3 Gems From Our January Stock Screeners

We pick a few of the stocks flagged up over the course of the month and provide the rundown.

As you may have noticed, we launched our own stocks screeners at the start of the year. We separated them into different categories, and have been updating them and sharing different tweaks (based on growth, income, geographies, etc) both now and going forward.

We like to think our screeners do add value, and so wanted to share some of the picks from the past month. This includes some that we have invested in as part of our AlphaPicks Portfolio (more on that later).

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As well as the screeners, this includes our flagship Monday weekly rundown with actionable trade ideas, as well as our Wednesday and Friday research and opinion pieces on global markets.

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Onto the review…

Deutz

Our value screener on 9th Jan flagged up Deutz AG as a potentially attractive play when the stock was trading at EUR 4.90. The German listed stock is an internal combustion engine manufacturer.

There were a few elements that caught our eye that led us to buy the stock. For example, the business was growing yet the share price wasn’t reflecting reality.

In the Q3 trading update from November, it highlighted that adjusted EBIT was up by around 40% to €92.7m in the nine-month period versus the same period in 2022. This led the firm to increase the full-year guidance for profitability. Sales revenue was also up 10% on the prior year.

Yet as of the 9th Jan, the price-to-sales ratio was a paltry 0.28. It was registering as having a return on equity of 15% in the last full year, as well as having low debt levels (that can sometimes be the Achilles heel for value stocks).

From the point of posting, the stock is up 13%, with strong momentum. We are eyeing up a move to EUR 6.00, followed by EUR 8.00.

As a side note, even though this is listed in Germany, it has a market cap of circa EUR 700m, so has good liquidity and shouldn’t be difficult to access via a brokerage account.

Novo Nordisk

Our growth screener on New Years’ Day popped up Novo Nordisk. The Danish multinational pharmaceutical company has a strong footing around the world, with the stock available to trade via the NYSE.

The firm has been growing rapidly over several years. Evidence of this can be seen from the 349% gain over the past five years. Yet despite this, we believe that that party hasn’t finished and that further gains can be had here.

Our flagged entry point was at $101.50, with the price now at $108.80, a gain of 7%. Over the course of a month, some might claim this isn’t mind blowing for a growth stock. This is true, but we actually like the fact that the increase in the share price is steady and feels more sustainable than a flash in the pan.

The current Full-Year Price/Earnings to Growth Ratio sits at just 1.38, which is low in our opinion. The screener also filters for stocks with a high last Full-Year EBIT Margin. Novo Nordisk fits the bill here, with a generous 42.28%.

We are looking for a price target of $140 by the end of the year.

Paragon Banking Group

We finish with a stock close to home, namely the UK listed Paragon. This stock was flagged up in the first iteration of our dividend screener.

It’s important to remember that for our dividend screener, we aren’t specifically targeting capital appreciation here, but rather attractive income payers that we think are sustainable.

We feel Paragon ticks most boxes here, with a dividend yield of 5.29%. Importantly, the screener managed to tag some key metrics that make us think the dividends are here to stay.

Firstly, the free cash flow yield is high, so we don’t feel there are any problems from that angle. The last full-year payout ratio was 48%. This is a sweet spot. After all, a payout ratio too low could indicate that income isn’t a key priority for management. A ratio too high could make future payments unsustainable.

Finally, the share price is up by 18% over the past year. This means that the yield isn’t skewed due to a falling share price, and that the firm is actually performing.

From here, this is a long-term play in that we hope to be able to pick up good income without huge levels of volatility around the share price.

Important points to note

Even though some of the stocks screened have moved already, we still believe they offer value for medium to long-term investors.

Going forward, we expect other interesting stocks to come up, which we intend to add to our portfolio selectively.

As usual, we have to stress that our stocks screeners shouldn’t be taken as pure investment advice. Due diligence is required on behalf of each reader to ascertain whether any pick is appropriate. The stocks pulled out have the potential (and do) go down in value and have no guarantee of making money.