CVI CVR Energy Inc

When the going gets tough, the tough get screening.

What I mean by this is that if there were ever a time to develop and hone your stock-picking skills by using quantitative screening methods, that time is now when GDP growth is dipping and sovereign debt/fiscal balance sheet concerns (read:taxes) are dominating Washington and Wall Street.

That's because rising tides in both the economy at large and specific sectors/industries will no longer virtually guarantee the profitable stock returns we've seen for the past two and a half years. So I went hunting Monday for one of my favorite investment opportunities: growth at a reasonable price, or GARP.

GARP Defined

There are as many ways to search for GARP as definitions of it. Today I offer two stock screens with slightly different definitions that both came up with the same three names. Before we get to the stocks, let me share the criteria of each screen.

First, I ran the Undervalued Zacks #1 Rank Stocks screen because I assumed that any #1 stock in our system is already generating noteworthy growth. The premise here is that undervalued stocks with a Zacks #1 Rank don't stay undervalued for long. This screen puts them on your radar screen so you can take action before the rest of the crowd does.

In addition to a price greater than $5 and average daily volume above 100,000, here are the key screening criteria that the stock must pass:

• One-year forward P/E multiple of less than 20 times
• Price-to-sales ratio of less than 1

Next, I looked at the Growth and Value Stocks Plus Zacks #1 Rank screen because I was curious if some of the names I saw on the above gauntlet would make it through this one also. The hurdles here were:

• One-year forward P/E of sub 15
• Current year EPS growth of greater than 20%

And the Winners Are...

The first screen produced only 35 names and the second came up with 44. They had a handful of stocks in common, but I want to share three that represent varying industries, the first two of which, Agricultural Machinery and Energy, I follow closely.

AGCO CORP. (AGCO) is engaged in the manufacture and distribution of farm equipment, machinery and replacement parts in the United States and Canada. Products include tractors, combines, hay tools and forage equipment and implements. The company has a $4.5 billion market cap and a PEG ratio of .93.

CVR Energy (CVI) is an independent refiner and marketer of high value transportation fuels and, through a limited partnership, a producer of ammonia and urea ammonia nitrate fertilizers. The company has a market cap of $2.4 billion and is on pace to grow earnings this year at 800% over 2010.

Dillard's Inc. (DDS) is one of the nation's largest fashion apparel and home furnishings retailers. Operating department stores in several states under the single name Dillard's, the company offers a distinctive mix of name brand and private label merchandise, appealing to a broad range of customers. With a $3.1 billion market cap, DDS is growing earnings this year at 57% and is still projected to top 16% EPS growth next year.

Another Ag name I follow, CNH Global (CNH) also came through both screens. I recently wrote about CNH and the forces driving global agricultural trends in my report Industrial Strength Power.

You Can Quant, If You Want

As any seasoned investor will tell you, stock picking is both art and science, with an occasional dash of luck. One way to both balance and reinforce your intuition -- and to check your biases -- is with solid analytical methods that look over an entire universe of stocks.

You never know when an idea you might love is slipping past you just because you didn't have the right tool to find it.

Using simple, pre-defined stock screens that we offer at Zacks.com is a push-button way to get quantitative and see what's out there that may grab your attention. We have dozens of screens available on a free rotating basis, and infinitely more possibilities when you test-drive our proprietary Research Wizard.

Disclosure: I am short puts in CVI.

Kevin Cook is a Senior Stock Strategist with Zacks.com
 
AGCO CORP (AGCO): Free Stock Analysis Report
 
CNH GLOBAL NV (CNH): Free Stock Analysis Report
 
CVR ENERGY INC (CVI): Free Stock Analysis Report
 
DILLARDS INC-A (DDS): Free Stock Analysis Report
 
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