|Emerging Value Edition (STX CAST XRTX GCI EDMC
WCC TER ASIA TBI PIR THO JBL ITT ARW ASNA HD)
Today marks the debut
of Briefing.com's brand new idea generation system for value investors: Emerging
Emerging Value is a proprietary system that provides a concentrated list of
stocks featuring low valuations across a variety of metrics, as well as healthy
yields and shareholder-friendly management teams. What's unique about our value
system is that it is explicitly designed to avoid one of the primary pitfalls of
value investing -- getting caught in "value traps" -- by combining traditional
fundamental valuation metrics with one technical metric that is a good proxy for
institutional money flows: 6-month Relative Strength.
Similar to Emerging Growth, Emerging Value is a purely quantitative system
that combines both fundamental and technical criteria to generate a new list of
top-ranked value stocks every week. In fact, EG readers will be immediately
familiar with the delivery and format of the EV content, which will feature
updated rankings on a weekly basis, intraday spot analysis, company fundamental
reports, and weekly technical set-ups posted within the Friday Technical
In practice, the types of names you'll typically see on our value rankings
are turnaround stories that market participants are betting will succeed,
cyclical companies that are emerging from the trough in their cycle, or
companies that are starting to benefit from more favorable commodity prices
(just to name a few). And as noted above, our system is also set up to emphasize
companies that have decidedly shareholder-friendly management teams, as
evidenced by attractive dividend payouts and/or active share buyback programs.
Emerging Value reports will appear on the Emerging Growth page, with updated
rankings published every Wednesday (EV replaces the Small-Cap Edition, which was
merged into the Monday EG rankings). In order to distinguish the value ideas
from the growth ideas, all EV content will be published under the new VALUE
ticker rather than the existing GROWX ticker.
Since Emerging Value is a brand new system, here are some miscellaneous
thoughts I'd like to mention to users:
- We've had an almost uninterrupted rally in stocks over the past month,
so even though the components you see below are value stocks, a number of EV
names will look a bit extended right from the get-go. At this stage buying
on pullbacks might be the better strategy, especially since we're just
getting into the thick of earnings season.
- We use a Composite Valuation ratio to determine value, which ensures
that a company is cheap across a variety of metrics (see the
User's Guide for more details on this). However, as you scan through the
New Buy List you'll often see cases where a company may appear to be "fairly
valued" according to an individual metric, but cheap according to the
Composite ratio, which is an aggregate measure. This is normal.
- The number of companies that are included in the EV New Buy List will
vary each week according to how many meet the criteria, which is different
from Emerging Growth, which has a fixed New Buy List of 25 companies. The
New Buy List for EV will however be capped at 25 companies.
- What we said on Monday concerning Emerging Growth's New Buy List also
applies to EV: the names that make up the Emerging Value New Buy List all
share attributes that qualify them to be considered for new
purchases, but investors should use their usual common sense to decide which
stocks have the most room to run going forward.
- During some points in the cycle growth outperforms value, and in other
phases value outperforms growth. So think of EG and EV as two complementary
systems that you can use to ensure a steady stream of ideas no matter which
style is in favor.
For descriptions of each new addition to the EV
rankings, please see the table below.
Note to readers -- The following
components are scheduled to report earnings within the next week:
- TER: Reports today after the close.
- WCC: Reports tomorrow before the open.
- GCI: Reports Monday, January 30 before the open.
- STX: Reports Tuesday, January 31 after the close.
- ARW: Reports Wednesday, February 1 before the open.
- EDMC: Reports Wednesday, February 1 after the close.
- Emerging Values Users Guide (1/24/12)
- Preview of Upcoming Changes: Emerging Growth 3.0 & The Brand New Emerging
Value System (1/13/12)
All times ET.
- Wednesday, January 25: TER
reports after the close.
- Thursday, January 26:
Numerous companies report earnings, call times are indicated in parenthesis:
BC (11am), KMT (9am), NUE (2pm),
SHW (11am) and WCC (11am) report before the open
while AMGN, EMN, FICO (5pm), KLAC (5pm),
MCRL (4:30pm), QLGC (5pm), SYNA
(5pm) and TKR report after the close; JBL
Annual Meeting at 10am ET; TER earnings call at 10am ET.
- Friday, January 27:
NWL reports before the open with a call at 10am ET; Earnings calls:
EMN at 8am ET, TKR at 11am ET.
- Monday, January 30: GCI
reports before the open with a call at 10am ET; RCII
reports after the close.
- Tuesday, January 31:
RCII earnings call at 10:45am ET; PLT (5pm) and
STX (5pm) report after the close with call times indicated.
- Wednesday, February 1: ARW
(1pm) and MRO (2pm) report before the open with call times
indicated; BYI (4:30pm), EDMC and
MKSI report after the close with call times indicated.
The following table contains a list of stocks that we believe should be
particularly attractive to value and yield investors who want to avoid "value
traps." EV components are derived from a quantitative screen and ranking system
that is designed to uncover companies that possess a combination of low
valuations across a variety of metrics, superior 6-month Relative Strength, and
shareholder-friendly managements that pay healthy dividends and/or have active
share buybacks in place. There are no growth or market cap criteria applied to
Companies in the New Buy List section must have a Composite Valuation Rank ≥ 80
and an RS Rank ≥ 90, and are sorted by Relative Strength in descending order.
Companies in the Holds section must have a Composite Valuation Rank higher than
the All Stocks mean, and must have an RS Rank ≥ 80; these companies are also
sorted by Relative Strength in descending order. (Note: The valuation and RS
requirements are factored in at the time we run the screen, which is typically
24 hours before publication, so there could be some slight discrepancies between
the displayed values on Wednesday and the hard caps.)
- Lead Analyst & Developer of the Emerging Value system: Jim Busch
- Fundamental Analysts: Robert Reid; Dennis Hobein; Jeff Eckmann; Chris
- Technical Analyst: Jon Henninger