Sometimes Good Is Good Enough

 | Jan 30, 2014 | 1:30 PM EST  | Comments
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Stock quotes in this article:

anat

,

bwld

Sometimes, waiting for perfection means missing good opportunities. Going with what is good enough can be amply rewarding. 

In this column, I typically write about stocks that earn "strong interest" ratings from my guru strategies. These are computerized strategies I created for my website, Validea.com, that are based on the writings and thinking of some of the greatest stock market investors of all time.

A stock earns a strong interest rating when it gets a score of about 90% or more from one or more guru strategies. These are the stocks I almost always write about here.

But there is a second level of recommendation, "some interest," that's worth considering. These stocks have scores of between 70% and 90%, and because they do not earn the highest accolades, I rarely write about them. They are liked by at least one guru strategy, but they are not quite favorites.

Here are two stocks that earn "some interest" ratings from three strategies. My thinking is that while some interest is a good recommendation, it is not quite positive enough to use as a recommendation in this column. But if a stock earns some interest from three different strategies, it is earning a strong recommendation nonetheless.

American National Insurance (ANAT), founded in 1905, sells life insurance, annuities, accident and health insurance and property and casualty insurance. The strategy I base on the writings of Peter Lynch is favorably impressed by the company's price/earnings-to-growth ratio, or P/E/G ratio, which is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is acceptable, while American National's is a very low 0.18.

My David Dreman strategy considers the company a contrarian investment, because both its P/E ratio and price-to-book ratio are in the bottom 20% of the market. Dreman looks for out-of-favor stocks, and American National fits the bill. And my Ken Fisher strategy likes the company's price-to-sales ratio and likes that it has ample free cash per share.

Buffalo Wild Wings (BWLD), which operates restaurants around the country, rates high according to my Lynch strategy for its earnings-per-share growth and low debt-to-equity ratio. The strategy I base on the writings of Martin Zweig gives the company good marks because its revenue is growing faster than earnings per share, and quarterly earnings are increasing. My momentum strategy indicates that earnings per share have increased in each of the past five years at an average growth rate of over 22%, and the stock's relative strength is a strong 85. It is trading within 15% of the 52-week high and is poised for a breakout.

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