Nov

30

Just What the Doctor Ordered - Utilities

Posted In: Stock Market

Stocks featured in this article are: Hawaiian Electric Industries, Inc. (HE), Laclede Group, Inc. (LG), New Jersey Resources Corp. (NJR), NSTAR (NST), and SCANA Corp. (SCG).

I started running this screen back in July of 2007; just as the market started showing its first cracks. When I put this screen together, it wasn’t designed to be a trading strategy per se’. Instead, it was a screen to help me identify those sectors and industries (and, therefore, stocks) that were holding up the best as the market was selling off.

When I first ran this screen back then, the best sector was the Medical Sector – hence the title “Just What the Doctor Ordered”. Since then, I’ve featured this screen several times with different sectors popping up.

It’s a catchy name for a screen, so I kept the title. But this time, the top sector is Utilities. But again, the whole idea with this screen is to find the ones that displayed the greatest resiliency or the biggest outperformance. Those should be the ones that respond the best.

Parameters:
The screen starts out with the usual items:
Price >= 5
Volume (Avg. 20 Days) >= 100,000
Then I specifically screen for the Sector with the greatest Relative Price Change over the last 4 weeks. Basically, I’m looking for the sector that performed the best, on average, in comparison to the S&P 500.

From there, I narrow that sector down to only those stocks with a Zacks #1 Rank (”strong buy”), Zacks #2 Rank (”buy”) or Zacks #3 Rank (”hold”). (The Zacks Rank is one of the best rating systems out there, so this automatically puts the odds in my favor.)

For good measure, I also make sure the stocks have Positive Earnings Estimate Revisions over the last 4 weeks for both Q(1) and F(1) or, at the very least, no negative revisions. (Studies show that stocks with Rising Earnings Estimates outperform the market.)

Then I narrow that list down even more by looking for the Top 20 stocks within the Top Sector based on the Relative % Change in Price over 4 Weeks. (First I looked for the Best Sector based on the Average Relative % Change in Price over 4 Weeks. This one then zeroes in on the best 20 stocks within that sector.)

Lastly, I cull it down to the Top 10 stocks within that Sectors Medium Sized Industry, also based on the Relative % Change in Price over the last 4 Weeks.

The screen this week (for Tuesday, 11/25/08) produced 14 stocks. Here are 5 of them:
HE Hawaiian Electric Industries, Inc.
LG Laclede Group, Inc.
NJR New Jersey Resources Corp.
NST NSTAR
SCG SCANA Corp.

You can also use this screen to look for the Top 2 Sectors, Top 3 Sectors or Top 5 sectors - or whatever you choose. Many screeners won’t let you screen for the Top Sectors or Industries. But in the Research Wizard you can. Now you can find the top Sectors based on whatever metric you like and then drill down to the best Industries and then to the best Stocks. Picking winning stocks has never been so easy.

Kevin Matras is the Research Wizard Product Manager and weekly contributing Editor at Zacks Investment Research who creates and writes the Zacks Commentary Screen of the Week. For more information, visit http://www.zacks.com

Article Source: Just What the Doctor Ordered - Utilities