Good Friday, which falls on March 25 this year, is officially a holiday for the Wall Street and the U.S. stock exchanges. Nevertheless, for an avid investor, the holiday is a great opportunity to ponder over the best stepping stone to hit the market with a blast ahead of next week’s trading.
Year to date, 2016 has not been quite great for equity investors. The S&P 500 is down 0.35%, while the Dow Jones Industrial Average is up a measly 0.45%. The heightening geo-political tensions coupled with growing uncertainty over the U.S. Federal Reserve’s near-term rate hike possibilities are making things difficult for investors.
Meanwhile, the sluggish growth in international markets continues to hurt U.S. exporters. Further, a strong dollar and continuing volatility in oil prices are impeding an upside in earnings estimates for 2016. Moreover, the ongoing presidential campaign and the upcoming election will maintain an element of doubt with regard to the economic environment, subsequently keeping investors on their tenterhooks in the near term.
In the current choppy market scenario, a prudent investor should be on the lookout for stocks that have strong fundamentals, low Price/Earnings (P/E) ratio and strong earnings growth outlook. We use our VGM score to track stocks that have these solid characteristics.
Under the Zack Style Score system, VGM stands for: V – Value, G – Growth and M – Momentum. The VGM score is simply a weighted combination of these parameters and is a comprehensive tool that allows investors to filter through the standard scoring system and pick the winning stocks.
All the five stocks selected herein flaunt a solid Zacks Rank #1 (Strong Buy), a VGM Score of ‘A’, P/E ratio below 16, Estimate Revision (F1) greater than 5% and long-term growth consensus estimate greater than or equal to 5%.
American Eagle Outfitters Inc. AEO – Based in Pittsburgh, PA, the company is a specialty retailer of casual apparel, accessories and footwear for men and women aged between 15 and 25. American Eagle currently operates under the AE Brand, Aerie by American Eagle and an online retailing channel – AEO Direct.
- P/E: 13.42
- Long-term EPS growth: 10%
- Estimate Revision (F1): 7.35%
American Public Education Inc. APEI – The company is an online provider of higher education, focused primarily on serving the military and public service communities. American Public operates in two segments, American Public Education (APUS) and Hondros College of Nursing (HCON).
- P/E: 12.11
- Long-term EPS growth: 5%
- Estimate Revision (F1): 8.74%
Express Inc. EXPR – Based in Columbus, OH, the company is a specialty retailer of women's and men's apparel in the United States. The company operates retail outlets in high-traffic shopping malls, lifestyle centers and street locations across the United States. It also sells its products through its e-commerce website, express.com.
- P/E: 12.43
- Long-term EPS growth: 15%
- Estimate Revision (F1): 6.04%
Forestar Group Inc. FOR – Based in Austin, TX, the company operates in two business segments, viz. real estate and natural resources. In addition, the company also sells wood fiber from its land primarily located in Georgia and leases land for recreational uses.
- P/E: 14.69
- Long-term EPS growth: 10%
- Estimate Revision (F1): 29.23%
Thor Industries Inc. THO – Elkhart, IN-based Thor Industries manufactures a wide range of recreational vehicles (RVs) at various manufacturing facilities located in Indiana and Ohio.
- P/E: 13.09
- Long-term EPS growth: 8.7%
- Estimate Revision (F1): 8.44%
Conclusion
We believe the aforementioned five stocks have solid growth potential to brave the market irregularities in the near term. Positive fundamentals make them good picks for long-term investments as well.
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