Stock Screens

By Michael Kaye, CFA

Under the Street's Radar

This week, S&P scouts for the stars of tomorrow by identifying underfollowed stocks with strong fundamentals

  STORY TOOLS

Printer-Friendly Version

E-Mail This Story

Reader Comments

  RELATED ITEMS

Stock Screens Archive

  PEOPLE SEARCH

Search for business contacts:

First Name :

Last Name :

Company Name :

PREMIUM SEARCH
Search by job title, geography and build a list of executive contacts

Being well-known has its advantages. Prominent local physicians always seem to get reservations at crowded restaurants. Movie stars get goody bags filled with swank gifts just for attending parties. And stocks with extensive coverage by Wall Street analysts often fetch higher valuations than those with a smaller following.

But the fact that a stock gets little notice from analysts doesn't mean it's unappealing. Our goal for this week's screen was to turn up some underfollowed names with attractive characteristics. In our view, stocks with these types of financial statistics are likely to garner more attention from the analyst community in the future.

To take care of the "underfollowed" part, we first looked for outfits with coverage from no more than four Wall Street analysts, based on data from Compustat. (By contrast, tech behemoth Microsoft [MSFT] is followed by 33 analysts, while General Electric [GE] has 19 spreadsheet scouts tracking its every move.)

INVESTOR INTEREST.  Of course, we wanted to be certain these more-obscure names had attractive fundamentals. So we next looked for those with a price-to-earnings growth (PEG) ratio less than 1 -- well below the S&P 500 average of 1.4 -- and a profit margin greater than 5.8%, twice the market median.

Next, we wanted to make sure that while the Street analysts were largely looking the other way, other market pros -- institutional investors -- were paying attention. We sifted for stocks with institutional ownership (as calculated by Compustat) greater than 40%. Also, the percentage of institutional ownership between the last quarter and the quarter before that had to be in the highest 20% of all public companies.

To avoid speculative issues, each stock had to have a share price above $5 and a market capitalization above $500 million. When we finished our screen, these six names emerged. Maybe one day we'll be able to say "we knew them when":

Company	Ticker
ASV Inc.	ASVI
Bronco Drilling	BRNC
CompuCredit	CCRT
Fremont General	FMT
Intralase	ILSE
ViroPharma	VPHM

Kaye, an analyst for Standard & Poor's Portfolio Services, is the author of The Standard & Poor's Guide to Selecting Stocks

 BW MALL   SPONSORED LINKS

• Learn about the Falling US Dollar  Free Forex Starter Kit from GFT. Includes a Risk-Free Practice Account.
• Free Hiring & Retention Guide  Hire, train and retain great employees with Profiles' system. Learn more today.
• Work doesn't have to suck...   Unleash your team's talent with web-hosted collaborative innovation software from OpenTeams.
• Men's Custom Dress Shirts  Execshirts.com - Custom tailored dress shirts for men, shipped free within one week for only $59. You choose the fabrics and the options and we do the rest, unbelievable shirts at an unbeatable price.
• Office Equipment / Low-Price Guarantee  Office Zone has thousands of office equipent and products to choose from. Products include laminators, binding machines, paper shredders, cutters, furniture and more. Browse through our wide selection and order your office equipment today!

Buy a link now!

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

Advertising | Special Sections | MarketPlace | Knowledge Centers

Terms of Use | Privacy Notice | Ethics Code | Contact Us

Copyright 2000- 2008 by The McGraw-Hill Companies Inc.
All rights reserved.