The Kirk Report

Widest Discounts From Book Value

It's time to provide an update to a popular screen I've been sharing since February - The Widest Discounts From Book Value.

If you recall, this value-focused screen has two main goals: 1) to find stocks that have the widest discounts from their current book value and, 2) which have enough cash on their books to be able to survive although business hasn’t been the best of late.

The performance of this screen continues to be impressive. Since our last update on April 16th (or 20 trading days ago), the screen is up +21.39% (30 gainers & 9 losers). In comparison, the S&P 500 was up only +3.21% during this same time frame. As of this morning, 48 stocks have the characteristics that fit.....[SCREEN]

Lucky Charm Portfolio

Following yesterday's post on the book value screen, a member asked me to provide a performance update to the Lucky Charm Portfolio.

Much like the market, the portfolio is off to a strong start since March 17th and is currently up +35.66% (10 gainers & 0 losers). A bit too lucky in such a short period of time if you ask me, but so far so good.

Screening For E, MA, & Price

I received a request from a member this morning for me to share my screen that finds stocks that 1) have relatively strong earnings, 2) that trade above the 50 day moving average, 3) that trade above the 200 day moving average, 4) the stock price is up in the latest 6 months, 5) the stock price is also up in the latest 12 months, and 6) the stock pirce is up year-to-date.

Here are the 27 stocks that meet all of those specifications as of this morning:

Ten of these stocks can also be found within my stock screen machine.

February Winners

Although February hasn't been what most hoped it would be, there have been some interesting winners out there if you take time too look for them.

I spent some time today looking through a screen of a little over 100 stocks that trade above $5 per share and which have gained more than +15% in February. Here's the spreadsheet. Even if you're not interested in stock prospecting you may find it of interest to see which industry groups are highly represented within this list of winners.

Whenever I review a list like this (and I try to do so frequently), I make it a goal to find 5 stocks I haven't been watching and which I think may offer an interesting trading setup in the days based purely upon the technicals. When I did that today, I found at least 16 setups. Yes, that many! I was surprised a little bit by that as I usually only find a couple, but it serves as a reminder that we all tend to focus too much on the market's daily performance while real winners can be found below the surface if you take the time.

So, as homework tonight, review this list and see if you find a few watchlist candidates. In my view, the very fact that these stocks have been able to outperform so much this month is justification enough to undertake this exercise. And, even if you have no desire to buy a single stock in this environment (a common complaint these days) you need to do everything you can to stay mentally sharp by building and monitoring watchlists of this nature so that you'll be ready when conditions improve to your liking. In fact, you may discover as I have that while the overall market is crummy, some low hanging fruit is ripe for picking.

Go get to work!

Heartbreakers

It's almost Valentine's Day and as many of you may recall, last year I asked members to submit the name of the stock that they think will cause investors the most heartbreak (i.e. the most loss) over the next year.

As you'll see, the performance of last year's list certainly accomplished its intended goal. The 2008 list of heartbreakers not only lost more than the market (the S&P declined -38.2% vs -42.25% for the heartbreakers), but only 5 of the 44 stocks managed to post a positive return since last Valentine's Day.

Some of these stocks were truly heartbreakers in every sense of the word. I'm fairly sure that not many people expected companies like Crocs (CROX), Las Vegas Sands (LVS), Dryships (DRYS), Motorola (MOT), Intuitive Surgical (ISRG), Vmware (VMW), Chipotle Mexican Grill (CMG), or Salesforce.com (CRM) to lose more than half of their value over the past year. Ouch!

While it is always interesting to see what members select for this annual list, the main purpose for it is simply to encourage everyone to think of the market from different perspectives and to at least consider that there are opportunities on the short side. As we saw from last year's performance, sometimes shorting stocks that are in favor can pay off.

Speaking of which, it is time for members to tell me their favorite heartbreaker stock for the coming year. Please have your idea to me before Valentine's Day and I'll reveal this year's list next week. Based on what happens by tomorrow's close, I'll be sending the member who selected the worst performing heartbreaker a nice little Valentine's Day gift!

Profits & Profit Margins

In a recent basic training tutorial, Harry Domash reviewed profitcents - a free service that provides analysis on just about any company's financial condition.

The website essentially provides a 5 star grading system (1 star is the worst - 5 star is the best) in five categories: liquidity, profits and profit margin, borrowing, assets, and value. In Harry's checks, the profits and profitability grade has been proving to be a good tool as those with higher scores in this category recently outperformed others. While admittedly his testing was unscientific and limited in scope, it was enough for him to recommend the service.

Well, you know me - there's not a tool I won't use (especially if it is free) to see how my own watchlist ranks according to this type of ranking system. So, earlier this morning I ran all of the stocks currently found within my stock screen machine to see how they ranked according to "Profits and Profit Margin" grade. Like Harry, I performed comparisons using "one quarter against the same quarter from the prior year." Here's what I discovered.....[READ]

January Barometer Portfolio

According to the Stock Trader's Almanac, Standard & Poor's top 10 industries in January outperform the index over the next 11 months. To wit, the sectors which outperform in January have a historical tendency to outperform for the full year.

Although I don't have a source that will allow me to see the January performance of every Standard & Poor's top sub-industries, I think for general purposes we can get a sense of relative outperformance by just looking at the S&P's Sector Tracker:

So far all of the industries are struggling, but we have relative outperformance of three main groups - Utilities (XLU), Health Care (XLV), and Energy (XLE). Here are their charts:

As many of you know, I use Telechart which relies heavily upon Morningstar's Industry Groups. In fact, I utilize this for the stock screen machine as well as you see if you visit the All Screens filter which displays every stock currently found within my stock screen machine with their sector. To see which industry groups have been outperforming the most in January, here are the top 20 Morningstar subindustry groups in January:

While I'm not a big fan of utilizing these kinds of historical tendencies for buy-and-hold portfolio construction using just the performance of one month, so many out there do and for that reason alone we should be aware of this pattern and subsequent performance. Like always, knowing which sectors outperform and underperform is always a good idea no matter what time frame you use.

Schaeffer's Contrarian Stock Screener

A member recently suggested I take a look at Schaeffer's Contrarian Stock Screener and I have to admit I've enjoyed playing around with it.

The screener's approach is different than what you'll find in other online tools because you start by picking a sentiment bias first:

The second step requires you to filter the candidates in order to narrow down the selection (like restricting only to oversold stocks and stocks that trade with minimum price and volume and more):

The third and final step is to select the indicators you want displayed along with the results (some of these are different than what you'll find in other screeners):

Then you get the results:

In this environment I think a stock screener of this nature can be useful. For example, situations where the analysts are uniformly bearish and which have already pounded those stocks to extreme oversold levels have been seeing some interest of late as you already must know from looking through this week's big upside movers. Check it out!

AAII Top Screens: 1-Year Update

One year ago I shared with members 7 stock screens that have posted gains for every year over the past 10 years. So, how did each of those screens hold up between January 16, 2008 and January 16, 2009 as the S&P fell -38.09% during this time frame)? Let's now take a look:

• O’Shaughnessy Small Cap Growth and Value: -45.24% (1 gainer & 18 losers)

• O’Shaughnessy Growth: -34.78% (7 gainers & 78 losers)

• Zweig: -42.22% (0 gainers & 10 losers)

• PEG With Est Growth: -41.00% (2 gainers & 37 losers)

• PEG With Hist Growth: -37.02% (7 gainers & 91 losers)

• Price-To-Sales: -41.50% (5 gainers & 52 losers)

• Graham Defensive Investor: -28.41% (0 gainers & 4 losers)

All in all, not a good showing especially for screens with such a strong and long track record of success. But, as we've seen from tracking the performance of other screens, we shouldn't be too surprised as there were few places to run and hide in 2008. In case you are curious and desire to track this year's list on your own, here are the tickers to monitor.....[READ]

Heartbreakers

Last Valentine's Day we put together our annual list of heartbreakers - i.e. stocks that members thought would give investors the most heartbreak over the next year.

Within now just three months left to go, the heartbearkers are collectively down -45% (41 losers & 3 winners).

The biggest heartbreaks so far? Crocs (CROX), Istar Financial (SFI), Las Vegas Sands (LVS), Dryships (DRYS), & MGM Mirage (MGM) have lost more than -80% since February 14, 2008. Ouch!