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What are we looking for?

U.S. companies with price and earnings momentum.

The screen

The summer rally continues for North American markets. Followers of the often hyped "sell in May and go away" strategy may have missed out on seasonally strong returns so far: From May 1 to Aug. 5, the S&P 500 total return index has posted a return of 6.3 per cent, for example.

As corporate earnings continue to come in generally strong relative to expectations, stocks that have been on the rise may continue their trend if expectations continue to see increases as well. In order to find U.S. companies with momentum tailwinds, Lawrence Ullman and I turned to Bloomberg to find the top 15 companies from the S&P 1500 index, which includes large-capitalization companies, mid-caps and small-caps, with the best mix of:

  • 12-month price change;
  • three-month price change;
  • three-month consensus earnings-per-share estimate revision;
  • one-month consensus EPS estimate revision;
  • earnings yield (trailing 12-month EPS as a percentage of the latest price must be positive).

More about the Ullman Group

The Ullman Group is an independent provider of strategic private capital management services to high-net-worth individuals, corporations, endowments, charities and foundations.

What we found

Using Bloomberg, we performed a back-test starting July 31, 2002, re-selecting an equally weighted portfolio of the top 15 qualifying stocks every three months.

Over the entire period, this strategy would have generated an annualized total return of 17.5 per cent compared with 8.6 per cent for the S&P 500 total return index. Over the past year, however, heightened volatility has led to this strategy underperforming with a return of 2.6 per cent compared with 5.6 per cent for the S&P 500 total return index.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Ltd. or its affiliates. Investors should contact a professional or do their own research before investing in any of the stocks shown here.

Craig McGee, CFA, is a portfolio manager with the Ullman Group at Richardson GMP in Toronto.

U.S. companies with price and earnings momentum

RankCompanyTicker1Y Price Change (%)3M Price Change (%)3M EPS Revision (%)1M EPS Revision (%)EPS Yield (%)
1Career Education Corp.CECO-Q120.6823.49145.83115.0731.02
2Cloud Peak Energy Inc.CLD-N37.9463.8511.1116.4516.05
3AK Steel Holding Corp.AKS-N96.8150.61197.5052.615.52
4Innospec Inc.IOSP-Q33.4920.618.9622.807.48
5Engility Holdings Inc.EGL-N49.8250.8520.2915.075.66
6Koppers Holdings Inc.KOP-N67.2325.6210.374.536.16
7United Rentals Inc.URI-N21.3529.195.474.5610.35
8Skywest Inc.SKYW-Q62.9921.433.354.068.12
9Walker & Dunlop Inc.WD-N19.2616.1615.4410.0410.39
10Drew Industries Inc.DW-N63.8144.3435.438.794.76
11Thor Industries Inc.THO-N36.8719.4811.554.296.04
12Murphy USA Inc.MUSA-N47.4335.8610.594.564.99
13Lydall Inc.LDL-N60.8222.468.269.034.92
14Insight Enterprises Inc.NSIT-Q12.1426.366.835.377.67
15TTM Technologies Inc.TTMI-Q16.0461.3818.6814.175.52

Source: Bloomberg