BOSTON ( The Street Ratings) -- Yesterday I wrote that stocks are cheap given the disconnect between stock yields and Treasuries. I provided a list of 20 top-yielding, top-rated companies that I would own, rather than a government bond that gives me only 2% a year.
Alas, those types of companies, such as
, might not be for everyone. Higher-quality companies (dividend-yielding, high return on equity) have outperformed the stock market this year, while high-beta companies have underperformed. Double-dip chatter, European contagion and other macro concerns have led investors to rein in the risk and opt for safer investments. (Hence, one reason Treasuries are where they are today.)
So while dividend-paying stocks are a good option, it makes sense to consider the possibilities. If investors assume more risk based on an increased level of confidence, higher-beta stocks will likely outperform. Another potential scenario is that economic conditions will deteriorate and put us into another recession. In that case, dividend-paying, safer companies would likely outperform. Whatever the case, it pays to diversify. If your entire portfolio consists of high-dividend stocks, be aware of the consequences.
Today I'm offering a more aggressive list of stocks. All are rated "buy" by
quantitative equity model. In addition, I've looked for companies with above-average growth in revenue, earnings and EBIT; namely, greater than 25% over the past year. Also, the stocks must have positive quarter-over-quarter growth in earnings and revenue. And I've also mandated that each stock have a beta of greater than 1.
Consider these stocks to be more aggressive. I wouldn't consider these names to be speculative or uber-risky, so if you're looking for one or two stocks to help increase the beta exposure in your portfolio, these stocks would be a good start.
Some names you might expect are included in the mix --
(PCLN - Get Report)
Green Mountain Coffee
and some you might not, such as
(CAT - Get Report)
CAT has been a big beneficiary of infrastructure spending in emerging markets, yet has fallen due to concerns over slowing growth in Japan and China. S&P research forecasts $9.10 earnings per share in 2012, implying a forward P/E of just 9.75. The recent purchase of mining-equipment company Bucyrus has boosted profits, while synergies from the deal should lead to improved margins (based on cost savings). Our model has a $116 price target on shares of CAT, which implies the potential for 30% upside. And as a bonus, you'll also collect a nice dividend, currently 2.1%.