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James Li
James Li
Articles (775)  | Author's Website |

Peter Lynch Screens Identify Opportunities for 2019

GuruFocus value screener highlight

As the stock markets continue fluctuating over the first three weeks of 2019, investors continue seeking good opportunities for the months ahead.

According to the Peter Lynch price-earnings screen, the top three stocks are Hennessy Advisors Inc. (NASDAQ:HNNA), Westlake Chemical Corp. (NYSE:WLK) and Eagle Materials Inc. (NYSE:EXP).

Dow begins rebounding from two-year low, yet volatility remains high

Despite trading near an intraday high of 24,854.36, up approximately 301 points from Thursday’s close of 24,553.24, the Dow Jones Industrial Average closed at 24,737.20 on Friday, down approximately 117 points from the intraday high. Market volatility remains high on several ongoing factors, including the government shutdown, which was temporarily resolved on Friday, and the U.S.-China trade war.

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Stocks gained as President Trump announced a deal with Congress that funds the government until Feb. 15. CNBC columnist Michael Sheetz quoted two analysts with different perspectives: while Fundstrat Global Advisors strategist Tom Block said the reopening of the government is a “positive for Wall Street,” KKM Financial CEO Jeff Kilburg said traders are expected to “take profits” as the D.C. dysfunction continues.

Value screeners recap

As we saw in previous articles, GuruFocus offers a wide variety of value screens, including Benjamin Graham’s net-net screen and the Buffett-Munger screen, which selects stocks based on Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)’s investing criteria. Table 1 shows the value screener record counts for each of our value screens, located under the Screeners tab, over the past week for the U.S. region.

Screener

Jan. 21

Jan. 22

Jan. 23

Jan. 24

Jan. 25

Graham Net-Net

279

283

282

283

281

Undervalued Predict

68

69

67

71

71

Buffett-Munger

25

27

26

28

27

Peter Lynch PE

47

49

48

47

55

Peter Lynch PS

162

169

162

161

174

Peter Lynch PB

222

234

229

222

255

Lynch p2ebitda

226

225

215

219

249

Hist Low PS

44

46

49

47

44

Hist Low PB

62

63

63

62

60

High Div Yield

73

72

71

70

63

Magic Formula

4282

4286

4188

4254

4234

Table 1: Value screener record for the U.S.

Tables 2 and 3 show the value screener record counts for Europe and Asia.

Screener

Jan. 21

Jan. 22

Jan. 23

Jan. 24

Jan. 25

Graham Net-Net

296

272

272

276

275

Undervalued Predict

98

81

78

86

88

Buffett-Munger

47

41

39

43

44

Peter Lynch PE

56

45

44

46

44

Peter Lynch PS

153

128

119

137

132

Peter Lynch PB

203

162

163

168

175

Lynch p2ebitda

258

202

192

206

195

Hist Low PS

38

40

44

41

39

Hist Low PB

50

51

54

52

50

High Div Yield

103

101

102

101

99

Magic Formula

5953

5274

5182

5243

5293

Table 2: Value screener record for Europe

Screener

Jan. 21

Jan. 22

Jan. 23

Jan. 24

Jan. 25

Graham Net-Net

643

649

649

646

639

Undervalued Predict

69

71

73

70

69

Buffett-Munger

75

77

77

75

75

Peter Lynch PE

75

74

76

74

74

Peter Lynch PS

123

126

128

121

120

Peter Lynch PB

142

140

141

136

132

Lynch p2ebitda

148

153

152

149

147

Hist Low PS

128

125

128

41

130

Hist Low PB

139

132

142

52

133

High Div Yield

27

26

26

24

25

Magic Formula

12617

12634

12635

12632

12631

Table 3: Value screener record for Asia

Legendary investor Peter Lynch, author of “One Up on Wall Street,” developed a chart containing two financial series: a company’s stock price and the price at a price-earnings ratio of 15. GuruFocus displays a Peter Lynch Chart on each company’s summary page: Figure 1 shows a sample chart for Apple Inc. (AAPL), Buffett’s largest holding.

1548435949100.png

Figure 1

Hennessy Advisors

Hennessy Advisors, the top stock on the Peter Lynch screen, is trading at a price-earnings ratio of 4.21, close to a 10-year low of 3.71.

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Hennessy Advisors manages a wide variety of funds, including the Hennessy Japan Fund (Trades, Portfolio) and the Hennessy Japan Small Cap Fund (Trades, Portfolio). GuruFocus ranks the asset management company’s profitability 9 out of 10 on several positive signs, which include expanding profit margins and a dividend yield of 3.72%, close to a five-year high. Additionally, the company’s Joel Greenblatt (Trades, Portfolio) return on capital of 7,529.05% ranks higher than 95% of global competitors.

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Westlake Chemical

Westlake Chemical, the second-highest ranked stock on the list, is trading at a price-earnings ratio close to a 10-year low of 5.87.

1548446527186.png

The Houston-based specialty chemicals company produces fabricated products through two business segments: Olefins and Vinyls. GuruFocus ranks the company’s profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 8 and a three-year revenue growth rate of 23.40%, a rate that outperforms 92% of global competitors. Additionally, Westlake Chemical’s business predictability ranks a solid 3.5 stars out of five.

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Gurus with large holdings in Westlake Chemical include Jim Simons (Trades, Portfolio) and Chuck Royce (Trades, Portfolio); the latter is the keynote speaker at our value conference in May.

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Eagle Materials

Eagle Materials, the third-highest ranked stock on the list, is trading at a price-earnings ratio of 11.69.

1548452695034.png

The Dallas-based company produces and supplies construction products, building materials and materials used in oil and gas extraction. GuruFocus ranks the company’s profitability 8 out of 10 on several positive signs, which include expanding profit margins and a strong Piotroski F-score of 7.

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See also

Other top stocks on the Peter Lynch price-earnings screen include Southwest Airlines Co. (NYSE:LUV), Marten Transport Ltd. (NASDAQ:MRTN) and Universal Forest Products Inc. (NASDAQ:UFPI).

Disclosure: No positions.

Read more here:

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


Rating: 5.0/5 (1 vote)

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Comments

newhigh
Newhigh premium member - 4 months ago

Thanks James. More of the same please, on a regular basis.

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