Stock screens invaluable
One of the biggest bargains in the world of investing is membership in the American Association of Individual Investors.
For $29 a year, members get a monthly magazine, the right to attend chapter meetings and access to an excellent website with more than 60 stock screens.
A stock screen is simply a computerized list of stocks that meet specified criteria. What I love about AAII's web site is that it tells how each screen has done over various time periods, going back in most cases to 1998.
I like to focus on screens that have done well both in the long term and recently. One is the “Piotroski High F Score” screen. According to AAII, this screen has averaged a 21.3 percent annual return since 1998 and has returned 142.3 percent this year through Nov. 30.
Joseph Piotroski is a professor of accounting at the University of Chicago Graduate School of Business. His screen (as interpreted and disseminated by AAII) starts with a low stock price compared to book value (corporate net worth per share).
To pass the screen, a company must pass eight out of nine additional tests, most of them relating to financial strength or operational success.
For example, a stock gets one point if it had a positive return on assets in the preceding fiscal year. If the ROA is higher than the year before, that's good for another point.
Another standard calls for cash flow higher than earnings. That means that earnings are not jacked up by non-cash accounting adjustments.
Companies gain an F-score point if their gross profit margin improved in the latest year.
The Piotroski screen is not infallible. AAII's version of it experienced a 21 percent decline in 2007 and a 41.5 percent decline in 2008, plus small losses in 2000 and 2011. But it has produced gains about three quarters of the time.
Five stocks pass AAII's version of the Piotroski screen. They are:
•SkyWest Inc. (SKYW).
•URS Corp. (URS).
•Golden Star Resources Ltd. (GSS).
•Fresh Del Monte Produce Inc. (FDP).
•Delta Apparel Inc. (DLA).
Skywest, out of St. George, Utah, flies more than 700 planes, serving smaller cities for major airlines such as United and Delta. It operates under various names, including Delta Connection, United Express and US Airways Express.
This airline is more consistently profitable than most: It has posted a gain in 14 of the past 15 years. And its valuations appeal to me — 12 times earnings, 0.2 times revenue and 0.5 times book value.
Skywest's debt is higher than I like, exceeding equity. And like all airlines, it is vulnerable to rising fuel or labor costs. On the whole, my view is mildly positive.
URS, with headquarters in San Francisco, is an engineering and construction company that does a fair amount of defense work. Again, valuations are compelling, at 13 times earnings, 0.3 times revenue and 0.9 times book value.
Deriving about a quarter of its revenue from federal contracts, URS is potentially vulnerable to cuts in government spending. It return on stockholders' equity has never been especially strong, but its balance sheet is. On balance, I like it but don't love it.
Golden Star is a small gold mining company based in Toronto. Its market value is barely over $100 million, and it's a penny stock at 39 cents a share. It used to trade at higher prices, more than $5 a share in October 2010, for example.
The company has two working mines in Ghana and is exploring elsewhere in Africa and in South America. It is cheap at 0.5 times book and 0.2 times revenue, but it has been posting losses lately. As a raw speculation I like it, but the stock is thinly traded, so do not chase it.
Fresh Del Monte Produce, based in the Cayman Islands, produces and sells bananas, pineapples, strawberries, salads, and other fresh fruits and vegetables.
Fresh Del Monte is consistently profitable but slow growing. It is safer than the first three stocks mentioned here but probably has less dramatic potential for gains. It sells for 15 times earnings and 0.9 times book value.
Delta Apparel sells sports clothing under a variety of brand names, including Soffe, Cotton Exchange, Junk Food, and Intensity Athletics; it makes private-label tee shirts.
Two recent loss years (including 2012, when cotton prices were high) mar a generally profitable record, but the company's earnings have been erratic. At just under book value and 0.3 times revenue, the shares are attractively cheap.
John Dorfman is chairman of Thunderstorm Capital in Boston and a syndicated columnist. He can be reached at firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Steelers notebook: Tomlin won’t discuss discipline for Bell, Blount
- Pittsburgh mayor says new police chief’s skills fit the job well
- Pirates add six players to roster, including OF Polanco
- WVU notebook: Holgorsen expects similar effort
- Unlike years past, strength of 2014 Steelers could be offense
- Former Dormont businessman avoids jail for wire fraud
- United Kingdom at risk, new poll finds
- Steelers Lookahead: Previewing Sunday’s game vs. Cleveland
- Regulators release details of Highmark’s post-UPMC transition plan
- Retail theft suspect takes off, leaves baby at Rostraver Township Walmart
- More pipelines proposed to carry Marcellus gas to southeast markets