April 2022 Perfect Stocks

April 2022 Perfect Stocks

You know the drill… It’s time for our monthly update of stocks with great balance sheets, solid valuations, and a little bit of security as we enter the fourth month of the year. Dare I call these April 2022 perfect stocks!

As you know, I’m always focused on momentum, which remained Green on Thursday. BUT that selloff at the end of the day was a bit of a warning that something is brewing. I want to be cautious heading into April expiration.

That’s why I’m looking to trade stocks that have strong readings on the following:

  • The Piotroski F-Score 
  • The Altman Z-Score
  • A valuation rank

There is war. There is inflation. There’s an oil supply shock. So, let’s take a step away from all of this, and instead focus on stocks that can help up generate income by selling cash-secured puts in these tiresome times. 

The Three-Point System

How do we get this list of stocks? It’s simple.

We start each screen by focusing on improving financial growth and low debt exposure – and the F-Score tells both. This is a score created by former Stanford/Chicago Professor Joseph Piotroski. 

The F-Score (or Piotroski Score) is a NINE-POINT system that rewards each company for meeting a certain criterion on its balance sheet. If the company meets all nine criteria, it has an F-score of 9. 

Then, there’s the Altman Z-Score. You know I love this one. It’s a weighted average of five metrics to determine whether a company might go out of business. So, if a company falls below 2.6, it has a risky balance sheet. Why is it risky? There are large debt loads or weak cash flow. Simple as that. 

My rule: Find stocks with a Z-Score of 3 or higher. I don’t know what’s coming in 2022, let alone 2023. I want to ensure that I’m protected if a major credit event transpires.

And there is a rich history of credit events when the Fed raises interest rates or oil prices move higher (And guess what? We have both situations happening).

Stocks with perfect F and high Z-Score are safer alternatives to the speculative mess that rallied after the Fed meeting two weeks ago. They tell us RIGHT NOW what is working in the U.S. economy. 

Finally, I add on a quick valuation score. I’m looking for a stock that’s trading at a discount to its rivals or to its own historical valuations (be it price-to-earnings, price-to-sales, or price-to-cash flow metrics). Okay… enough typing. Here is the April perfect stock list.

April 2022 Perfect Stocks

Here we go…

StockF-ScoreZ-ScoreWall Street Target Upside 
Macy’s (M)92.6628.9%
Whirlpool (WHR)92.6820.3%
Sturm Ruger (RGR)914.70N/A
Universal Logistics (ULH)92.8123%
Flanigan’s Enterprises (BDL)92.92NA
Bath and Body Works (BBWI)93.9468.2%
Cognizant (CTSH)97.667.6%
Owens Corning (OC)92.8626.4%
USA Truck (USAK)93.2260.1%

I LOVE THIS LIST. It helps me generate some great ideas. And I know the story looking at just about every one of these stocks. Remember, for example, that Macy’s is a secret way to play inflation because of their real estate. There is ample pressure for the company to spin-off its real estate assets, and it’s cleaned up its balance sheet.

Remember – I like the upside of most of these companies, but my preferred strategy is to sell puts on them so that I can either generate income or pick the entry point that I want in order to set myself up for a longer-term ride. I’ll circle back and talk about ports tomorrow. For now, let’s trade these names.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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