Each month I scan the data tables of Investor’s Business Daily, looking for the best stocks to buy that have an earnings-per-share rank of 80 or higher, an SMR rating of at least an A and trade over 500,000 shares per day.
The EPS rating measures a company’s earnings growth against all other publicly traded companies over the last three years with heavier weighting for the most recent quarters. The SMR rating is a collective grade for Sales Growth, Profit Margin and Return on Equity. Breaking the stocks down like this narrows thousands of possibilities to what usually amounts to 150 to 250 stocks.
Heading in to September, I went through the universe of stocks and found 148 stocks that met the above criteria.
After paring it down to 148, I scanned the charts for various items — stocks hitting support at a moving average, a trendline, trend channels, oversold, etc. After looking at all the numbers, these three companies stood out to me as being among the best stocks to buy in September.
Best Stocks to Buy in September: Autohome (ATHM)
Autohome (NYSE:ATHM) is a Chinese internet company that offers car buyers independent information on automobiles. The company has seen its earnings grow by 32%-per-year over the last three years and the latest quarter was in line with that average at 32% growth.
Autohome’s Sales have grown by an average of 31%-per-year over the last three years and were up 22% in the most recent quarterly report.
Looking at the profitability measurements, ATHM shows a return on equity of 30.7% and a profit margin of 39.4%. The operating margin is a very respectable 37%.
What we see on the weekly chart for ATHM stock is that it is extremely oversold. The weekly stochastic readings are the lowest they have been in over two years when the stock was under $30 a share.
The recent downswing in Chinese stocks has taken a toll on many of the best companies and Autohome is no exception. We see that Autohome stock dipped below its 52-week moving average a few weeks ago, but it has now bounced back above it.
With the stochastic readings making a bullish crossover this week, I look for ATHM stock to continue its upward trend. The ongoing trade negotiations between the U.S. and China will certainly cause fluctuations, but I think Autohome is a great buy below the $85 level.
Best Stocks to Buy in September: Micron (MU)
Along with Autohome, Micron Technology (NASDAQ:MU) also makes it on this list of best stocks to buy in September 2018. This semiconductor manufacturer is based in Boise, Idaho and it has been on a tremendous run in the last few years, both in terms of the company’s performance and in the stock’s price performance.
Earnings have grown by an average of 80%-per-year over the last three years and they grew by 94% in the most recent quarter. Analysts expect earnings to grow by 137% for 2018 as a whole.
Micron’s sales have grown by an average of 22%-per-year over the last three years and were up 40% in the most recent quarter.
The return on equity for MU stock is at 36.8% and the profit margin is at 28.6%. The company’s operating margin is an incredible 47.1%.
The Micron stock price has jumped by almost 600% from the low in May 2016 through the high this past May. Since that high, MU stock has pulled back a little, but it has found support at its 52-week moving average and seems to have halted the short-term decline.
The slight pullback did bring the overbought/oversold indicators down from pretty high levels and they are now down near their lowest levels in over two years. The weekly stochastic readings hit the 20 level for the first time since Feb. 2016. The indicators have since reversed and I think that is a good sign.
I look for Micron stock to resume its uptrend and I would be comfortable owning the stock as long as it remains above the 52-week moving average.
Best Stocks to Buy in September: Steel Dynamics (STLD)
Steel Dynamics (NASDAQ:STLD) is a steel producer based in Ft. Wayne, Indiana and it is the highest-rated steel producer according to the IBD ratings.
The company has average earnings growth of 62%-per-year over the last three years. The most recent quarterly report showed incredible earnings growth of 143% and analysts expect STLD to grow earnings by 112% in 2018.
Steel Dynamics’ sales haven’t been growing as fast as the earnings, but they have still grown by an average of 9% over the last three years. The most recent quarterly report showed sales growth of 29%.
The return on equity for STLD stock is at 20.5%, while the profit margin is at 10.2%. The operating margin for the company is at 12.3%.
What we see on the weekly chart for Steel Dynamics stock is an upwardly sloped trend channel. The upward trend has been pretty clearly defined by the channel and the stock just recently hit the lower rail of that channel.
The lower rail of the channel is in close proximity to the 52-week moving average and that should provide a second layer of support for STLD stock.
There is also a bit of a seasonal factor for Steel Dynamics. If you look at the 10-week RSI, the indicator has hit a low in each of the last two Septembers.
I expect Steel Dynamics stock to continue trading within the trend channel and I would be comfortable holding the stock as long as it is in the channel.
As of this writing, Rick Pendergraft did not hold a position in any of the aforementioned securities.