OFF THE CHARTS
A monthly screen for interesting stocks*
When it comes to bargain hunting, few did it better than Benjamin Graham, the father of value investing, who devised 10 criteria for picking stocks. This Graham-inspired screen looks for equities with five years of positive earnings and a current ratio (assets divided by liabilities) above two, among other requirements.
Consumers are fickle at the best of times. That’s especially true for fashion purveyors like Fossil. The stock’s past-year price chart makes it look like it’s becoming a relic. However, the firm had a surprisingly strong second quarter; Dorothy Lakner of Topeka Capital Markets noted that the brand is still gaining strength in mature markets like the U.S. Fossil has been hurt by weakness in the luxury goods sector, as Asian demand slows and tourists avoid the U.S. due to the high dollar. That’s still true, but Fossil tops our screen based on Graham’s criteria. The company’s debt is just 82% of its working capital, and its current ratio is above three. The Street might not like Dillard’s but Benjamin Graham sure would. Six analysts follow the mid- to up-market department store; four call it a Hold and two, a Sell. While all retailers face declining mall traffic and nervous consumers, almost a third of Dillard’s stores are based in oil-producing U.S. states where these pressures are particularly acute. This could change, of course, if there is a rebound in energy prices. In the meantime, the company is well-positioned to weather the storm due to its low debt levels. In fact, Dillard’s was able to use some of its war chest to buy back shares worth US$200 million in the second quarter. The latest analyst report on Oceaneering from Trey Stolz at Iberia Capital Partners is titled “Murky Waters and Moderated Expectations.” It’s a fitting description of the offshore oil and gas service provider. Like the rest of the energy sector, Oceaneering has felt the full force of declining oil prices. Still, it pops up on our value screen thanks to its extremely strong balance sheet. Despite the current pressures, the company has been able to cut its debt levels and still has cash on hand. While analysts’ support for Oceaneering is at a new low, it’s already trading at their particularly dour consensus price.
*Share prices charted from Nov. 10, 2014–Nov. 9, 2015; all values in US$