Heading into each week, I will sift through hundreds of charts and build a watch list of stocks and ETFs that could be potential buying opportunities. After the list is created, the next step involves analyzing the fundamentals behind each stock and how they compare with the overall market and competitors.
TUTORIAL: Stock Basics
This week there were a large number of stocks that look attractive after the overall market pullback that occurred over the last few days. Stocks that were hitting new highs have pulled back to levels that are once again buying opportunities. Here are five stocks that caught my eye.
MasTec (NYSE:MTZ) is a specialty contractor in the U.S. that focuses on utility and communications infrastructure. They build everything from wind and solar farms to installing underground communication wires. The stock hit a 10-year high in late April on heavy buying before pullback to near the $21 area. With a forward P/E ratio of only 14 and price-to-sales of 0.8, the company is not only attractive from a technical perspective, but also fundamentally. Add in the exposure to alternative energy with oil above $100 per barrel and MTZ is at the top of this list.
A stock my financial group has owned in the past and is looking at again is Brazilian water utility Companhia de Saneamento Basico do Estado de Sao Paulo (NYSE:SBS). The company offers water and sewage services to customers in the state of Sao Paulo in Brazil. The stock hit a new all-time high in April and has since been consolidating between $58 and $60 per share. The action has been bullish and offering investors an opportunity to buy SBS before the next breakout. Fundamentally, SBS trades with a forward P/E ratio of 6.7, which is low even for a water utility. Exposure to Brazil and the water sector make SBS an attractive long-term investment.
SeaCube Container Leasing (NYSE:BOX) is a U.S.-based company that offers shipping containers via lease or purchased. The containers service both shipping lines as well as rail and trucking companies. The stock went public in late October 2010 and has been on a straight move higher, up 50% from its first day of trading. Add in the 5.6% annual dividend and investors in BOX have been all smiles. With that being said, I feel there is more upside potential for BOX and buying near $16 gives the stock an attractive forward P/E ratio of 7.2.
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Informatica Corporation (NASDAQ:INFA) calls itself the data integration company because they help companies via software and services to utilize their data in a timely and relevant manner. The stock rose to the best level in over a decade on the first day of May before pulling back to the 50-day moving average at $50, where it found support. Even with the great chart, INFA is considered an aggressive stock play because it is valued with a forward P/E ratio of 32 and price-to-sales of 8.5. The key to buying a stock such as INFA is keeping a narrow stop-loss in the event the stock breaks the current uptrend.
The Bottom Line
The reason the four stocks above were mentioned is a combination of both fundamentals and technicals. The charts will likely drive the short-term action, and the long-term performance is more a result of the underlying fundamentals. Buying on the pullbacks we highlighted increases the odds of picking a winner. Setting predetermined stop-loss orders to protect against big losses is also integral in long-term investment success.
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