5 Fundamentally Attractive Stocks to Buy for January
These companies represent a broad range of opportunity, from Big Energy to a small leather craft retailer
Specifically, three have the potential to benefit from the “January effect” that supports small-cap and illiquid stocks, and the other two have come under some selling pressure that should abate in January.
So, here’s a look at five stocks to buy for January:
Fortegra Financial (FRF)
Fortegra Financial (FRF), a provider of payment protection and other insurance services, is cheap at just 9 times expected 2014 earnings per share.
Through the recent sale of its insurance brokerage unit, FRF will deleverage its balance sheet and gain additional capacity for stock buybacks in the future.
The whole company could be sold, too, as management recently indicated it would consider all alternatives to add to shareholder value.
Tandy Leather Factory (TLF)
With a market cap of just $100 million and daily volume of a meager 9,000 shares, Tandy Leather Factory (TLF) is a hidden beauty (and one to use strict limit orders and stop-losses on), but one that can shine in January.
This do-it-yourself leather craft retailer and wholesaler has been growing sales at a rate in the high single digits and expected to grow earnings by 20% annually for the next five years, yet sells for just 12 times expected 2014 earnings of 80 cents per share.
Computer Services (CSVI)
Computer Services (CSVI), a provider of bank processing services, has been a steady grower, and at around 18 times trailing earnings it sells at a significant discount to fellow bank processor Jack Henry’s (JKHY) 22 multiple.
JKHY makes a lot of acquisitions, and CSVI, with a market cap of just $475 million, would be an interesting target.
Be aware that CSVI stock trades just 3,000 shares a day on average, so here too, make sure to use limit orders and stop-losses if considering.
Macy’s (M) isn’t on my radar because Miracle on 34th Street was on television a lot during the holiday season. Macy’s has been the best department store, and recent concerns over the holiday shopping season have weighed on the stock.
I expect the season to still be good for the retailer, and after that, Macy’s stock investors will focus more on the company’s strong position in the industry and the improving job market, which should boost consumer spending.
Devon Energy (DVN)
Natural gas prices have been on a tear recently in part on predictions of a colder winter. However, Devon Energy (DVN), which is a large producer of natural gas as well as oil, has not benefited from rising gas prices due to concerns over lower oil prices and a recent acquisition.
DVN stock is trading around technical support as I write this, and the stock can rise as long as natural gas prices go higher.
Traders could look to sell around $65.
All in all, I expect a positive year for stocks, but I expect the market to become more selective. Keep your eyes on economic conditions and stock valuations.Continue Reading