Undervalued Stocks with Respect to Growth and Yield (PEG+Y Ratio)

As the Stock Market including the U.S. S&P 500 Index goes down, experienced people say you should start creating a wish list of companies to buy at lower levels.

One measure of valuation is the PEG+Y Ratio which is the Forward Price Earnings Ratio divided by the Five Year Estimated Growth Rate Plus Yield:

PEG+Y = (Forward Price Earnings Ratio) / (5 Year Estimated Growth Rate + Yield)

PEGY (simpler form is the PEG Ratio) of less than 1 is a great value. A PEGY ratio of greater than 2 (or some other value like 1.5) can be considered overvalued.

Here are some PEG+Y Ratios of some popular companies:

#	Symbol	Company	PEG+Y	Current Price	Forward P/E	5 Year Growth Rate	Forward Yield
1	CEDC	Central European Distribution	0.15	6.08	7.07	46.62	0.00
2	BTU	Peabody Energy	0.16	31.61	5.56	33.05	1.00
3	SI	Siemens	0.22	86.96	8.37	35.50	3.00
4	FCX	Freeport-McMoran	0.27	29.87	4.99	15.06	3.30
5	AEA	Advance America	0.37	7.12	6.72	15.00	3.40
6	BAC	Bank of America	0.38	5.53	4.61	11.48	0.70
7	LVS	Las Vegas Sands	0.38	36.71	14.86	30.08	0.00
8	VE	Veolia	0.41	13.78	9.44	13.15	10.10
9	NXG	Northgate Minerals	0.42	3.26	15.52	36.80	0.00
10	JPM	JP Morgan	0.44	28.65	5.4	8.96	3.30
11	SHFL	Shuffle Master	0.45	7.74	11.22	25.00	0.00
12	GLW	Corning Glassware	0.46	11.88	6	11.50	1.60
13	HRS	Harris Corp	0.47	33.23	6.09	9.63	3.30
14	CNQ	Canadian Natural Resources	0.49	27.59	7.79	14.70	1.20
15	WFC	Wells Fargo	0.50	23.18	6.94	12.00	2.00
16	ABB	ABB Ltd	0.50	16.42	8.6	13.40	3.90
17	GE	General Electric	0.50	14.69	9.3	14.74	3.90
18	BIDU	Baidu	0.50	105.16	23.9	47.65	0.00
19	AAPL	Apple	0.51	374.6	11.47	22.69	0.00
20	NIHD	NII Holdings Inc.	0.51	25.06	9.49	18.66	0.00
21	NTES	NetEase	0.52	36.35	8.95	17.30	0.00
22	CAT	Caterpillar	0.53	70.55	7.94	12.44	2.50
23	PCLN	Priceline	0.54	445.75	15.23	28.31	0.00
24	GILD	Gilead	0.54	37.81	8.4	15.43	0.00
25	RTN	Raytheon	0.55	39.5	7.22	9.00	4.20
26	INTC	Intel	0.56	20.62	8.35	11.03	3.90
27	SLB	Schlumberger	0.56	57.72	10.67	17.32	1.70
28	GS	Goldman Sachs	0.57	90.08	5.97	9.04	1.50
29	TDG	Transdigm Group	0.57	77.38	14.2	24.97	0.00
30	NFLX	Netflix	0.59	113.25	17.37	29.32	0.00
31	CELG	Celgene	0.59	60.7	14.35	24.16	0.00
32	GEOY	Geo Eye	0.61	27.1	2 10.72	17.50	0.00
33	GOOG	Google	0.61	495.52	11.8	19.21	0.00
34	HCBK	Hudson City Bancorp	0.64	5.31	6.9	5.00	5.70
35	PM	Philip Morris	0.65	61.76	11.88	13.26	4.90
36	SWY	Safeway	0.66	16.32	8.77	9.78	3.50
37	DECK	Deckers	0.67	88.11	15.09	22.50	0.00
38	LOW	Lowe's	0.68	18.98	10.66	12.73	2.90
39	MDRX	AllScripts	0.69	16.99	15.88	23.11	0.00
40	HD	Home Depot	0.71	31.59	11.79	13.51	3.00
41	TRMB	Trimble Navigation	0.73	32.4	2 13.4	18.25	0.00
42	MA	Mastercard	0.74	310.88	14.92	19.84	0.20
43	CSCO	Cisco	0.76	15.19	8.08	9.20	1.50
44	RIG	Transocean	0.76	45.91	7.77	3.65	6.60
45	DEO	Diageo	0.79	75.15	11.82	10.70	4.30
46	TGT	Target	0.82	47.8	11.01	10.96	2.40
47	WMT	Walmart	0.83	51.96	10.63	10.00	2.80
48	AMX	America Movil	0.84	21.5	9.51	9.95	1.40
49	ATVI	Activision	0.85	11.95	12.85	13.68	1.40
50	MO	Altria Group	0.86	26.56	12.13	8.0	0 6.10
51	INFY	Infosys	0.87	50.04	15.44	16.14	1.70
52	CME	Chicago Mercantile Exchange	0.87	248.5	12.76	12.44	2.30
53	IBM	IBM	0.87	173.29	11.74	11.83	1.70
54	CVS	CVS Caremark	0.87	32.97	10.34	10.35	1.50
55	GME	Gamestop	0.88	22.97	7.32	8.34	0.00
56	IGT	International Game Technology	0.89	13.73	12.15	11.99	1.70
57	ECOL	US Ecology	0.90	15.05	14.07	11.00	4.70
58	XOM	Exxon Mobil	0.90	71.15	8.14	6.47	2.60
59	WM	Waste Management	0.90	31.36	12.85	10.00	4.20
60	JACK	Jack in the Box	0.92	19.26	10.82	11.80	0.00
61	WEN	Wendy's	0.92	4.46	19.3	9 19.28	1.70
62	YUM	YUM Brands	1.02	48.45	15.0	9 12.56	2.30
63	PEP	Pepsi	1.06	60.29	12.51	8.55	3.30
64	ERTS	Electronic Arts	1.06	19.76	16.61	15.73	0.00
65	MON	Monsanto	1.08	60.11	17.58	14.30	2.00
66	VCLK	Value Click	1.08	14.92	13.44	12.43	0.00
67	UL	Unilever	1.10	30.56	12.18	7.00	4.10
68	PG	Procter and Gamble	1.12	62.84	13.63	8.90	3.30
69	T	AT&T	1.14	28.16	11.09	3.77	6.00
70	MCD	McDonalds	1.14	86.02	15.06	10.01	3.20
71	QSII	Quality Systems	1.15	92.11	26.85	21.95	1.40
72	SNDA	Shanda Interactive	1.17	28.86	15.86	13.53	0.00
73	K	Kellogg	1.18	52.88	13.95	8.65	3.20
74	GIS	General Mills	1.24	37.96	13.41	7.60	3.20
75	SWK	Stanley Black and Decker	1.26	48.25	7.91	3.00	3.30
76	YHOO	Yahoo	1.27	13.53	16.3	12.84	0.00
77	HMSY	HMS Holdings	1.27	22.95	31.01	24.33	0.00
78	JNJ	Johnson and Johnson	1.28	62.08	11.74	5.58	3.60
79	HAIN	Hain Celestial	1.28	28.31	16.27	12.70	0.00
80	PCP	Precision Castparts	1.28	148.33	14.29	11.05	0.10
81	HRL	Hormel Foods	1.31	26.53	14.99	9.50	1.90
82	ISRG	Intuitive Surgical	1.39	348.76	25.81	18.62	0.00
83	KO	Coca Cola	1.42	65.42	15.29	8.00	2.80
84	HANS	Hansen Natural	1.43	79.76	22.4	15.70	0.00
85	WFM	Whole Foods	1.44	62.44	27.75	18.70	0.60
86	CERN	Cerner	1.48	65.56	29.53	19.89	0.00
87	SGMS	Scientific Games	1.50	6.63	14.41	9.63	0.00
88	COST	Costco	1.52	81.63	21.26	12.77	1.20
89	GRMN	Garmin	1.56	30.6	14.17	4.10	5.00
90	COP	Conoco Philips	1.61	60.99	7.07	0.20	4.20
91	CMG	Chipotle Mexican Grill	1.65	292.7	33.88	20.50	0.00
92	CLH	Clean Harbors	1.69	47.83	20.18	11.93	0.00
93	AMT	American Towers	1.98	52.86	38.58	19.46	0.00
94	AMZN	Amazon	2.39	211.98	66.24	27.67	0.00
95	RGR	Sturm Ruger	5.80	24.63	12.76	0.00	2.20

End of World Portfolio: Gold, Guns, and Spam: Outperforming

Some people say that the End of the World Portfolio consists of "Gold, Guns, and Spam".

To evaluate these, we will compare the S&P 500 compared to Gold (GLD), Guns (RGR: Sturm Ruger, maker of firearms), and Spam (HRL, Hormel, maker of Spam).

(Dividends not taken into consideration):

1. First Major Downturn: October 2007 to September 22, 2011:
   
   
   
   • S&P 500: -27.83%
     
   • GLD: +131.29%
     
   • HRL: +57.62%
     
   • RGR: +68.98%
     
   
   
   During this time period, the "End of the World Portfolio" trounced the US Market S&P 500 index.
   
   
2. Downturn Peak to Trough: October 29, 2007 to March 9, 2009:
   
   
   
   • S&P 500: -51.83%
     
   • GLD: +24.23%
     
   • HRL: -14.97%
     
   • RGR: -44.86%
     
   
   
   From Peak to Trough, 2007 to 2009, the End of World Portfolio outperformed the S&P 500. We do see that the more traditional defensive GLD and HRL did better in the downturn than RGR.
   
   
3. Recent Peak to Now: July 7, 2011 to September 22, 2011:
   
   
   
   • S&P 500: -16.63%
     
   • GLD: +13.34%
     
   • HRL: -10.01%
     
   • RGR: +23.2%
     
   
   
   

Hormel (HRL) has a forward PE 15.11, a Forward Yield of 1.80%, and a 5 year estimated growth rate of 9.50% for a PEG+Y ratio of: 1.3

Sturm Ruger (RGR) has a forward PE of 15, a Forward Yield of 1.90%, and an unknown 5 year estimated growth rate.

Idea #6: AEA: Cash Advance Centers: Profit from Bad Times and Living Paycheck to Paycheck

Simple Idea #6: AEA: Advance America, Cash Advance Centers: Profit from Bad Times, Recession, Unemployment, and Living Paycheck to Paycheck

• TICKER: AEA
  
• SECTOR: Financial Services, Loans, Credit Services
  
• GROWTH THEME: Bad times are with us with risks of recession, continued high unemployment and people continuing to live paycheck to paycheck. AEA, Advance America, Cash Advance America provides short term loans, cash advances, and credit improvement services.
  
• MARKET CAP: $500 Million
  
• FORWARD PE: 7.75
  
• ESTIMATED 5 YEAR GROWTH: 15%
  
• FORWARD YIELD: 3%
  
• PEG+Y GROWTH: 0.43 (Very Good: < 1.0)
  
• PERCENT ABOVE 50 DAY MOVING AVERAGE: 3.8%
  
• PERCENT ABOVE 200 DAY MOVING AVERAGE: 35%
  

Idea #5: HANS: Hansen, Leading Energy Drink Maker, Monster brand

Simple Investment Idea #5: HANS (Hansen): Leading Energy Drink Maker ('Monster' brand)

• TICKER: HANS
  
• SECTOR: Consumer Staples, Beverage, Energy Drink, Specialty Drinks
  
• GROWTH THEME: Hansen (HANS) is a specialty drink maker, and their Monster Brand Energy Drink is a leader. Generation Y (a large group) and the Youth, and global growth will help propel stock and industry forward.
  
• DEMOGRAPHICS: Wiley has a study of Energy Drink Demographics.
  
• MARKET CAP: $7.1B
  
• FORWARD PE: 22.73
  
• ESTIMATED 5 YEAR GROWTH: 14.5%
  
• FORWARD YIELD: 0%
  
• PEG+Y GROWTH: 1.56
  
• PERCENT ABOVE 50 DAY MOVING AVERAGE: 4.7%
  
• PERCENT ABOVE 200 DAY MOVING AVERAGE: 29%
  
• RELATED COMPANIES: Pepsi (PEP), Coca Cola (KO), Diageo (DEO)
  
• RELATED BRANDS: Red Bull (Austrian Red Bull GmbH), Rockstar
  

Stock Market S&P 500 in Upper Range of 60 Year Mainstream Price Channel

The S&P 500 (US Stock Market) has been going down for sometime, and the S&P 500 went down 6.7% on August 8, 2011, to 1119.46. From the long term view, where is this market headed?

If we look at the S&P 500 chart from 1950 to 2010 (We made this chart the middle of 2010), we see that the S&P 500 Stock Market is now solidly within the mainstream price channel between the years 1950 and 2010. The peaks in 2000 and 2008 can be considered part of an unsustainable "Bubble" period.



Based on the charts, the current price channel (2011) appears to be somewhere between 500 and 1300 on the S&P 500. Over the long term, the trend still is up, but over many years, the S&P 500 might trade within this mainstream price channel for many years.

Stock Market To Stagnate for Years

In June 2010, we blogged about the US Stock Market stagnating for around five years within a Secular Bear Market. We still hold that view.

Lower Highs, Lower Lows, Violent Rallies in a Secular Bear Market

Since 2008, we appear to be making lower highs (around 1500 in 2008, and around 1370 on the S&P 500 in 2011), and maybe we'll be making lower lows.

If we are in a Secular Bear Market, this does not mean we will be going straight down in a straight line. There will be many tradeable and violent snapback rallies when we least expect it, but these will be Bull Markets within a Secular Bear Market.

Idea #4: SNDA: Profit from Millions of Online Chinese Gamers

Simple Investment Idea #4: SNDA: Profit from Millions of Online Chinese Gamers

• TICKER: SNDA
  
• COMPANY: Shanda Interactive Entertainment LTD.
  
• SECTOR: Technology, Chinese Online Gaming
  
• GROWTH THEME: Online Gaming in China is big business, with millions of players. There is also a great demographic shift in China, and there will be 24 million surplus bachelor marriage aged men, a key Chinese online gaming demographic.
  
• MARKET CAP: $2.79B
  
• FORWARD PE: 23.64
  
• ESTIMATED 5 YEAR GROWTH: 11.09%
  
• FORWARD YIELD: 0%
  
• PEG+Y GROWTH: 2.13
  
• PERCENT ABOVE 50 DAY MOVING AVERAGE: 9%
  
• PERCENT ABOVE 200 DAY MOVING AVERAGE: 18.64%
  
• RELATED COMPANIES: The9 Limited (NCTY), Giant Interactive (GA), Perfect World (PWRD), CDC Corporation (CHINA), NetEase (NTES), Activision Blizzard (ATVI)
  

NOTE: Popular World Of Warcraft MMORPG (Multiplayer Massively Online Role Playing Game) is controlled by Activision Blizzard (ATVI)

Idea #3: QSII: Profit from Digitizing HealthCare Systems

Simple Investment Idea #3: QSII: Profit from Digitizing HealthCare Systems

• TICKER: QSII
• COMPANY: Quality Systems
  
• SECTOR: HealthCare, Technology
  
• GROWTH THEME: There is a big need to modernize and digitize HealthCare Records and HealthCare Information Systems (IT).
  
• MARKET CAP: $2.51B
  
• FORWARD PE: 31.48
  
• ESTIMATED 5 YEAR GROWTH: 18.27%
  
• FORWARD YIELD: 1.70%
  
• PEG+Y GROWTH: 1.57
  
• PERCENT ABOVE 50 DAY MOVING AVERAGE: 8.3%
  
• PERCENT ABOVE 200 DAY MOVING AVERAGE: 30.1%
  
• RELATED COMPANIES: Cerner (CERN), AllScripts Healthcare Solutions (MDRX)