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McGervey Wealth Management Founder Mike McGervey on what to look for when picking stocks and stocks investors should consider for the year ahead.
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About it money manager who looks at a very unique metric when picking stocks what is that while Michael -- is here to talk about it he's the president of -- -- -- wealth management.
And it's almost a signal that you look for.
Pick out and -- that helps you with your strategy thank you for joining us to share this with our viewers because we thought it was awfully interesting.
What is that strategy.
A list thanks for having me.
One of the things that we look for in particular with with regard to good indicator.
Is -- -- earnings to the upside it's often a great predictor of future price movement.
And we see these upward revisions often times are a precursor to a surprise in earnings.
And earning surprises as you know ten to.
Take place immediately we see price movement immediately.
And earning surprises also tend to affect the market potentially up to one year.
And we use this as a base to basically establish a good block -- stocks which we then can take to further fundamental analysis drill down.
Into balance sheet information.
Drill down into earnings -- down to return on equity.
And then taken a step further.
And actually look at technical analysis to enhance the timing.
-- are trying purchase and also on the downside to give us a sell side discipline has a safety net.
What -- you've got a couple of stocks that you've you've brought -- you was sonoco group one.
Have are these examples of of stocks that have popped as a result of your metric.
-- all three of those are examples and in particular we've seen in the last quarter.
Not only -- revisions to the upside for the current fiscal year but also the next fiscal year and it.
Genesco in particular has had revisions even in the last couple of weeks for for multiple times.
And we're seeing in Genesco.
That it's today I don't want to wait for those who don't know Genesco as a retail stock go ahead.
Sure and in with regard to the retail stock it's leading the industry.
In relative strength it's also leading that industry in what we would consider strong earnings growth revenue growth.
In the industry set sector itself -- -- apparel is also in the top 20%.
Of all 200 industry groups.
And we see that combined with the and increasing consumer confidence US retail sales up about four and a half percent over last year.
Just things to help keep -- bid in this particular security.
And and back with the discipline again it's our 57%.
Growth in earnings in the third quarter along with double digit earnings surprise.
Well -- look let me get to when you talk about some of your other picks say for example Group 1 Automotive that one up about 22% over the past year.
Then -- sonoco logistics up 43%.
Number one do you anticipate that they'll have those kinds of returns of 2012 because that's rather -- especially considering Genesco up 65% to so they've all done very well this here.
And number two are you starting to see analysts changed their upgrade -- -- -- their price targets etc.
so you're looking at that as well.
Right well with regard to Sunoco logistics we do look at that as potentially a double play and what I mean by that as we have the upside potential -- We also have what what I would consider recession resistant dividend paying stock.
That's are currently pays about 4% -- it has fairly trading -- fairly decent multiples of about sixteen.
Which are reasonable.
And with regard to the downside we were going to use technical analysis to protect that.
Group one you mentioned has has seen the advantage of double digit returns.
Auto dealers that is.
Automobile.
Retail.
Dealership.
And it.
Auto auto dealers have seen double digit returns for the last two years we do expect that to continue into twelve.
And they've also seen very strong.
Mike McCurry good to see a Mike thanks very much for coming -- -- -- happy new year.
