Quickel Picks: 5 PEG Values

10/09/2013 7:00 am EST


Stephen Quickel

Editor, US Investment Report

Yes, the market volatility has been unsettling to many investors. Our own approach in this kind of market is to rely on sound stock-picking to steer us into top-flight stocks and keep our portfolios in play for continued gains, notes Stephen Quickel, Editor of US Investment Report.

Not everything we recommend will go up or resist downturns. But we can minimize the damages by seeking out the most attractive growth stocks we can find and protecting them with firm stop-loss limits.

Hunkering down in cash will preserve capital, but can also block us from participating in the gains from a steadily improving economy.

On average, the new stocks on our recommended list trade within two percentage points of their highs, indicating strong momentum. Their collective expected earnings growth is a very rapid 23.2% a year, with an average estimated earnings gain for the next 12 months of 70%. Heady numbers!

The average forward P/E, based on 2014 earnings, is 16.8, giving them a very attractive PEG ratio of just 0.75. Here are thumbnail descriptions of each company and why we like their stocks.

In consumer goods we are adding G-III Apparel Group Ltd. (GIII) based in New York. GIII designs, manufactures, and markets a range of women's apparel and accessories and is rated Buy or Strong Buy by 6 of 7 Street analysts covering it.

In auto making, gigantic General Motors (GM) is attracting unusual attention, with projected 5-year earnings growth of 17.5% and a 44% bottom-line bulge expected in the 12 months ahead. Its PEG is a mere 0.46, with 16 of 19 analysts calling GM a Strong Buy or Buy.

In internet services, small-cap investors might check out Dallas-based NQ Mobile (NQ), which focuses on security, privacy, and productivity.

Revenues are headed to $250 million in 2014 from $90 million in 2012, with earnings expected to grow 30% to 40% a year. NQ has shot from 8 to 23 since July, yet trades at reasonable valuations.

In air transportation we like Delta Air Lines (DAL) with its worldwide hub system, its varied fleet of aircraft, and eye-catching projected earnings growth of 27% a year. DAL bought 49% of Virgin Atlantic this summer. Its P/E is 8, its PEG just 0.29

In financial services we like Cardtronics (CATM) of Houston, with its extensive network of automated teller machines (ATMs) in the US, UK, Canada, and Mexico. The stock spurted from $30 to $37, but with rising revenues, earnings, and analyst support, it could add another 20% to $45 or more.

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