Ride The Wave Of Recovery When It Arrives
- Date: 2008-11-02 - Word Count: 948
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Fundamentally strong, bargain stocks that are poised to gain a lot of upside territory in a market recovery include SPAR, FFH, TBSI and FWLT.
There has been a great deal of chatter about market bottoms amid the recent sell-offs of record proportions. As investors and observers debate over the number or range that will define a bottom, everyone seems to agree and history has proven that a recovery will ensue and will reward long-term investors.
Investors, of course, will know the exact bottom and how long it took to get there after it was established, and nobody knows what kind of momentum to expect as stocks stage a turnaround. However, investors can prepare to catch the upside by picking fundamentally sound stocks at today's extremely attractive valuations.
Using the Research Wizard, I found 4 diversified, fundamentally strong bargain stocks that are poised to gain a lot of upside territory in a market recovery. They are Spartan Motors (SPAR), Fairfax Financial Holdings (FFH), TBS International Limited (TBSI) and Foster Wheeler (FWLT).
I discovered these companies by screening for companies that are either a Zacks #1 Rank ("strong buy") or Zacks #2 ("buy"). Additionally, I narrowed the universe of stocks down to those that had some of the lowest P/E ratios over the last 5 years. I also made sure there was a solid history of earnings growth for all the picks.
What I found…
Spartan Motors (SPAR) and its subsidiaries are involved in the design, engineering and manufacturing of custom chassis and vehicles for the emergency-rescue, recreational vehicle and specialty vehicle markets in the United States and internationally. The company operates in two segments, Spartan Chassis and Emergency Vehicle Team.
Over the past 5 years, SPAR's earnings per share exhibited growth of 52%. Its third-quarter earnings of 45 cents per share more than doubled the consensus estimate of 21 cents surged past the year-prior 8 cents. Net sales reached $237.5 million, a year-over-year increase of 59.5%.
The Zacks #2 Rank company noted that its market diversification and flexible manufacturing model continue to allow it to grow and profitably compete in difficult times.
Analysts lifted full-year 2008 earnings estimates by two cent to $1.14 per share over the past week. The most accurate forecasts is a higher $1.16.
Spartan Motors has a 5-year low P/E ratio of 2.15 and currently trades at 3.19x. The company's return on equity (ROE) is at 32%, which is more than double the industry's average of 13%. SPAR also offers a dividend yield of 2.9%, while its industry peers pay no dividend.
Fairfax Financial Holdings (FFH), through its subsidiaries, engages in property and casualty insurance and reinsurance as well as investment management and insurance claims management businesses. The company has operations in Canada, the United States, Singapore, Hong Kong, Bermuda, Barbados, Ireland and the United Kingdom. The company was founded in 1951 and is headquartered in Toronto, Canada.
The Zacks #1 Rank stock sports a return on equity (ROE) of 36%, more than tripling the industry average of 11%. FFH sports a net margin of 18.7%, also well above the industry average 6.8%.
During the past 5 consecutive quarters, the company's earnings missed on estimates a couple times amid a tough financial environment. However, on average, the 5 quarters produced an upside surprise of 30%.
The Fairfax's earnings per share increased by an eye-popping 173% over the 5 years. The company's P/E is at 3.27. Its 5-year low P/E stands at 2.8.
The company is slated to report third-quarter results in November 6.
TBS International Limited (TBSI) is an ocean transportation services company that offers worldwide shipping solutions through liner, parcel and bulk services, and vessel chartering. TBS has developed its business around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North America, Africa and the Caribbean. TBS provides frequent regularly scheduled voyages in its network, as well as cargo scheduling, loading and discharge for its customers.
After delivering an excellent second quarter, the company's best quarter ever, it is scheduled to announce third-quarter results on November 6.
The Zacks #2 Rank company's second-quarter earnings of $1.82 per share topped the consensus estimate by 12% and came in well ahead of the year-prior result. On average, TBSI was 20% ahead of analysts' expectations over the past 5 straight quarters.
Wall Street is forecasting full-year 2008 earnings of $7.12 per share, versus the three months-ago projections of $6.37.
TBSI is trading 1.22x and sports a 5-year low P/E of 2.35. The company's return on equity is a solid 44%, which eclipses the industry average of 18%.
Foster Wheeler (FWLT), a Zacks #2 Rank name, is an international engineering, construction and project management contractor as well as a power equipment supplier. The Company operates through two business groups, The Global Engineering and Construction (E&C) Group and The Global Power Group.
The is scheduled to release third-quarter results on November 5.
The company reported its second quarter in early August, referring to it as the second consecutive quarter of record earnings.
Earnings per share of 98 cents, excluding an item, surpassed the consensus estimate by 21% and improved on the previous year's total. The company missed expectations only once over the past 5 consecutive quarters but still averaged out an upside surprise of 6%.
Analysts are calling for full-year earnings per share of $3.75, up 3% from the estimates of two months ago.
At 70%, FWLT boasts the highest return on equity (ROE) of the group and stomps the industry average of 9%. Earnings per share are expected to grow by 18% over the next 3 - 5 years, which compares favorably to the industry average of 15%. Historically, FWLT's earnings ascended 20% over the past 5 years.
Foster Wheeler is trading 6x. The company's 5-year low P/E is the lowest of the bunch at 0.74.
There has been a great deal of chatter about market bottoms amid the recent sell-offs of record proportions. As investors and observers debate over the number or range that will define a bottom, everyone seems to agree and history has proven that a recovery will ensue and will reward long-term investors.
Investors, of course, will know the exact bottom and how long it took to get there after it was established, and nobody knows what kind of momentum to expect as stocks stage a turnaround. However, investors can prepare to catch the upside by picking fundamentally sound stocks at today's extremely attractive valuations.
Using the Research Wizard, I found 4 diversified, fundamentally strong bargain stocks that are poised to gain a lot of upside territory in a market recovery. They are Spartan Motors (SPAR), Fairfax Financial Holdings (FFH), TBS International Limited (TBSI) and Foster Wheeler (FWLT).
I discovered these companies by screening for companies that are either a Zacks #1 Rank ("strong buy") or Zacks #2 ("buy"). Additionally, I narrowed the universe of stocks down to those that had some of the lowest P/E ratios over the last 5 years. I also made sure there was a solid history of earnings growth for all the picks.
What I found…
Spartan Motors (SPAR) and its subsidiaries are involved in the design, engineering and manufacturing of custom chassis and vehicles for the emergency-rescue, recreational vehicle and specialty vehicle markets in the United States and internationally. The company operates in two segments, Spartan Chassis and Emergency Vehicle Team.
Over the past 5 years, SPAR's earnings per share exhibited growth of 52%. Its third-quarter earnings of 45 cents per share more than doubled the consensus estimate of 21 cents surged past the year-prior 8 cents. Net sales reached $237.5 million, a year-over-year increase of 59.5%.
The Zacks #2 Rank company noted that its market diversification and flexible manufacturing model continue to allow it to grow and profitably compete in difficult times.
Analysts lifted full-year 2008 earnings estimates by two cent to $1.14 per share over the past week. The most accurate forecasts is a higher $1.16.
Spartan Motors has a 5-year low P/E ratio of 2.15 and currently trades at 3.19x. The company's return on equity (ROE) is at 32%, which is more than double the industry's average of 13%. SPAR also offers a dividend yield of 2.9%, while its industry peers pay no dividend.
Fairfax Financial Holdings (FFH), through its subsidiaries, engages in property and casualty insurance and reinsurance as well as investment management and insurance claims management businesses. The company has operations in Canada, the United States, Singapore, Hong Kong, Bermuda, Barbados, Ireland and the United Kingdom. The company was founded in 1951 and is headquartered in Toronto, Canada.
The Zacks #1 Rank stock sports a return on equity (ROE) of 36%, more than tripling the industry average of 11%. FFH sports a net margin of 18.7%, also well above the industry average 6.8%.
During the past 5 consecutive quarters, the company's earnings missed on estimates a couple times amid a tough financial environment. However, on average, the 5 quarters produced an upside surprise of 30%.
The Fairfax's earnings per share increased by an eye-popping 173% over the 5 years. The company's P/E is at 3.27. Its 5-year low P/E stands at 2.8.
The company is slated to report third-quarter results in November 6.
TBS International Limited (TBSI) is an ocean transportation services company that offers worldwide shipping solutions through liner, parcel and bulk services, and vessel chartering. TBS has developed its business around key trade routes between Latin America and China, Japan and South Korea, as well as select ports in North America, Africa and the Caribbean. TBS provides frequent regularly scheduled voyages in its network, as well as cargo scheduling, loading and discharge for its customers.
After delivering an excellent second quarter, the company's best quarter ever, it is scheduled to announce third-quarter results on November 6.
The Zacks #2 Rank company's second-quarter earnings of $1.82 per share topped the consensus estimate by 12% and came in well ahead of the year-prior result. On average, TBSI was 20% ahead of analysts' expectations over the past 5 straight quarters.
Wall Street is forecasting full-year 2008 earnings of $7.12 per share, versus the three months-ago projections of $6.37.
TBSI is trading 1.22x and sports a 5-year low P/E of 2.35. The company's return on equity is a solid 44%, which eclipses the industry average of 18%.
Foster Wheeler (FWLT), a Zacks #2 Rank name, is an international engineering, construction and project management contractor as well as a power equipment supplier. The Company operates through two business groups, The Global Engineering and Construction (E&C) Group and The Global Power Group.
The is scheduled to release third-quarter results on November 5.
The company reported its second quarter in early August, referring to it as the second consecutive quarter of record earnings.
Earnings per share of 98 cents, excluding an item, surpassed the consensus estimate by 21% and improved on the previous year's total. The company missed expectations only once over the past 5 consecutive quarters but still averaged out an upside surprise of 6%.
Analysts are calling for full-year earnings per share of $3.75, up 3% from the estimates of two months ago.
At 70%, FWLT boasts the highest return on equity (ROE) of the group and stomps the industry average of 9%. Earnings per share are expected to grow by 18% over the next 3 - 5 years, which compares favorably to the industry average of 15%. Historically, FWLT's earnings ascended 20% over the past 5 years.
Foster Wheeler is trading 6x. The company's 5-year low P/E is the lowest of the bunch at 0.74.
Related Tags: market, stocks, investing, earnings, estimates, zacks
Alex Kolb is a Growth Analyst at Zacks Investment Research covering Growth & Income stocks and Investment Ideas. He also contributes Investment Ideas to Zacks.com. For more information please visit www.zacks.com. Your Article Search Directory : Find in Articles
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