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The World According to GARP
11/01/2013 9:00 am EST
Our Quadrix stock-rating system is not designed to focus on the highest growth stocks nor the deepest value stocks. Rather, the model is designed to reward stocks with broad-based strength, says Chuck Carlson, editor of DRIP Investor.
Our systems look across both growth and value metrics, as well as variables related to financial strength, operating momentum, quality, earnings estimates, and relative share-price performance.
In short, Quadrix works well at finding steady growers with broad-based fundamental strength and reasonable valuations. This is a variation on the GARP (Growth At a Reasonable Price) style of investing.
GARP has performed quite well this year, and I expect the market will continue to reward growth stocks selling for reasonable valuations.
Below, we look at three stocks with direct-purchase plans that are positioned nicely to benefit from continued support for GARP investing. Each of the stocks scores at least 80 (out of a possible 100) in three important Quadrix areas—Overall, Value, and Momentum.
My favorite insurance-related stock is Chubb (CB). The company is a leading provider of property and casualty insurance. The company has handily beaten earnings estimates in each of the last four quarters, and I suspect that streak will continue over the next few quarters.
The stock yields nearly 2%, and the dividend should be hiked within the next six months. Chubb is the type of Steady Eddie stock that rarely is at the top of the leader board in a given year, but just churns out consistent returns year-in, year-out.
One somewhat surprising stock on the list is a utility, New Jersey Resources (NJR). Utilities don't typically score well in our Quadrix system, as a result of their slow-growth ways.
That New Jersey Resources scores well in both growth, and value metrics, speaks well of the stock's total-return potential. I like the yield of nearly 4%, and dividend growth should be above-average for the group. The stock ranks as one of the more attractive plays in the utility sector.
The final stock I'll mention on the list is Skyworks Solutions (SWKS). The company's high-performance analog semiconductors are used in a variety of markets, including handsets, wireless infrastructure, aerospace/defense, automotive, CATV, energy, medical, and test and measurement.
Some of the company's components can be found in Apple's new 5S phone. Skyworks is not the type of tech company that investors usually equate with value stock. However, the company's Quadrix Value score of 87 indicates that the shares are far from overpriced.
And growth potential remains attractive. For investors looking for a growth-value combo play with some zip potential, these shares should fit the bill.
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