One of the more interesting uses for Portfolio Grader that I have heard of is to track changes in stocks with turnaround potential. Identifying these stocks as the fundamentals improve and the shares are upgraded can provide some huge winners if you catch a stock early as it goes from “D” to “C” to “B” and all the way up to an “A” ranking.
It may not be my preferred method of buying stocks — I’m a growth guy, through and through — but I designed Portfolio Grader to be useful in a variety of ways. If you’re looking for potential long-term turnaround, this screener can be a powerful tool in your stock-picking arsenal.
Let’s take a look at a stock that is working its way through the ranking system and may become an “A”-rated stock as fundamentals continue to improve. Gaming-equipment maker Bally Technologies (BYI) started the year as a “hold”-rated stock as fundamentals in the gaming industry were pretty flat. Back in February a strong quarter led to an upgrade to a “B” ranking for a short period of time before analyst skepticism caused it fall back to a “C” ranking. Investors who bought the stock and then held as PG suggested have enjoyed a quick 40% gain. Now that fundamentals have continued to improve, analysts are again upgrading the stock — and two weeks ago the stock once again bumped to a “buy” in the Portfolio Grader system.
Finisar (FNSR) makes optical components and subsystems for high-speed data and communication networks. The company struggled with the downturn in the economy, and the stock had been rated a “sell” all year by Portfolio Grader. The company recently posted its third positive earnings surprise; spending for telecom and data systems is starting to pick up, and analysts are raising their estimates for the rest of this year and 2014. Amid the improving fundamentals and growing institutional buying pressure, the stock was upgraded last week to “C,” or “hold” ranking. If we continue to see strong corporate spending on technology, this stock could easily move up to a “buy” ranking before the summer ends — another turnaround candidate.
Mutual fund manager Janus Capital (JNS) is also seeing slow improvements in its underlying fundamentals. The company struggled as investors avoided mutual funds, but there are signs this dynamic is starting to change. The company posted slight positive surprises in the last quarter and also raised its dividend by a penny per share; the stock is now yielding over 3%. Janus has partnered with a large Japanese life insurance company to increase its presence in Asia, a move that should help drive decent revenue and profit growth for the company. Pursuant with the improving situation, Portfolio Grader raised its ranking to a “hold.” If the stock market continues to rise, assets under management and profit growth could rise sharply — and take the stock to a “buy” ranking.
Using Portfolio Grader can help investors find stocks with improving fundamentals that just might be turnaround stocks in the second half.
Louis Navellier is the editor of Blue Chip Growth.