Trader Gregory Rowe (center) and others work on the floor of the New York Stock Exchange on Monday, March 16, 2020. (AP Photo/Craig Rattle)
If you follow stock market news, you've no doubt heard about the “Magnificent Seven,” the seven mega-cap stocks that dominated the stock market last year, at least the S&P 500. These include Apple (ticker: AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Meta Platform (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA).
Today we're naming the “Glorious Six,” six up-and-coming stocks that could be winners this year. I found these companies by screening for companies that are financially solid and have unusually high earnings growth prospects. Here are the details:
As is often the case, I used the free and easy-to-use Finviz stock screening program to pinpoint these potential stock market stars. Here's how:
Start at the Finviz home page (finviz.com). Select Screener from the top menu and click All to display the available screening filters.
Define candidate universe
The current Magnificent Seven are all mega-cap stocks. This means that its market capitalization (total amount of outstanding shares) is over $200 billion. So we decided that Glorious Six should be a large-cap stock at this point. Their market capitalization ranges from $10 billion to $200 billion. Use the “Market Capitalization” filter and specify “Large” to limit candidates to large-cap stocks.
strong revenue growth
I've found that stock prices track twelve-month earnings per share (EPS) more closely than any other single factor. So we've limited the list to stocks that analysts believe have very high short-term and long-term EPS growth prospects.
To do this, specify “20% or more'' for “This year's EPS growth'', “Next year's EPS growth'', and “Next 5 years' EPS growth''.
Low debt and high profits
Stocks with low profitability or high debt typically perform poorly. In fact, all of today's Magnificent Seven are profitable companies with relatively little debt.
Therefore, to limit the list to profitable companies, specify Return on Equity as Positive. Next, specify Debt/Equity as less than 0.8 to exclude stocks with large amounts of debt.
Follow smart money
Institutional investors such as mutual funds, hedge funds, and endowments have access to information the rest of us never see. Specify an Institutional Ownership of 70% or higher to limit the list to stocks that these “informed” investors are buying.
6 brilliant candidates
Six candidates for the Glorious Six appeared on my screen.
• Baker Hughes (BKR): Baker manufactures equipment for oil and natural gas exploration and production. It pays a dividend of 2.9%.
• BioMarin Pharmaceutical (BMRN): BioMarin develops treatments for serious, life-threatening medical conditions, primarily for children.
• Cameco (CCJ): Cameco specializes in uranium production and related services.
• Incyte (INCY): Incyte makes medicines for the treatment of cancer and inflammatory diseases.
• Service Now (NOW): Service Now provides cloud computing services that automate digital workflows and accelerate enterprise IT operations.
• Progressive Corp. (PGR): Progressive provides auto insurance services. Dividend yield is 1.7%
These are just my thoughts, but please do your own due diligence. The more you know about stocks, the better your results will be.
Harry Domash of Aptos publishes the Winning Investing and Dividend Detective websites. Contact us at www.winninginvesting.com or Santa Cruz Sentinel, 318 Encinal St., Santa Cruz, CA 95060. To see previous Domash columns, visit santacruzsentinel.com/topic/Harry_Domash.
