This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bill Gunderson's Radio Play of the Day: Watsco

Stocks in this article: WSO

Let's begin with the construction and housing sector:

Data from Best Stocks Now App

Small-cap equities are still my No. 1 asset class. And the building and construction sector has been at, or near, the top of my sector rankings for almost a year.

Data from Best Stocks Now App

As you can see, Miami-based Watsco is a small-cap in the one of the best sectors right now. Watsco is an uncomplicated company. It distributes air conditioning, heating and refrigeration products for the replacement and homebuilding markets. Watsco passes my performance test:

Data from Best Stocks Now App

As you can see, the stock has outperformed the market by a wide margin over one, three, five and 10 years. It rose 9.2% in 2008, when the market tumbled 39%! When I compare the performance of Watsco to the 3,200 stocks that I follow, it scores a high-performance grade.

My second test is valuation. Performance and momentum is one thing, but valuation is also a critical piece to the puzzle:

Data from Best Stocks Now App

When I take next year's analyst's consensus EPS estimate of $4.31 per year and extrapolate it out by a 16.7% growth rate over the next five years, I establish an earnings estimate for five years from now. Of course, a lot can happen between now and then, but stocks trade on expectations. When expectations change, stock prices follow.

Furthermore, when I apply a multiple that I deem to be appropriate to that estimate, I establish a five-year price target that still is a great deal higher than the current price of the stock. The stock passes my valuation test.

My third test is visual. I never buy a stock without checking a one-year chart:

I don't buy stocks that are in downtrends -- sorry, Apple! I don't really like sideways trends either. Something needs to happen first. Is it going to break to the downside or the upside? I don't like to buy extended trend either. My favorite chart pattern is a fresh, new breakout.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs