“Davos Man,” the hypothetical investor who gravitates toward global businesses and bonds has been ruling the roost for the past decade, but he might be passing the baton to “Joe Six Pack” investors, which focus more on mainstream, domestic assets. This according to a recent Globe and Mail article by Validea CEO John Reese.
The article discusses the notion of the Great Rotation theory– the idea that the financial assets that thrived during the last ten years of slow growth, low interest rates and non-existent inflation are now being eclipsde by those that had underperformed—and highlights the spectrum of opinions on the subject.
Using his guru-based stock screening models, Reese identifies six high-scoring, Joe Six Pack-friendly stocks:
- Home Bancshares Inc. (HOMB) is engaged in providing a range of commercial and retail banking and related financial services. The company is favored for its ratio of price-earnings to growth in earnings-per-share (PEG ratio).
- Universal Forest Products Inc. (UFPI), through its subsidiaries, supplies wood, wood composite and other products to the retail, construction and industrial markets and earns high marks for its PEG ratio.
- Tyson Foods Inc. (TSN) sells chicken, beef, pork and prepared foods under Tyson, Jimmy Dean, Hillshire Farm, Sara Lee and Ball Park brands. The company is favored for its EPS growth and price-earnings ratio.
- Owens corning (OC) is engaged in the business of composite and building materials systems. Its balance sheet reflects favorable debt levels (debt is approximately half of equity) and price-earnings to EPS growth adds appeal.
- Trinity Industries Inc. (TRN) owns a range of businesses providing products and services to the energy, transportation, chemical and construction sectors and is favored for its operating cash flow, which exceeds net income by a comfortable margin.
- Amtrust Financial Services Inc. (AFSI) is an insurance holding company that provides specialty property and casualty insurance. The company boasts predictable earnings and favorable average return-on-equity over the past ten years.