Week 12, 2018 – Top Stock Bargains Watch List

Author: AsgeirThe US Stock Market reached its (temporary?) top the 26th of January this year. Only nine trading days later the (temporary?) bottom was reached, a fall of 10,2 percent in the S&P 500 Index. 20 trading days later the S&P 500 were only able to climb back 8 percent, and it has not reached any higher since. Could this be a signal of weakness..? My guess is, yes it is! But let me emphasize guess, because I will not make any predictions. Why not? I have no need to. A prediction of the market is speculation and not investing. True value investing is all about picking undervalued stocks: Good, healthy companies at bargain prices. Then it is not predicting or guessing the future. Instead it is using common sense. It is a well founded approach based on real numbers and real money value.

Please enjoy this week’s newsletter. I hope that you will continue to have great benefit of the Top Bargains Watch List 🙂

You can read the previous week’s list here: Top Bargains Watch List – Week 9

Since January I have a portfolio where the top bargain stocks are included. You can follow the performance of every stock and the portfolio here: MATS Strategy – Portfolio Performance (updated regularly).

Anyway, please leave a question in the comments field area at the bottom if anything is unclear, or if you just simply want to discuss a related issue.

The average Market Adjusted Total Score (MATS) this week: 89,0

As always, I run the Magic Formula Investing screener to pick the 50 top companies with a minimum market cap of 300 Mill. USD. I intentionally exclude companies above 8.000 Mill. USD (the watch list is limited to small/medium cap companies). This week (as of March 19th) the screener provided a portfolio of 34 companies. These companies from the screener all together gave an average MATS score of 89,0. Like the last weeks, one company is not included in the average score, which is Unisys since this stock also this week got a very high score of 522,6 and this would have given an unbalanced average score, and several of the other top bargain stocks would have been excluded. The 12 companies that ended up with higher than average score, are the top bargain companies listed in the table below.

Some interesting things to notice from this week’s list:

  • Four of the stocks qualify two important criterias: Their Net Working Capital makes up 50 % or more of the Market Cap Value + they have a market discount of 50 % or more compared to their highest stock price during the last three years:
    • UIS, GME, MDCA and CJREF. These are the same companies as I mentioned in the previous list except for PDLI that drops out of the list this time. These stocks claim the top scores and rank among the top six companies.
  • Four stocks get into the list because they get a high “Financial Score” (Earnings Yield and Return on Invested Capital added together):
    • TVTY, RPXC, EGRX and NTRI.
  • Four stocks get into the list because their Net Working Capital makes up 50 % or more of the Market Cap Value:
    • EVC, AMCX, AGX and TRNC.
  • Stocks that get into the list because they have a high “Financial Score” combined with a market discount of 50 % or more compared to their highest stock price during the last three years: No companies this time.

By filtering the stocks from the list this way, it will be easier to see which criterias that qualify each company. I hope this will be helpful when you need to choose which of the stocks to invest in.

Here is the list – 12 top bargain stocks with calculations and scores:

All companies listed here are the stocks that got an above average MATS (Market Adjusted Total Score). You can read more about how the numbers and scores are calculated and how the model works here: “The Market Adjusted Total Score – MATS”.

(You will find a further explanation of the parameters just below the table.)

Company High last 3 Yrs Current Price Dividend paid* Percent of High Added Value (if >50 % discount from High last 3 Years)* Financial Score* Total Score S&P, Percent of High Market Discount*

Market Adjusted Total Score*

UIS 23,08 11,15 48,3 1,7 497,9 500,4 94,4 44,4

522,6

2018-03-19
TVTY 48,05 39,95 83,1 244,3 244,3 94,4 11,3

249,9

2018-03-19
GME 47,44 14,81 0,76 32,8 17,2 171,6 197,4 94,4 44,4

219,6

2018-03-19
MDCA 28,4 7,1 25 25 130,1 167,6 94,4 44,4

189,8

2018-03-19
EVC 9,26 4,65 0,1 51,3 159,1 159,1 94,4 43,1

180,7

2018-03-19
CJREF 15,79 5,42 0,23 35,8 14,2 107,3 128,6 94,4 44,4

150,8

2018-03-19
RPXC 16,82 11,06 0,05 66,1 106,2 106,2 94,4 28,3

120,4

2018-03-19
AMCX 85,78 49,72 58 93,1 93,1 94,4 36,4

111,3

2018-03-19
EGRX 97,17 52,21 53,7 87,8 87,8 94,4 40,7

108,1

2018-03-19
AGX 74,5 40,45 54,3 85,8 85,8 94,4 40,1

105,9

2018-03-19
TRNC 21,55 16 74,2 87,2 87,2 94,4 20,2

97,3

2018-03-19
NTRI 59,95 30,4 0,25 51,1 68,6 68,6 94,4 43,3

90,2

2018-03-19
S&P 500 2873 2713 94,4 94,4 5,6 2018-03-19

 

*Market Discount: If the stock has fallen (or risen) more than the market, a factor of 0,5 is used into the “Market Adjusted Total Score” area to adjust for the difference.
*MATS: Market Adjusted Total Score. A score which aims to discover stocks with the best combination of financial performance and historical prices.
*Added Value: If >50 % discount from the highest price last 3 years, a factor of 1,5 is added to this difference into the “Total Score” area.
*Dividend paid: Dividend paid after the last quarter’s results.
*Financial Score: A company’s Earnings Yield (EY) + Return On Invested Capital (ROIC). If Net Working Capital makes up 50 % or more of the Market Cap Value, the score is adjusted for this: (EY+ROIC)+(NWC%/MCV%)+50. The last available numbers from the last quarter are used (data from Yahoo Finance).
Disclaimer: The Market Adjusted Total Score (MATS) calculated above, is only a result of my own calculations, and must not be interpreted as “market signals” in any way. I am not an investment advisor. Even though I do my best to avoid mistakes, wrong calculations may occur.

What changes are there in the Top Bargains Watch List since last time?

  • Four companies drop out of the list this time: PDLI drops out because it is not among the companies in the MFI screener this week. HRB (70,9), EGOV (84,7) and CNCE (86,3) are still among the 34 companies from the screener, but they get a MATS score below average. HRB gets a lower “Financial score” than last time because of its latest quarter results.
  • Let me quote myself from last time: “There is one company dropping out of the list this week: Tivity Health Inc. (TVTY). The reason is because it does not qualify Joel Greenblatt’s screener as a Magic Formula Investing company this time. Which in my opinion is quite surprising, because it still gets a Market Adjusted Total Score of 215,7 (!).” And this week it is back in the MFI screener! I must admit I am glad too see it’s back in Greenblatt’s screener, since this confirms that my own calculations are not totally wrong. With a MATS of 249,9 it ranks #2.
  • In addition we got three newbies this time:
    • Eagle Pharmaceuticals Inc. (EGRX): It has been in the MFI screener for several months, but not reached above average MAT Scores until now.
    • Tronc Inc. (TRNC): The same goes for this company, for several months it has been among the +/- 35 companies from where the average MATS are calculated from, but gotten scores below average.
    • Nutrisystem Inc. (NTRI): With this company it is different. It has not been in Greenblatt’s Magic Formula screener until now.

TVTY, EGRX, TRNC, NTRI, PDLI, HRB, EGOV, CNCE

How can you compare your own stocks to the MATS Score of the top bargain stocks?

Here is an example of how to calculate the Market Adjusted Total Score. With this tool, you can type in the numbers from your own stocks into the formula, and watch how the values influence the MATS Score. In just a few seconds, you can see which values you need to put in to make your stock as strong as the top bargain companies. You can change several of the values, e.g. its market price or the financial score. Try it and see for yourself (in Dropbox, you need to click “Open” at the right to make it work in e.g. Excel Online):

Calculate the Market Adjusted Total Score

Text from my post in week 7, 2018: I typed in the values of Amazon Inc. (AMZN) just to check what score it has, and it gets a MATS score of only 15. The stock has a “Financial Score” of 18. To make AMZN get a score around the average top score of this week’s list (87,9), its stock price needs to be as low as $ 270! Or, with yesterday’s closing price of $ 1451, it needs a “Financial Score” of 90 to get a MATS Score of 87…

Is it possible to get a MATS calculation for other stocks too?

Yes, it certainly is!

The price of further MATS calculations (Market Adjusted Total Score):

  •  10 USD per calculation
  • 25 USD for three stocks (or the last available quarter plus the two last years for one stock).
  • 49 USD for one stock compared to five competing stocks (picked by you). MATS Scores are calculated for all six stocks. For even more relevant comparison, MATS Score of the stock is also adjusted to the average market discount of the five other stocks (in replacement of the adjustment vs the S&P 500 Index).

Payments will be done through PayPal. Please make a request to support@stockbargains.net for payment details.