A few weeks ago, we were all looking to London because of the Olympics. Being a timely person, I wrote about some U.K. companies worth considering as investment opportunities. This week, with the Republican National Convention in Tampa, Fla., let's look at investment-worthy companies in the Sunshine State.
Miami-based World Fuel Services (INT) markets and finances aviation, marine and ground-transportation fuel products. The strategy I created based on the writings of Peter Lynch likes World Fuel Services. This strategy emphasizes the PEG ratio, which is price-to-earnings relative to growth and is a measure of the cost of growth to the investor. A PEG of 1.0 or less is acceptable, and World Fuel Services has a yield-adjusted PEG of 0.66. Also in its favor is a very manageable level of debt.
Another Lynch favorite is Jabil Circuit (JBL), based in St. Petersburg. It is a major electronic manufacturing services company with operations in North and South America, Europe and Asia. The company's price-to-earnings ratio is 11.65 and its growth rate, based on the average of the three-, four- and five-year historical EPS growth rate is 34.94%, giving it a PEG of 0.33. A PEG of 0.5 or less is considered very strong, and Jabil is in this desirable territory.
Fresh Del Monte Produce (FDP) is another Florida company worth investing in. Fresh Del Monte, incorporated in the Cayman Islands but headquartered in Coral Gables, Fla., is a vertically integrated producer, marketer and distributor of fresh produce, juices, snacks and desserts.
The strategy based on Joseph Piotroski's work is very positive about Fresh Del Monte. Piotroski studied the stock market and found that excess returns can be earned by holding a portfolio of high book-to-market stocks. He also found that it is very important to separate companies that trade at a discount because they are financially distressed from companies that are unfairly trading at a discount. Fresh Del Monte is in the top 20% of the market based on the B/M ratio, which is essential for this strategy to recommend a stock.
On the other side, the strategy finds that the company is performing well financially, with positive returns on assets and positive cash flow from operations. In addition, the long-term debt-to-asset ratio has fallen in the past year, during which time the company's current ratio has increased. Also, the gross margin has gotten higher during the past year. All of these are very positive signs.
You do not have to be in Florida to enjoy its orange juice or its well-performing companies. Whatever your political leanings, this is a good time to buy into three of the Sunshine State's stellar names.
