Growth and Value: Finding Growth Stocks at Excellent Values

This week’s screen has something for both Growth Investors and Value Investors alike.

Growth Investors focus on companies with great earnings growth, but that alone isn’t good enough for many stock pickers any more. They want good growth at reasonable prices (low P/E’s).

And while Value Investors focus on low P/E stocks, too many are low because they lack earnings power.

So instead, try combining the best of both worlds and focus on the companies with the highest growth rates with the lowest P/E ratios.

The screen I’m running this week is as follows:

Companies with 5 Yr. Historical Growth Rates to be in the top 20 percentile of all companies.

(Using a Uniform Rank of 1-99 (99 being the best growth rates), I screened for stocks ranked 80 or better.)

Companies that also happened to have the lowest P/E’s too – lower than 80% of all other companies.

(Using a Uniform Rank of 1-99 again (this time 99 having the lowest P/E’s), I screened for stocks ranked 80 or better.)

I then required those stocks to be trading at or above $5, ... with average daily trading volumes of 100,000 shares or more.

And a Zacks Rank of 2 or less.
(Only ‘buys’ and ‘strong buys’ allowed).

Incidentally, this screen backtested very well, too. In fact, it beat the market in every year for the last 6 years (2001 thru 2006). (I ran a series of tests over the last five year time span, using a four-week rebalancing period. Each run was rebalanced over a different set of four-week periods to eliminate coincidence and verify robustness.)

In 2001, this screen showed an average annualized gross return of 42.6%. In 2002, it was 19.1%. In 2003, it was a whopping 93%. In 2004, it came in at 40.4%. 2005 was up 11.9%. 2006 was 16.8%. And so far in 2007 (YTD thru 3/9/07), its average compounded gross return is up 5.4%.

This screen is an excellent way to find good growth companies that also have low valuations.

There are 14 stocks that made it thru this week’s screen (3/19/07).

Company	Ticker	5 Yr. Hist. EPS Rank 1-99 (higher # = best EPS)	5 Yr Hist. EPS Gr.	P/E Rank 1-99 (higher # = lowest P/E)	P/E using 12 mo. EPS	Current Price	Avg Daily Vol (20 day avg.)	Zacks Rank
AUTO MFRS - DOMESTIC
Paccar Inc	PCAR	86	53.65%	86	12.16	$72.33	1,730,648	2
ELEC-MISC COMPONENTS
Ceradyne Inc	CRDN	97	120.19%	88	11.71	$55.26	891,895	1
FINANCE-CONSUMER LOANS
First Marblehd	FMD	94	91.47%	88	11.66	$43.19	1,581,531	2
INSURANCE-PROP/CAS/TITLE
Arch Cap Gp Ltd	ACGL	85	49.85%	98	6.67	$64.25	209,999	2
Argonaut Grp	AGII	88	59.1%	86	12.14	$33.75	170,369	2
Ohio Cas Corp	OCAS	87	55.19%	93	9.76	$29.39	376,156	2
Phila Cons Hldg	PHLY	85	50.86%	84	12.85	$43.42	280,842	2
Safeco Corp	SAF	86	52.8%	92	9.97	$66.42	617,842	2
OIL & GAS-FIELD SERVICES
Global Inds Ltd	GLBL	92	76.05%	92	10.21	$16.85	2,142,846	1
OIL & GAS-INTL INTEGRATED
Total Fina Sa	TOT	87	55.78%	99	5.09	$65.19	1,936,932	2
STEEL-PRODUCERS
Arcelor Mittal	MT	93	86.45%	94	9.03	$50.05	2,656,583	2
Schnitzer Steel	SCHN	93	81.98%	94	9.33	$37.87	355,339	2
TELECOMMNCTNS-WIRELESS
Turkcell Il-Adr	TKC	86	53.79%	82	13.31	$13.19	788,442	1
ELECTRONICS-MANUFACTURING MACH
Siliconware-Adr	SPIL	91	75.76%	86	12.27	$9.26	1,543,454	1

Check it out for yourself. See where your stocks Rank out of all of the other stocks out there, and test your own strategies and see how they’ve done. Find out what works and what doesn’t. It can all be done with the Research Wizard stock picking and backtesting program. Sign up now for your two week free trial and learn how.
http://www.zacks.com/researchwizard/index.php?site=regrep

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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