In light of the U.S. Trade Representative’s comments regarding the removal of 10% tariffs on certain Chinese imports, stocks with good value and growth potential according to GuruFocus’ Peter Lynch Growth and Value Screen include Shoe Carnival Inc. (SCVL, Financial), Stamps.com Inc. (STMP, Financial), Tech Data Corp. (TECD, Financial), NetApp Inc. (NTAP, Financial) and Methode Electronics Inc. (MEI, Financial).
Dow soars as U.S. removes tariffs on select Chinese imports
On Tuesday, the USTR announced it will exclude certain products from the list of Chinese imports subject to a 10% tariff on Sept. 1 based on health, safety, national security and other factors. Additionally, the agency will postpone tariffs on products such as cell phones, laptop computers and certain types of footwear until Dec. 15.
The Dow Jones Industrial Average traded at an intraday high of 26,426.97, up 529.26 points from Monday’s close, on the news. Despite this, the Dow closed at 26,199.95, just 292.58 points from the previous close as investors kept watching the spread between the 10-year Treasury constant maturity rate and the two-year Treasury constant maturity rate: The spread on Monday declined to 0.07%, suggesting the two-year yield is close to overtaking the 10-year yield, a reliable recession indicator. Apple Inc. (AAPL, Financial), a top holding of Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial), soared over 4%.
Peter Lynch Growth and Value Screen identifies good investing opportunities
GuruFocus’ Peter Lynch Growth and Value Screen seeks companies that have a business predictability rank of at least two stars, a 10-year revenue growth rate of at least 6% and a trailing 12-month price-earnings ratio below 14. However, to account for Lynch’s warning in investing in cyclical companies, the modified screen requires a business predictability rank of at least three stars and two additional criteria: a financial strength rank of at least 5.5 out of 10 and a profitability rank of at least 5.5 out of 10.
As of Tuesday, the Modified Peter Lynch Growth and Value Screen listed five stocks in the U.S. region.
Shoe Carnival
Evansville, Indiana-based Shoe Carnival manufactures and sells name-brand dress, casual and athletic footwear for men, women and children. GuruFocus ranks the company’s financial strength 6.1 out of 10: Even though Shoe Carnival’s debt-to-equity ratio underperforms 62.43% of global competitors, the footwear retailer has robust interest coverage, a strong Piotroski F-score of 7 and a solid Altman Z-score of 3.72.
Gurus with large holdings of Shoe Carnival include Jeremy Grantham (Trades, Portfolio) and 2019 GuruFocus Value Conference keynote speaker Chuck Royce (Trades, Portfolio).
Stamps.com
Stamps.com, an El Segundo, California-based company, provides internet-based mailing and shipping solutions to individuals, small businesses, home offices and large enterprises. GuruFocus ranks the company’s profitability 7 out of 10 on several positive signs, which include operating margins that have increased approximately 8.40% per year over the past five years and are outperforming 83% of global competitors.
Gurus with large holdings of Stamps.com include Ken Fisher (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
Tech Data
Clearwater, Florida-based Tech Data brings products from technology vendors to the market and provides customers with logistics capabilities. GuruFocus ranks the company’s profitability 7 out of 10: Even though the profit margins underperform over 89% of global competitors, Tech Data’s return on equity and Greenblatt return on capital are outperforming over 63% of global competitors. Additionally, Tech Data’s business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.
NetApp
Sunnyvale, California-based NetApp provides data storage products and services to enterprises across the globe. GuruFocus ranks the company’s profitability 7 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7, expanding profit margins and a return on equity that outperforms 98.95% of global competitors. Additionally, NetApp’s business predictability ranks three stars even though the company’s three-year revenue growth rate underperforms 53.50% of global competitors.
Methode Electronics
Methode Electronics, a Chicago-based computer hardware company, manufactures component and subsystem devices employing radio remote control, electric, wireless and sensing technologies. The company operates three business segments: automotive, interface and power products. While approximately half of the company’s revenue comes from the U.S., the other half comes primarily from China and Malta.
GuruFocus ranks Methode Electronics’ profitability 6 out of 10: Even though the company’s three-year Ebitda growth rate underperforms 86.36% of global competitors, its operating margin has increased approximately 0.7% per year on average over the past five years and is outperforming 65.73% of global competitors. Additionally, the company’s business predictability ranks 3.5 stars out of five on consistent revenue and earnings growth over the past 10 years.
Disclosure: No positions.
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