When sourcing investment ideas, we utilize an investment system that replicates the strategies of great investors and other time-tested approaches through a set of computerized strategies, explains Justin Carbonneau, editor of Validea.
From Warren Buffett to Peter Lynch to Ben Graham, great investors have shared their investing knowledge and wisdom and our expertise is uncovering these investment strategies and extracting the precise fundamentals used to construct each one.
We run close to two dozen approaches that range from deep value, value and quality, growth-at-a-reasonable price, growth and momentum.
Our models rank and score all stocks that trade in the U.S. on a daily basis and we tend to favor stocks that pass multiple models simultaneously because this gives us confidence that there are dozens, if not hundreds, of financial and valuation data points being assessed all at one time.
Covenant Logistics (CVLG) — my Top Pick for aggressive investors — is a logistics and trucking company with a strong 35-year business history.
Started by a husband-and-wife team in 1986, the company prides itself on its unique values-based corporate culture. It’s not just the culture and operations that standout — the fundamentals do as well.
The stock scores 80% or by eight of our guru models, including the growth-at-a-reasonable price strategy outlined by Peter Lynch. One of the key variables in Lynch’s approach was the “PEG” ratio, which is the Price-to-Earnings ratio (5.2) divided by the long-term earnings growth rate (40%).
The PEG for Covenant is a very attractive 0.13 at the current time. It’s not just the valuation either — the company boasts a return-on-equity of over 32%, has relatively low levels of debt, and has seen its stock outperform the vast majority of others over the past year.
The combination of value, growth, quality and momentum make the shares of this transportation company highly attractive. With a market cap of a little over $500M this is a smaller firm but one that gives investors a good opportunity to produce solid returns by investing in a well-run and growing business.