4 Stocks on Winning Streaks

06/26/2014 7:00 am EST

Focus: STOCKS

The following four stocks have outperformed the S&P 500 over the last month and Mary-Lynn Cesar of Kapitall.com tracks their performance in the charts listed below.

The S&P 500 closed at a record high on Wednesday after Federal Reserve Chair Janet Yellen expressed her confidence in the state of the economic recovery, as well as the central bank's intention to keep interest rates low until next year.

The SPX gained 0.8% following Yellen's comments, ending the day at 1,956.98 in its 20th all-time high of the year.

Since mid-May, the SPX has achieved several important milestones. The index crossed 1,900 for the first time ever on May 14 for a brief period, then closed above the 1900 benchmark again on May 23. Then, on May 30, the SPX closed at an all-time high of 1,940.46, marking the 17th closing record of the year.

This inspired us to run an S&P-centric screen to create the following list of stocks. We began by screening for stocks on winning streaks, which means that they've been outperforming the SPX. Winning streaks are measured by a persistence of consecutive days during which a stock earned a greater return than the index and little persistence of days in earning a smaller return.

We then narrowed down that group by screening for stocks that are undervalued relative to earnings growth, with a price/earnings to growth (PEG) ratio below 1. This valuation ratio incorporates expectations of future earnings into its calculations, and is calculated by dividing a stock's price-to-earnings (P/E) ratio by its annual earnings per share (EPS) growth. The higher the earnings growth, the lower the PEG ratio. And when a stock has a PEG under 1, it can be considered undervalued.
We were left with four stocks on our list. Do you think these stocks on winning streaks will continue to outperform the SPX? Use this list as a starting point for your analysis, and let us know what you think in the comments.

chart
Click to Enlarge

  • Approach Resources, Inc. (AREX): Engages in the acquisition, exploration, development, and production of oil and gas properties in the United States. Market cap at $869.62M, most recent closing price at $22.09.

The stock's average daily alpha versus the SPX stands at 0.78% (measured close to close, over the last month). During this period, the longest winning streak lasted seven days (i.e. the stock's daily returns outperformed the SPX for seven consecutive days). The longest losing streak lasted two days (i.e. a win streak / losing streak ratio of 3.5).

PEG at 0.65.

  • Gruma S.A.B. de CV (GMK): Engages in the production, marketing, distribution, and sale of tortillas, corn flour, wheat flour, and related products. Market cap at $5.07B, most recent closing price at $46.28.

The stock's average daily alpha versus the SPX stands at 0.77% (measured close to close, over the last month). During this period, the longest winning streak lasted five days (i.e. the stock's daily returns outperformed the SPX for five consecutive days). The longest losing streak lasted two days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.19.

chart
Click to Enlarge

NEXT PAGE: Next 2 Winning Stocks

|pagebreak|

3. Micron Technology Inc. (MU): Engages in the manufacture and marketing of semiconductor devices worldwide. Market cap at $33.89B, most recent closing price at $31.81.

The stock's average daily alpha versus the SPX stands at 0.78% (measured close to close, over the last month). During this period, the longest winning streak lasted five days (i.e. the stock's daily returns outperformed the SPX for five consecutive days). The longest losing streak lasted two days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.68.

4. Triangle Petroleum Corporation (TPLM): Engages in the acquisition, exploration, and development of unconventional shale oil resources in the Bakken Shale and Three Forks formations in the Williston Basin of North Dakota and Montana. Market cap at $1.03B, most recent closing price at $11.93.

The stock's average daily alpha versus the SPX stands at 0.77% (measured close to close, over the last month). During this period, the longest winning streak lasted five days (i.e. the stock's daily returns outperformed the SPX for five consecutive days). The longest losing streak lasted two days (i.e. a win streak / losing streak ratio of 2.5).

PEG at 0.29.

chart
Click to Enlarge

By Mary-Lynn Cesar of Kapitall.com

Related Articles on STOCKS