MILLBURN, N.J. (Stockpickr) -- Over the years have been consistent in the themes that I apply to my fundamental research. I tend to foucs on earnings growth at a reasonable price, a strong balance sheet and financial condition, and dividends -- though not always at the same time.
This week, I'm combining these themes to seek out the best companies that fit the following criteria:
Earnings-per-share revisions greater than the S&P 500 over the past month. I used the past month because that captured the heart of earnings season.
Price-to-earnings ratio less than that of the S&P 500 on a market-capital-weighted average.
Standard & Poor's credit rating of BBB or better; I was only interested in investment-grade companies.
Dividend yield greater than the S&P 500 dividend yield, which now stands at about 2.2%.
The search, using the Bloomberg Professional Service, yielded 14 results based on those criteria. To refine that list, I decided to apply some disciplined analysis over and above those results.
The first decision that I made was to exclude those stocks of financial companies because, as we have seen, with sovereign debt, banks, broker-dealers (witness what just happened with
(MFGLQ: Pink Sheets), insurance companies and other financial institutions, the credit ratings agencies have a poor track record and are unreliable.
I then carefully went through the data to insure accuracy of the data points, double-checking with other informational sources such as Telemet Orion, Yahoo! Finance and company financial reports. This process knocked out nine companies from the search results.
Let's take a closer look at the following
is the world's leading semiconductor manufacturer. While sales of personal computers are no longer a huge growth factor for Intel, the boom in mobile computing devices is propelling future growth for the company. Furthermore, Intel's engineering has allowed it to maintain and expand its technological advantage over competitors such as
Advanced Micro Devices
Recently, Intel reported third-quarter earnings of 65 cents, which was better than consensus estimates of 61 cents. This resulted in upward full-year EPS consensus revision of 9 cents for the company from 47 analysts. For the fourth quarter, analysts expect Intel to earn 69 cents, which is 4 cents more than it was a month ago.
Intel, one of the
, shows up on a list of
, along with
, is one of the three largest publicly traded commercial railroad companies in the U.S. since Burlington Northern was acquired by
. Railroads are increasingly important in the shipment of raw materials and finished goods within our nation and to the coasts for transportation to our many shipping partners, especially in Latin America, Europe and the Far East.
Recently, Norfolk Southern reported third-quarter earnings of $1.59, which was better than consensus estimates of $1.41. This resulted in upward full-year EPS consensus revision of 19 cents for the company from 26 analysts. CSX and Union Pacific did not fare as well as Norfolk Southern when it came to third-quarter earnings performance and upward revisions. For the fourth quarter, analysts expect Norfolk Southern to earn $1.38. which is 5 cents greater than it was a month ago.
Norfolk Southern is one of TheStreet Ratings'
is one of the premier media content providers in the world, operating in three segments: filmed entertainment, TV/cable networks and publishing. Among its highly recognizable brands are HBO, Cinemax, CNN, TBS, TNT, Sports Illustrated, People, Fortune, Warner Brothers and New Line Cinema. Long known for one of the worst mergers and acquisitions of all time with the original America Online (
was spun off in 2009). The company has had to trim itself down by cutting debt, focusing on cash flow and spinning off companies.
Time Warner Cable
was spun off in its entirety in 2009; prior to that it was a tracking stock of which Time Warner held an 84% stake. As part of that spinoff, Time Warner offloaded a considerable amount of long-term debt (an estimated $20 to $22 billion) onto Time Warner Cable's balance sheet. Now the more svelt Time Warner can operate as a cash cow, paying off more debt, repurchasing stock and paying a dividend. I expect a dividend increase in early 2012.
The rapid emergence of digital delivery of content will no doubt favor the content providers in the future, which will work to Time Warner's advantage.
Time Warner reported earnings of 79 cents, which was better than consensus estimates of 76 cents. This resulted in upward full-year EPS consensus revision of 1 cent for the company from 11 analysts. For the fourth quarter, analysts expect Time Warner to earn 86 cents, which is unchanged from a month ago but 2 cents greater it was two months ago.
Time Warner, one of the
, shows up on a recent list of
is a global aerospace and defense contractor. The company consistently beats analysts' consensus estimates and generates high single-digit to low double-digit earnings growth. While budgetary concerns in Washington, D.C., may lead one to believe that General Dynamics may feel the fiscal pinch, I think that may be a naive generalization. With the Arab Spring continuing into the Arab Fall and likely beyond, continued problems in Afghanistan, piracy on the high seas and the increasing military needs of nations with emerging economies, General Dynamics should continue to generate reasonable earnings growth.
Selling 8.78 times 2011 estimates and 8.39 times forward estimates with a near-3% dividend, this company's shares are quite reasonably valued. Recently, General Dynamics reported third-quarter earnings of $1.83, which was better than consensus estimates of $1.77. This resulted in upward full-year EPS consensus revision of 4 cents for the company from 16 analysts. For the fourth quarter, analysts expect GD to earn $1.98, which is 3 cents greater than it was a month ago.
General Dynamics, one of the
, shows up on a recent list of
is a global manufacturer and distributor of electrical and electronic products for commercial and residential construction. You might think that Hubbell is in the wrong business given the depressed nature of the housing and commercial construction in industry in the U.S. but that would be short-sighted. The company has returned robust results during the construction boom and after its bust.
Recently Hubbell reported third-quarter earnings of $1.37, which was better than consensus estimates of $1.28. This resulted in upward full-year EPS consensus revision of 9 cents for the company from seven analysts. For the fourth quarter, analysts expect Hubbell to earn $1.09, which is 3 cents greater than it was a month ago.
To see these stocks in action, check out the
-- Written by Scott Rothbort in Millburn, N.J.
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At the time of publication, Rothbort was long INTC and BRK.B, although positions can change at any time.
Scott Rothbort has over 25 years of experience in the financial services industry. He is the Founder and President of
, a registered investment advisor specializing in customized separate account management for high net worth individuals. In addition, he is the founder of
, an educational social networking site; and, publisher of
. Rothbort is also a Term Professor of Finance at Seton Hall University's Stillman School of Business, where he teaches courses in finance and economics. He is the Chief Market Strategist for The Stillman School of Business and the co-supervisor of the Center for Securities Trading and Analysis.
Mr. Rothbort is a regular contributor to
TheStreet.com's RealMoney Silver
website and has frequently appeared as a professional guest on
Fox Business Network
and local television. As an expert in the field of derivatives and exchange-traded funds (ETFs), he frequently speaks at industry conferences. He is an ETF advisory board member for the Information Management Network, a global organizer of institutional finance and investment conferences. In addition, he is widely quoted in interviews in the printed press and on the internet.
Mr. Rothbort founded LakeView Asset Management in 2002. Prior to that, since 1991, he worked at Merrill Lynch, where he held a wide variety of senior-level management positions, including Business Director for the Global Equity Derivative Department, Global Director for Equity Swaps Trading and Risk Management, and Director for secured funding and collateral management for the Global Capital Markets Group and Corporate Treasury. Prior to working at Merrill Lynch, within the financial services industry, he worked for County Nat West Securities and Morgan Stanley, where he had international assignments in Tokyo, Hong Kong and London. He began his career working at Price Waterhouse from 1982 to 1984.
Mr. Rothbort received an M.B.A., majoring in Finance and International Business from the Stern School of Business, New York University, in 1992, and a B.Sc. in Economics, majoring in Accounting, from the Wharton School of Business, University of Pennsylvania, in 1982. He is also a graduate of the prestigious Stuyvesant High School in New York City. Mr. Rothbort is married to Layni Horowitz Rothbort, a real estate attorney, and together they have five children.