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JimVanMeerten (61.38)

Can you find the best of the best?

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March 30, 2010 – Comments (1) | RELATED TICKERS: BA , GD , PPA

Once in awhile on Financial Tides I like to look at the best of the best. Value Line has used this trading strategy for years and it seems to have worked well for them. Their theory is if you pick the most timely stocks in the most timely industries you should do better than the market. These days I have a different way of locating the best of the best.

I look at which sector ETF hit the most new highs in the last 20 trading sessions and then analyze the stocks in that sector. This month the Powershare Aerospace and Defense ETF (PPA) hit new highs in 15 of the last 20 trading session. After screening the stocks in that sector I see that Boeing (BA) and General Dynamics (GD) have had the greatest price appreciation over the last 5 trading sessions.

Are these stock worth adding to your portfolio? Let's see how they stack up on a side by side basis:

Boeing (BA) hit new highs in 10 of the last 20 trading sessions and appreciated 14.56% last month. It has a buy signal on 12 of 13 Barchart technical indicators for a 96% buy rating.

Analysts have 12 buy, 12 hold and 4 negative recommendations published. This year sales are estimated to be down 4.8% but up 6.6% next year. Earnings are expected to increase 116.0 % this year, 12.1% next year and 8.33% a year for the next 5.

On Motley Fool investor sentiment is that the stock will beat the market by a vote of 3,489 to 373 with the more experienced All Stars in agreement 917 to 53.

If I use the same criteria to evaluate General Dynamics (GD) I find:

GD hit new highs in 7 of the last 20 session with a 5.03% price increase last month. Barchart has 12 of 13 technical indicators signalling a buy for a 96% rating.

Analysts have 14 buy, 7 hold and 1 sell recommendation published. Sales are expected to increase 6.1% this year and 3.9% next year. Earnings are estimated to increase 5.6% this year followed by 7.3% next year and maintain a 7.8% per year growth for the next 5 years.

On Motley Fool the CAPS members think the stock will out perform the market by a vote of 1168 to 51 with the All Stars in agreement 327 to 12.

Both companies have:
1 - Recent price momentum

2 - Positive analysts recommendations

3 -  Investor sentiment that the stock will beat the market

The numbers of the 2 companies are not really that much different but there seems to be 3 times as many investors willing to commit to BA than to GD.

I'm not making a recommendation either way but I thought I'd like to share with you an alternate way to find the best of the best:
1 - Start out with what you think is currently the strongest performing Sector ETF

2 -  Look for the best individual stocks in the sector

3 -  Decide to go with the sector or the individual stock.

I'd like to hear your ideas on this approach. Please do your own complete due diligence to make sure you are comfortable with your selections.

Jim Van Meerten is an investor who writes on financial matters here and on Financial Tides. Please leave a comment below or email JimVanMeertn@gmail.com

Disclosure: I do not own any of the stocks mentioned.

1 Comments – Post Your Own

#1) On March 30, 2010 at 1:26 PM, vriguy (76.68) wrote:

Wouldn't that approach increase your chances of buying at too high a price? If Boeing has appreciated 14.5% in the last month, why aren't you selling?  It'll return to earth soon enough and you maybe can ride it up again.

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