January’s Perfect Stocks

January's Perfect Stocks

To start the year, let’s begin with our monthly F and Z score rankings. We are always looking at three different metrics to help build a list of winning stocks that are low-risk, high-upside stocks given their rock-solid balance sheets.  

This is the ultimate Do-It-Yourself lesson for trading and investing. We look at:

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

We like to trade covered calls and cash-secured puts on these stocks. We can also do poor man’s covered calls on these stocks to trade options.

All About the Numbers

Let’s start by finding positive financial growth and low debt exposure – and the F-Score tells both. The F-Score is a NINE-POINT system that rewards each company for meeting a certain criteria on its balance sheet. If the company meets all nine criteria, it has an F-Score of 9. 

The Z-Score is a weighted average of five metrics to determine whether a company might go out of business. For example, if a company falls below 2.5, it has a risky balance sheet – typically due to large debt loads or weak cash flow. I prefer to target companies with a Z-Score of 3 or higher. 

Remember, stocks with solid F and Z scores tell us RIGHT NOW what is working in the U.S. economy. As I always say, no one can fake performance when using forensic analysis. But we also want to make sure that these stocks are not overvalued by any metric.

January’s Perfect Stocks:

StockF-ScoreZ-Score
BHP Group (NYSE:BHP)93.84
Labcorp. (NYSE:LH)93.99
Quest Diagnostics (NYSE:DGX)94.12
SEI Investments (NASDAQ:SEIC)917.28
Zumiez (NASDAQ:ZUMZ)94.08
Weyco Group (NASDAQ:WEYS)94.50
Hologic Inc. (NASDAQ:HOLX)94.28

So what do we learn from January’s perfect stocks?

Diagnostics companies (LH, HOLX, and DGX) continue to benefit from the ongoing COVID surge.

Financial services companies have benefited from investors seeking guidance heading into 2022 with markets stretched and valuations high (SEIC). 

Specialty clothing and at-home clothing firms are still holding strong thanks to e-commerce demand (WEYS and ZUMZ). And certain mining stocks look attractive with inflation in play (BHP).

Tomorrow, we’ll make the case for the latter. There are a wealth of mining stocks that look attractive and could benefit from a rotation into value in the near future.

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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