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During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
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Get Four
|  | JUNE 11, 2004
 STOCK SCREENS By Michael Kaye, CFA Digging for Undiscovered Gems S&P hunts for promising stocks that fly under analysts' radar in this week's screen The old question "If a tree falls in the forest and no one hears it, does it make a sound?" may have a corollary in the investing world: If a company posts solid results, and analysts aren't around to notice, is it still worth an investor's consideration? Of course, many large-cap stocks are followed by a sizable number of Wall Street analysts. (Microsoft [MSFT ], for example, is followed by nearly 30 analysts, according to financial-data provider I/B/E/S.) But some attractive issues could come in under Wall Street's radar, at least in terms of analytical coverage. We decided to look for some of them in this week's screen. We started by searching for companies of decent size -- a market cap of $250 million or greater -- that have posted an earnings-per-share growth rate of at least 17% over the last three years and at least 15% over the last five years. WEAVING THE FILTER. Then we looked for a sign that the strong performance has largely escaped the investing community's notice. We sifted for those companies for which two or fewer analysts have issued earnings estimates, based on data from I/B/E/S. (With a Wall Street following of that size, companies could presumably skip the hotel ballroom and hold analyst meetings at the local Starbucks.) But of course, underfollowed doesn't necessarily mean unworthy of attention. And that brings us to our final filter: Each stock had to carry an S&P Fair Value ranking of "4" or "5." S&P's proprietary Fair Value quantitative model seeks to outperform the market by buying undervalued stocks and selling them when they reach maximum price appreciation. Under the system, stocks with a ranking of "5" are considered the most undervalued, while stocks ranked "4" are considered moderately undervalued. When we finished running the numbers, these names emerged:
 Kaye is an analyst for Standard & Poor's Portfolio Services All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc. Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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