What are we looking for?
We want to screen for the 10 highest-ranking stocks listed on either the NYSE or Nasdaq. Rankings are determined by the INK Edge V.I.P. criteria (valuations, insider commitment and price momentum).
This is the same approach we apply to determine membership for the INK Canadian Insider Index, which is used by the Horizons Canadian Insider Index ETF (HII-T).
Our universe includes more than 3,500 United States-listed stocks that meet minimum size and liquidity requirements.
To make the final grade in this screen, a stock must trade more than $3 (U.S.) and have a market cap of at least $250-million.
We begin by determining a stock's rank in each V.I.P. category based on equally weighted factors.
Valuations (past 12 months except dividend yield)
- price-to-earnings, price-to-book and price-to-sales ratios;
- enterprise value to EBITDA (earnings before interest, taxes, depreciation and amortization);
- price-to-cash flow or price-to-cash; shareholder yield (buybacks plus dividends).
Insider (officer and director) commitment
- recent net insider buying;
- personal holdings (excludes shares held for other investors);
- insider intensity, based on the number of insiders buying.
- based on three-, six- and 12-month returns.
Next, each V.I.P. category rank is equally weighted to determine a composite ranking.
The percentile V.I.P. category and composite rankings are in relation to all other stocks in the market. Rankings are between 0 and 100; the higher, the better.
A composite ranking more than 90 goes into the top decile "sunny" outlook category. The INK sunny outlook category is not a buy recommendation but is designed to identify a stock group that has the potential to outperform the market. So, as always, keep in mind that even if a particular stock has a bright outlook, it could still rain on your portfolio's parade. Diversification remains key.
What we found
Eldorado Resorts grabs the top spot thanks to strong insider commitment and price momentum. Seeing a casino operator take first place may say a lot about the current environment. The risk of losing money over the next few months remains high given relatively lofty market valuations during a period of Fed tightening. Consequently, investors committing cash to stocks right now may want to give particular attention to value. On that front, reinsurer Axis Capital Holdings, printer Ennis, and Chinese gaming company Sohu.com stand out positively on the list.
Investors should conduct further research before buying any of the companies listed here.
Ted Dixon, CFA, is CEO of INK Research, which provides research and alerts on insider trading reports in Canada and the United States. Please visit CanadianInsider.com to find out more about INK services and insider reporting in Canada. INK staff may also hold a position in profiled securities.