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An Analysis of 5 Key Market Indicators

February 17, 2012 | About:
I have been tracking five stocks over the past month. In the following article, I will analyze five stocks that I believe are positioned well for growth in 2012. I will analyze these picks on a relative value basis and analyze each stock's performance, and make recommendations accordingly.

Rio Tinto (RIO): Looking back one month ago this stock was at $53.56 per share and today it's trading around $62 per share. The S&P, in the same time period, has risen from 1280 to 1325, a gain of 45 points. In addition to capital appreciation the stock also pays a dividend of $1.07 per share on an annual basis with a dividend yield of 1.8% at the stock's current price. However, this dividend is not consistent and has been wide ranging in the past.

The trailing twelve month price to earnings multiple on the stock is 7.69 on earnings of $8.16 per share — compared to the sector average of 10.77, suggesting investors are not willing to pay a premium on the stock. Rio Tinto is a multinational mining corporation based in the UK but the company also has corporate offices in Australia. The company has operations on every continent but the main focus of its mineral explorations are in Europe, Canada and Australia. Rio Tinto's two main competitors in this sector are BHP Billiton Limited (BHP) and VALE S.A. (VALE). BHP Billiton Limited has a five-year expected PEG ratio of 1.85 and VALE has a five year expected PEG ratio of 2.58. Rio Tinto, on the other hand has a five-year expected PEG ratio of only .84 making it relatively cheap by comparison. At current price levels, I still rate this stock a buy.

Tanger Factory Outlet Centers (SKT): One month ago this stock was $28.75 per share and today it's hovering around $30 per share. The stock is also starting to hit new 52-week highs and is in a general upward trend. In the same time period the S&P has risen from 1280 to 1325, a gain of 45 points. The stock also pays a dividend of $.80 per share on an annual basis with a dividend yield of 2.7% at the stock's current price. This dividend was significantly reduced in 2011.

The trailing twelve month price to earnings multiple on the stock is 61.31 on earnings of $.49 per share — compared to the sector average of 30.53, suggesting investors are willing to pay a premium on the stock. Tanger is classified as a real estate investment trust that specializes in acquiring,developing, owning and operating factory outlet shopping centers in 22 states across the United States. The company's two closest competitors are CBL & Associates Properties (CBL) and General Growth Properties Inc. (GGP). CBL & Associates currently has a PEG ratio of 2.58 and General Growth Propertiescurrently has a PEG ratio of 3.26. Tanger Factory Outlet Centers is the cheaper of the trio in terms of earnings growth with a PEG ratio of only 2.31. Based on this information, I rate this stock a buy right now.

ARM Holdings (ARMH): One month ago this stock was trading at $27 per share and today it's hovering around $26 per share. In the same time period the Nasdaq has risen from 2650 to 2859, a gain of 209 points. The stock also pays a dividend of $.11 per share on an annual basis with a dividend yield of .4% at the stock's current price. Yet, this dividend is not consistent and has been wide ranging in the past. The stock itself has been range bound for the past twelve months between $23 per share and $32 per share and very volatile with a beta of 1.51.

ARM Holdings is based in the United Kingdom and is a holding company which owns and licenses intellectual property rights to manufacturers of microprocessors. The company's products target wireless, mass storage, imaging, automotive, industrial, entertainment, security and networking markets . The company is the leading provider of 32-bit microprocessors with 75% market share and its products have been licensed to over 165 semiconductor companies including Intel, Samsung, and Texas Instruments, to name a few. The company's only real competitor in this market is MIPS Technologies, Inc. (MIPS). MIPS Technologies currently has a PEG ratio of -4.89 with a five year earnings growth forecast of 19%. ARM Holdings seems expensive by comparison with a PEG ratio of 2.90 and a five year earnings growth forecast of 18.75% but this is most likely just reflecting the market share differential. I would avoid shares of ARM Holdings for now, until the stock becomes more stable.

Dick's Sporting Goods (DKS): Shares were trading around $36.40 per share one month ago and today they are hovering around $44 per share. In the same time period the S&P has risen from 1280 to 1325, a gain of 45 points. The stock is presently approaching the 52 week high it hit in May of 2011. In addition to this capital appreciation the company also pays out a nice little dividend of $.50 per share on an annual basis with a dividend yield of 1.2% at the stock's current price. The trailing twelve month price to earnings multiple on the stock is 21.91 on earnings of $1.93 per share which is just about in line with the sector average of 21.34.

In recent news the company stated that it has been hurt slightly by warmer than expected weather but a new stock buyback plan warmed investors none the less-- sending the stock into the upper quartile of its yearly range. The company's two main competitors in this market are Footlocker Inc. (FL) and Walmart Stores, Inc. (WMT). Footlocker currently has a PEG ratio of 1.46 and Walmart Stores has a PEG ratio of 1.26. With Dick's Sporting Goods' PEG ratio of 1.24, it is slightly cheaper by comparison. I still rate this stock a buy at current price levels.

E.I. du Pont de Nemours & Company (DD): Looking back one month ago shares were trading at $48.10 per share and today they are around the $52 mark. In the same time period the Dow Jones Industrial Average has gone from 12,300 to 12,862 — a gain of 562 points. In addition to capital appreciation the stock also pays a dividend of $1.64 per share on an annual basis with a dividend yield of 3.2% at the stock's current price. This dividend has remained constant since 2008.The trailing twelve month price to earnings multiple on the stock is 14.13 on earnings of $3.68 per share — compared to the sector average of 10.90, suggesting investors are willing to pay a premium on the stock. And if insider trading is any indicator of a stocks future prospects at least one insider is bullish on the future.

The company's two closest competitors are Monsanto Company (MON) and Dow Chemical Company (DOW). Monsanto Company currently has a PEG ratio of 1.95 with a five year earnings growth forecast of 12% and Dow Chemical Company has a PEG ratio of .88 with a five year earnings growth forecast of 13.5%. E.I. du Pont currently has a PEG ratio of 1.32, making it moderately priced by comparison, with a five-year earnings growth forecast of 9%. I would avoid shares of E.I du Pont de Nemours & Company for now.

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