In an interview with South Texas Money Management President and Chief Economist Jim Kee, he reiterated to Kapitall the ideas shared by many analysts: "If you're looking for cheaply valued stocks, turn to tech, health care, financials and energy."
"Of course," he adds, "you can't trade sectors on value alone." We couldn't agree more.
Screening health-care stocks
Narrowing in on the health-care sector, we created a screen of firms offering a dividend above 1% -- a sign of profitability -- and encouraging accounts receivable trends relative to sales.
Receivable trends are encouraging because it helps to gauge whether the quality of sales, not just the quantity, is increasing over time.
To be more specific: We screened for names with strong sales trends relative to accounts receivable, and for increases in revenue that are outpacing increases in accounts receivable year over year, as well as receivables comprising a smaller portion of accounts receivable over the same time period.
These trends are positive because accounts receivable has not yet been received, and there is no guarantee it will be received in full, so the smaller the portion of revenue and current assets, the better.
Business section: Investing ideas
Below are the results of this screen. These stocks have positive sales trends relative to both revenue and current assets. They also have dividend yields above 1%. Details below.
Do you think these stocks are poised to move higher? List sorted alphabetically. (Click here to access free, interactive tools to analyze these ideas.)
1. Baxter International
2. CONMED: Provides surgical devices and equipment for minimally invasive procedures and monitoring. Market cap at $772.32M, most recent closing price at $27.30. Dividend yield at 2.2%. Revenue grew by 5.93% during the most recent quarter ($194.32M vs. $183.45M y/y). Accounts receivable grew by -3.33% during the same time period ($142.35M vs. $147.26M y/y). Receivables, as a percentage of current assets, decreased from 41.13% to 40.52% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).
5. Kensey Nash: Engages in the field of regenerative medicine utilizing its proprietary collagen and synthetic polymer technology to help repair damaged or diseased tissues. Market cap at $334.69M, most recent closing price at $38.47. Dividend yield at 2.6%. Revenue grew by 19.2% during the most recent quarter ($22.16M vs. $18.59M y/y). Accounts receivable grew by 2.66% during the same time period ($10.81M vs. $10.53M y/y). Receivables, as a percentage of current assets, decreased from 18.54% to 15.41% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).
6. Techne Corp.
7. Teva Pharmaceutical Industries
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Disclosure: Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz and Google Finance.
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