Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.
What are we looking for?
U.S.-traded, large cap stocks set to rebound.
Over the past four weeks, the U.S. markets have been on a wild ride, first selling off almost 10 per cent, then rebounding sharply in the past week. The strength of the last week's rebound has led many market watchers to declare the downturn over with a bottom now in place. Of particular interest is the fact that U.S. small caps – which have been hammered over the past three months – now appear to be rallying hard, leading to a belief that U.S. investors are embracing risk again – a bullish sign.
The screen
We will be using Recognia Strategy Builder to search for reasonably valued U.S.-traded large cap stocks that have been beaten down over the past month.
We begin by setting a minimum market capitalization threshold of $5-billion (U.S.) to focus on larger, more established companies in the American market. Next, we will look for companies with reasonable valuations based on their trailing 12-month price-to-earnings ratios. We will consider companies with P/E ratios of 18 or less based on historical data. We will also focus on companies whose prices have come down significantly in the past month by screening based on four-week price performance. We will select only stocks that are trading down more than 7.5 per cent over the past four weeks.
Finally, we will select stocks with a beta of 1.5 or greater. Beta measures the price correlation of a security compared with the entire market. Stocks with beta of more than 1.0 are more volatile than the market but move in the same direction.
More about Recognia
Recognia is a global leader in quantitative and technical analysis. It is accessible by more than 20 million investors and traders worldwide through leading retail online brokers. Recognia covers 85 exchanges worldwide, and analyzes 72,000 instruments daily including stocks, indexes, ETFs, currencies and futures.
What did we find?
MetLife Inc. has the largest market cap on our screen, at $56.8-billion. This insurance giant has more than 90 million customers in 60 countries. The company has a beta of 1.9 and a trailing P/E of 12.8.
Vancouver-based Teck Resources Ltd. ranks No. 8 and has the highest beta of any company on our screen, at 2.15. Teck's stock price is off approximately 19 per cent over the past month, giving it the worst four-week price performance on our screen.
SanDisk Corp. is one of two technology companies on our screen. The company is more volatile than the market as a whole, with a beta of 1.76, and is trading down more than 10 per cent from where it was four weeks ago.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.