Five Ideas for a Watch List

05/27/2014 9:00 am EST


Stephen Quickel

Editor, US Investment Report

From a starting list of 250 candidates, we are adding the following ideas to our Watch List; these stocks meet the qualification of buy candidates, although we do not want to make purchases until a confirmed rally develops, suggests Stephen Quickel, editor of US Investment Report.

The US stock market has simply remained too treacherous to buy into right now, in spite of abundant evidence that economic growth is accelerating and many prime growth stocks have come down in price. Meanwhile, here is what we like about these Watch List ideas:

Affiliated Managers Group (AMG)

Based in Prides Crossing, Massachusetts, this global asset management company serves institutional, mutual fund, and high net worth clients across a broad range of asset classes.

We rode AMG from $80 in 2011 to $217 at the end of 2013. As low as $180 in late April, AMG gapped up to $195 on strong volume, above its 10-week moving average. The Street consensus target is $236.

LKQ Corp. (LKQ)

A Chicago auto parts provider, LKQ tripled to $34 in 2011-13 and, with earnings expected to grow 22% a year, is now available at $28-29 and a moderate forward P/E of 17.

It concentrates on car and truck parts for both OEM and after-market customers in the US and Canada. Our six- to 12-month target price is $37-$38, a bit above the Street consensus of $36.

Mohawk Industries (MHK)

This Calhoun, Georgia, floor covering maker supplies carpet, rug, ceramic, stone, and hardwood products for residential and commercial use in the US and Europe, with stakes in manufacturers in Australia, Brazil, China, and Russia.

Down from $150 to $130 in the current correction, MHK is now at $135 with a consensus target of $162. The P/E is just 14; the PEG is an attractive 0.68 on 21% a year profit growth.

NXP Semiconductors NV (NXPI)

Headquartered in Eindhoven, this Dutch chip maker is best known for its high-performance mixed signal products for automotive, wireless, mobile, and computing applications. Its Nasdaq stock, rising steadily during the US market correction, offers 25% a year earnings growth, a forward P/E of 13, and a PEG of just 0.54.

Precision Drilling (PDS)

Likewise, rising throughout the correction, with just a bit of profit-taking recently on weak volume, this Calgary, Alberta company provides contract drilling and well completion services in Canada and the US.

With oil and gas prices up, and earnings expected to grow 31% a year (including 46% in the coming 12 months), PDS' forward P/E is a mere 11 times next year’s earnings, its PEG is a bargain-basement 0.36.

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