With the pace of new COVID-19 cases slowing, many investors expect economic growth to accelerate over the course of 2021. John Buckingham, editor of the Prudent Speculator newsletter, has provided a custom screen of 25 stocks that meet the following criteria:
° Expected growth of earnings per share of at least 15% over the next 12 months.
° Forward price-to-earnings ratios below 20. (In comparison, the forward P/E for the S&P 500 Index SPX, 0.00% is a weighted 22.1, according to FactSet, up from 17.6 a year ago and 16.6 two years ago.)
° Its are sufficiently undervalued to warrant a purchase today.»
° For non-financial companies, estimated increase in sales of at least 10% over the next 12 months.
The Prudent Speculator is published by Kovitz Investment Group of Chicago. Kovitz manages about $6 billion through value strategies mainly for private clients. Buckingham co-manages the Al Frank Fund VALUX, +2.35%, which is rated four stars (out of five) by investment-research firm Morningstar and follows strategies outlined in the Prudent Speculator.
Starting with a group of about 2,800 companies, the Prudent Speculator team applies proprietary screens to identify stocks that are “potentially undervalued” relative to the broad market. The list is narrowed by analyzing companies’ levels of cash, debt, debt-maturity schedules, debt-service costs, capital expenditures and profit margins.
Buckingham and his team then consider qualitative factors, such as brand positioning, to narrow their list to a group of about 120 stocks they recommend across five strategies covered in the newsletter. The core Prudent Speculator strategy has the highest total return for the past 30 years among newsletters tracked by the Hulbert Financial Digest.
While Buckingham is a value investor, there are growth stocks that made the list, including Cohu Inc. COHU, -2.78% and Kulicke & Soffa Industries Inc. KLIC, -4.19%, both of which make equipment used by semiconductor manufacturers. Here are the 25 stock meeting all the criteria. The companies are listed in alphabetical order: