[Publication Note:
Unfortunately, due to the COVID-19 pandemic, there have been unforeseen manufacturing and production interruptions at our publisher John Wiley & Sons. We regret to inform you that there will be a delay in the delivery of the Stock Trader’s Almanac 2021. We hope to have them around mid-December and get them to you by yearend.
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This basket is being presented in order to take advantage of the “Best Months” of the year (November through April/June) for stocks. We will look to add these 20 stocks, in the table below, near current levels or on minor dips. Many of the positions did weaken today and are likely to open below the suggested buy limits. 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, PE, price-to-sales ratio, market value, a dividend yield and a suggested buy limit and stop loss.
These 20 stocks all have reasonably solid valuations, revenue and earnings growth. Most also exhibit positive price and volume action as well as other constructive technical and chart pattern indications. The covid-19 induced shutdown and bear market earlier this year did influence and skew traditional metrics like PE and price-to-sales ratio as many companies experienced sharp drops in Q2 results and brisk rebounds in Q3. The group of 20 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 nearly 8,000 U.S. traded stocks for those with a market cap of at least $50 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 with a few exceptions. From there we searched for stocks that appeared to fair well in Q2 and Q3 based upon sales and earnings. A special nod was given to stocks with a below average number of analysts following them.
We then dug into numerous individual company charts before settling on these final 20 stocks. Our underlying theme was to find reasonably priced stocks that appear to be quietly growing sales and earnings while flying somewhat under the radar with only a limited number on The Street paying close attention to them. As market cap goes higher, this becomes increasingly challenging and a history of earnings surprises and future estimates becomes even more important.
At the end of the screening process we were left with a reasonably diverse basket. Computer and technology are well represented with six stocks, but the remainder of the basket includes medical, semiconductor/solar, construction, transportation/aerospace and consumer related stocks. We did not search specifically for top-performing stocks within any specific sector, this just happens to be what remained after our process.