Combining strong underlying fundamentals with low valuations can lower risk and increase portfolio returns. Zacks’ Discounted Fundamental Strength Profit Track strategy has generated double-digit returns for six consecutive years, including a 34% gain in 2006. For the first month of 2007, this Profit Track returned 7.3%. Four stocks that currently have both fundamental strength and discounted valuations are Avnet, Inc. (NYSE: AVT), Manpower Inc. (NYSE: MAN), Steelcase, Inc. (NYSE: SCS) and Western Digital Corporation (NYSE: WDC). View the entire list of stocks for the Discounted Fundamental Strength Profit Track at http://at.zacks.com/?id=2142.
Here are details about four companies currently identified by the Discounted Fundamental Strength Profit Track:
Avnet, Inc. (NYSE: AVT) is a distributor of electronic components and computer products. This Zacks #2 Rank stock made the grade for the Discounted Fundamental Strength profit track due, in part, to a current ratio of 1.98 and a debt/equity level of 0.34. The high current ratio implies a higher level of fiscal strength, meaning that the companies on this are more able to take advantage of business opportunities when presented. Recently, Avnet completed its acquisition of the Enterprise Infrastructure Division of Magirus Group and announced a U.S. distribution agreement with Veramark Technologies. Avnet is scheduled to report its third-quarter results on Oct 25.
Manpower Inc. (NYSE: MAN) just reported solid third-quarter results, including earnings per share that improved year over year by 35% while beating the consensus by approximately 14%. Revenues increased 15% to $5.3 billion. The employment services company attributed the results to its strong geographic presence, especially in countries such as The Netherlands, Germany and Belgium. In addition to the quarter’s numbers, Manpower passed the test for this profit track for several other reasons, including a PEG Ratio of 0.83, a debt/equity ratio of 0.30 and a five-year return on assets average of 4.25%. The company appears to have solid fundamentals while being well-positioned to capitalize on opportunities.
Steelcase, Inc. (NYSE: SCS) is an office furniture maker and a member of the Discounted Fundamental Strength profit track, sporting a PEG Ratio of 0.59, a debt/equity ratio of 0.21 and an average five-year return on assets of 1.61%. The company announced solid second-quarter numbers last month, including revenues that advanced 4.5% to $825.2 million from $789.7 million. Earnings per share also improved year over year and bettered the consensus by more than 4%. Steelcase attributed the results to benefits from improving its operations, along with a focus on more aggressively implementing its growth strategies.
Western Digital Corporation (NYSE: WDC) is scheduled to report its fiscal first quarter results on Nov 1. Earnings estimates for the storage company moved higher last month after outlook for the quarter was enhanced. The company attributed the positive change to improvements in demand, product mix and pricing. With an average return on assets over the past five years of 19%, Western Digital has been historically profitable and managed assets well to build shareholder value. (The parameter for this profit track only calls for an average ROA of greater than 1.5% over the past five years.) Other factors that give this company Discounted Fundamental Strength includes a PEG Ratio of 0.86, a debt/equity ratio of 0.01 and a current ratio of 1.80.
Discover all the current stocks currently on the Discounted Fundamental Strength Profit Track at: http://at.zacks.com/?id=2143.
About Profit Tracks
What is a "Profit Track"? Each Profit Track is a successful stock picking strategy with proven results through the Bear Market of 2001-2002 and the Bull run started in 2003. On Zacks.com we have created these nine unique screens to offer investors great strategies to potentially outperform the market in the years ahead. In 2006, the Low Price Stocks strategy was the top performing Profit Track with a return of +56.5% followed by the Discounted Fundamental screen with a +34% return. To see all nine strategies along with philosophy, past performance and current stocks, go to http://at.zacks.com/?id=1838
All the Profit Track strategies were created and backtested using the Research Wizard software from Zacks Investment Research. If you like this screening strategy, but want to narrow down the list of stocks and even improve the performance, then you should start a free trial to this powerful stock picking tool. Learn more about the Research Wizard free trial offer and our new special report “Top 10 Stock Screening Strategies” at http://at.zacks.com/?id=2156
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Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADR’s.
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