Irish Spring Eruption
Stock Screen, by Mark Robertson, Managing Partner November 26th, 2018
Our adaptation of one of the favorite screening techniques of Hugh McManus, shopping near periodic lows, yields a number of companies that have been discussed or nominated during several of the most recent monthly Round Table webcasts.
During the November Round Table one of the audience participants asked what the Irish Spring stuff is all about.
Irish Spring has become one of our favorite screening methods. It’s a dual tribute to Round Table Knight Hugh McManus and our Ivory Soap screen that is based on the sole ranking of Manifest Investing Ranking — our combination recipe that equally weights the quality and return forecast of all companies.
Hugh McManus has a particularly strong track record over the last 8 years for our monthly webcast … so we’re obviously interested in better understanding his methods. Hugh McManus likes to shop for opportunities among stocks that are trading near their 52-week lows and for non-core case studies, he’ll sometimes demand that the stock prices be near multi-year lows. Part of the driver behind this is the recognition that there’s often a large difference between 52-week highs and 52-week lows, even for some of the bluer chip established stocks. Isolating opportunities to invest when stocks are in the lower part of those annual ranges would seem to provide a margin of safety and reduce some of the downside … and “all things created equal” why should we shop anywhere else? (Read that in an Irish brogue for full effect.)
Hugh has reminded us in the past that it’s not as simple as a percentage difference between the current price and the 52-week low. As shown here, it’s more of a range. The lower limit is indeed the 52-week low. But the higher limit of the range is a 1-year price target based on projected earnings and P/E ratio — using consensus assumptions for growth, profitability and long term valuation.
A stock trading near its 52-week low would have a “position-in-range” of 0%.
With the current swoon in the markets, there’s a whole bunch of companies tarding near their 52-week low these days. Just two months ago (9/20/2018), the average 1-year total return forecast was 9.7%. It is now 25%.
A number of these companies have been discussed and/or selected during recent Round Table sessions including: Southeast Airport Group (ASR), Dycom (DY), FaceBook (FB), MKS Instruments (MKSI), FleetCor (FLT)II-VI (IIVI) and Skechers (SKX).
For more: Hugh discussed his affinity for shopping near periodic lows in
Irish Spring Screening Results (11/26/2018). Growth: Sales growth forecast based on regression. Proj Ann Ret (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. 52-Week Position: Position on scale between 52-week low price and 52-week target price. The data is ranked (ascending order) based on this criterion. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via www.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.
Mark Robertson
Mark Robertson is founder and managing partner of Manifest Investing, a source for research and portfolio management focusing on strategic long term investors.