (FDS)
  • F5 Networks (FFIV)
  • Footlocker (FL)
  • HEICO (HEI)
  • Sherwin-Williams (SHW)
  • VF Corp. (VFC)
  • Zimmer Biomet (ZBH)

I still haven’t finalized my decision, but I wanted you to know some names that are under serious consideration.

 

Manifest Investing Analysis

We start with a snapshot of the dashboard for the ten nominees and the value of $100 invested five years ago — so we can see which stocks have been “naughty” and which ones have been “nice” for the last few years.

Eddy Elfenbein’s short list for 2016 Buy List additions as of 12/4/2015.

This dashboard is public and is available to view at:
https://www.manifestinvesting.com/dashboards/public/cws-buy-candidates-2016

Collectively, these ten candidates have been smokin’ hot with an annualized total return of 22.3% (vs. 13.5% for the S&P 500, VFINX). The only exception has been F5 Networks (FFIV) — checking in at a loss for the trailing five years.

Buy list shopping 20151204

The Long and Short of the CWS Shopping List

Note: The price targets from Goldman Sachs (GS) are from public releases and represent a partial sample. The price target is logged as of the most recent public analyst report. Although every effort is made to keep this information as current as possible, some of the ratings may not reflect more recent research and updates. Some of the older Goldman Sachs estimates (>6-9 months) have been adjusted using more recent price targets from Merrill Lynch, JP Morgan, Morgan Stanley etc.

If you were Eddy, which stocks would you select for your 2016 Buy List?

Do you have another stock or candidates that you feel are more worthy?

Bring it.