Year-to-date, consumer cyclicals is the winner, with stocks averaging an 18.3% gain, followed by technology (16.8%), financial services (15.6%), and industrials (12.1%). Even the worst return—5.1%--posted by utilities, is pretty darn good!
As I said at the beginning of the year, I fully expect that momentum to continue into the foreseeable future, due to significant improvements in our economy. Rising corporate profits, reduced unemployment, a more active housing environment, and still-low interest rates, are all contributing to a more positive mindset from consumers and investors.
And with that in mind, I’ve decided to begin publishing “my two best stock picks” weekly. I’ll give you some basic information as to why I think they have room to grow—including how much potential I believe they have. Then you can do your own research to see if they fit in with your investing goals.
My screening criteria are basically fundamentally-oriented, asking the question: Is this a strong, well-run company? A few of my primary screens are: Good cash flow, low debt, low P/E, and increase in institutional interest. Those parameters are augmented by a few technical indicators, such as moving averages and momentum factors, which tell us if this is a good time to buy (or sell).
When I ran my screens this week, I came up with a whopping 37 companies! Here are two with the most potential:
Spectrum Pharmaceuticals (Nasdaq: SPPI) is a biotech company, operating primarily in hematology and oncology.
Price: $13.44Market cap: $791.55 million
Target: $20
Why I Like It: Discounted value, focuses on two fields that are growing phenomenally, with the ability to be a takeover candidate for a larger pharma, as well as a buyer of its smaller competitors.
FSI International (Nasdaq: FSII) operates in the microelectronics industry, offering surface conditioning equipment that uses wet, cryogenic, and other chemistry techniques to clean, strip, or etch the surfaces of silicon wafers; and refurbished microlithography products to deposit and develop light sensitive films
Price: $5.14Market cap: $200.96 million
Target: $8
Why I Like It: The semiconductor sector is on an upswing, along with FSII, which just reported a very good quarter. I also like the company’s cutting-edge technology—a good indicator of a business that might also make a great takeover candidate. And I think the company is undervalued.
These stocks are both small-cap, so please understand that investing in them may entail more risk than buying shares in their larger competitors. Consequently, if you decide to purchase them, please make sure that they constitute only a small portion of your portfolio.
Note: I intend to establish a portfolio of similar picks, some 25-30 stocks that I’ll update on a regular basis. I will discuss them from time-to-time in my blog and on this web site, but a full analysis of each stock—as well as detailed updates—will be available only via subscription. If you’d like more information, just contact me directly, at nzambell@frontiernet.net
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