5 Stocks with Strong Fundamentals and Mometum

Each month I update a fundamental/technical screen at Scott's Investments and track the results real-time. July's list of 18 stocks is here and the top 10 rated stocks returned an average of -6.54versus -11.03% for SPY. The entire list of stocks last month returned an average of -9.94%.

The screen looks for the following:

earnings growers still reasonably priced as judged by the PEG ratio
low debt
a history of high return on equity and investment, and
price momentum as gauged by the percentage the stock is trading to its 250 day high.
The stocks are then ranked based on fundamental factors as compiled by stockscreen123.

Now you can follow me on Stocktwits and Twitter!

A mere 5 stocks qualify for this month's list. The market sell-off and volatility in August has trimmed the number of stocks trading near 52 week highs. Apple (AAPL) is number one on this month's list, despite the resignation of Steve Jobs. The company has no debt, a PEG ratio of .73, and ROE of 41.99%. The Jobs resignation could take time to affect the material operations of Apple. It is too early to say if it will have any significant material impact, so until the numbers and momentum say otherwise, Apple remains on the top of this month's list.

Wet Seal Inc. (WTSLA), an apparel store for women, is a repeat stock on this list. The company bounced off its 200 day moving average after its second quarter earnings report. It was highlighted by:

Net sales were $148.8 million compared to net sales of $131.5 million for the prior year second quarter.
Net income was $2.2 million, or $0.02 per diluted share, as compared to $1.6 million, or $0.02 per diluted share, in the prior year quarter. Excluding the after-tax effect of the non-cash asset impairment charges, net income would have been $2.8 million, or $0.03 per diluted share, in the current year quarter, and would have been $2.2 million, or $0.02 per diluted share, in the prior year quarter.
The Company generated cash flows from operations of $9.5 million during the second quarter, and ended the quarter with $147.8 million of cash, cash equivalents and short-term investments, and no debt.
For the third quarter of fiscal 2011, earnings are estimated in the range of $0.05 to $0.06 per diluted share.

From a technical perspective, it is not difficult to see some key resistance levels to watch. If the stock can break the low $5s, it would be a bullish sign. It looks to be forming a triple top if it cannot break this level. The longer the stock waits to break this level, the more bullish a breakout above the level becomes (monthly chart):

Below are the remaining 3 stocks in the list. Giant Interactive has an interesting technical setup as well, as I posted on Stocktwits:

Ticker	Name	Options	Rank	Mkt Cap	PEGLT	Dbt Tot2 EqQ	ROE% 5YAvg
AAPL	Apple Inc.	Here	94.28	355613.5	0.66	0	31.92
BIRT	Actuate Corporation	Here	92.62	299.61	0.64	0	18.35
WTSLA	The Wet Seal, Inc.	Here	78.48	503.62	0.91	0	15.16
NVEC	NVE Corporation	Here	64.59	300.95	0.79	0	24
GA	Giant Interactive Group Inc (ADR)	Here	39.89	1954.94	0.93	0	19.8

Disclaimer: No current positions in stocks mentioned. Please note that Scott's Investments is not a financial adviser. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of Scott's Investments.

Market News and Data brought to you by Benzinga APIs

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Comments