Mid-September Stock Basket: Use Dips to Accumulate By: Christopher Mistal | September 22, 2016 | Email | Print

Since the beginning of July, NASDAQ has been the star and its leadership is continuing this week with another all-time high close today. NASDAQ was up 6.6% in July and 1.1% in August, and as of today’s close is up 2.4% so far in September. This is noticeably better than S&P 500 which was up 3.6% in July, down 0.1% in August and is currently up 0.3% for the month. For the month of September these results are better than past election year averages, but there is still time remaining. These gains could hold or could just as easily vanish before month’s end.

 

 

A month plus of sideways trading preceded an early September dip by DJIA, S&P 500 and NASDAQ. This action lead to a slow deterioration of Stochastic, relative strength and MACD indicators applied to all three indices. Strength the last two days has reversed that trend and all three technical indicators across all three indices are now positive. Tomorrow could prove pivotal in providing further confirmation that the market has regained traction and can sustain recent positive momentum. A solid gain on Friday would be a sign that confidence is returning. Over the last six Fridays, DJIA and S&P 500 have closed down. NASDAQ’s record is slightly better, but it has been down three of the last five Fridays.  

 

 

These 14 stocks all have reasonably solid valuations, healthy revenue and earnings growth, while exhibiting positive price and volume action as well as other constructive technical and chart pattern indications. The group of 14 covers a broad array of sectors and industries. It also runs the gamut of market capitalization with a mix of large caps with more than $5 billion in market value, midcaps in the $1-5 billion range, and small caps under $1 billion.

 

We first sifted through the universe of about 8,000 U.S. traded stocks for those with a market cap of at least $25 million and average daily volume of 50,000 shares or more on average over the past twenty trading sessions. Then we winnowed the list down to only those stocks with relatively low price-to-sales and price-to-earnings ratios. From there we looked for stocks that were exhibiting revenue and earnings growth.

 

With this list of about 50 stocks we dug into each individual company and chart before settling on these final 14 stocks. Our underlying theme was to find reasonably priced stocks quietly growing sales and earnings that are flying somewhat under the radar with few on The Street paying close attention to them. As market cap goes higher, this becomes increasingly challenging and a history of earnings surprises becomes even more important. 

 

At the end of the screening process we found that homebuilders, technology, medical and financial industries were well represented in the basket. We did not search specifically for top-performing stocks within these sectors, this just happens to be where reasonable value and growth currently exist.

 

This basket is being presented in order to take advantage of the “Best Six Months” (November to April) for stocks. We will look to add these 14 stocks, in the table below, on dips. We will allocate a hypothetical $2000 from the cash position in the portfolio to each position. For each stock we have provided the ticker, name, sector, general business description, plus annual sales growth, PE, price-to-sales ratio, market value, a dividend yield and a suggested buy limit and stop loss.