Market momentum is green. If the market readings change, I’ll let you know right away. But for now, we’re looking for a quick one or two-week Bear Rally. Now what?
After all of our indicators turned positive, we are ready to deploy some capital back into the market. We had a wave of insider buying. We saw momentum indicators like the RSI, MFI, and MACD turn positive. And even some bearish friends of mine were bullish as can be.
All week, I’m going to discuss a few stocks that offer strong value and momentum upside. But let’s dive into the stocks that we know are working in this economy. That’s right… It’s F&Z Score time for June 2022 perfect stocks.
Ready to Go
How do we trade the best stocks? Cash secured puts and credit spreads offer you great potential as you’re dipping a toe back into the market. If you’ve followed me over the last few weeks, I’ve written extensively about these trades.
If you’re ready, start with the safe stocks that are working in this economy. I look 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.
Start right here:
- The Piotroski F-score
- The Altman Z-score
- A valuation rank
Here’s How It Works
Let’s start by finding positive financial growth and low debt exposure. That’s where the Piotroski F-Score succeeds. The F-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. That means it’s perfect.
The Altman Z-score is a weighted average of five metrics to determine whether a company might go out of business. If a company falls below 2.6, it has a risky balance sheet. That risk is tied to a balance sheet that likely has lots of debt or weak cash flow. We are looking for stocks with a Z-score of 3 or higher. This is pure forensic analysis.
But let’s add one last element to this. We want our stocks to have attractive valuations. We don’t want to trade at 15 times sales, and we don’t want to have negative book value or negative EBITDA. So, we aim for stocks with attractive buyout values.
And using EV/EBITDA (Enterprise Value to Earning Before Interest Taxes Depreciation and Amortization), we come up with this list. Here are your top F and Z score stocks for June 2022.
The List of June 2022 Perfect Stocks
Let’s just get to it…
| Stock | F Score | Z Score |
| BHP Group Ltd. (BHP) | 9 | 4.69 |
| LyondellBasell Industries (LYB) | 9 | 3.45 |
| CF Industries Holdings (CF) | 9 | 3.50 |
| Bed Bath & Beyond Inc. (BBBY) | 9 | 3.80 |
| Penske Automotive Group Inc. (PAG) | 9 | 3.42 |
| SandRidge Energy Inc. (SD) | 9 | 3.72 |
| P.A.M. Transportation Services (PTSI) | 9 | 3.37 |
| Covenant Logistics Group (CVLG) | 9 | 3.45 |
| Photronics Inc. (PLAB) | 9 | 4.20 |
| Academy Sports and Outdoors (ASO) | 9 | 3.24 |
| Donnelley Financial Solutions (DFIN) | 9 | 3.57 |
Following the recent downturn in the markets, you now have a list of 11 stocks that have strong balance sheets, low takeover metrics, and have real tangible assets. If you want to start trading them, don’t buy the stock or call options. Go deep out of the money on puts, and trade credit spreads.
Again, with these trades, you can improve your probability of profit, generate large income payments from a small position, and pick your preferred entry buying price.
And what happens with these trades? If the stocks go higher, you’ll make money. If the stocks don’t reach the strike price, you’ll make money. And if the stock falls to the strike price, you’ll get a great stock at a much cheaper valuation than today. It’s “win, win, win.”
