If you have a friend whose opinions about certain things -- be it restaurants, vacation spots, hotels or stocks -- you respect, then when this person recommends something, you pay attention. If two friends whose opinions you respect make the same recommendation, then likely your ears will perk up and you will take the recommendation very, very seriously.
To choose stocks, I rely on a number of old friends. Well, they are not personal friends, but they are among the greatest stock pickers in Wall Street's history. These gurus, who include Warren Buffett, David Dreman and Kenneth Fisher, are folks whose approaches to investing I respect and like so much, that I computerized them. This way I can analyze stocks in ways very similar to theirs, and can do so with great speed and accuracy.
Three compelling stock picks have been identified by two of these strategies. One strategy liking a stock enough to give it a high grade is enough for me to recommend it to you. But these picks have the backing of two gurus, which makes them particularly noteworthy.
All three stocks are favored by my Peter Lynch strategy. The most important variable employed by this strategy is the P/E/G ratio, which is price-to-earnings relative to growth. A P/E/G of up to 1.0 is permissible.
The three stocks in question are First Cash Financial Services (FCFS),Vodafone (VOD) and T. Rowe Price (TROW). First Cash is a pawnshop operator in the U.S. and Mexico with 800 locations. British-based Vodafone is one of the world's largest telecommunications companies, with more than 400 million customers. T. Rowe Price is a money manager and financial services firm with more than $700 billion in assets under management.
First Cash's P/E/G is 0.95, Vodafone's is a particularly strong 0.20 and T.Rowe Price's 0.90.
First Cash and T.Rowe Price are also favorites of my Warren Buffett-based strategy. Some aspects of these companies liked by this strategy include: strong market positions, earnings per share that have largely increased in each of the past 10 years, solid average returns on equity and positive free cash flows per share. In addition, this strategy projects what it thinks the compound annual returns will be for investors during the coming 10 years. For First Cash, the strategy projects annual returns of 14.7% and 14.2% for T.Rowe Price. These are desirable rates of return.
Vodafone is favored by my James P. O'Shaughnessy strategy. It likes the company's large market cap ($91 billion), cash flow per share that is positive and large numbers of shares outstanding and sales. Among stocks with these attributes, the strategy picks the top 50 based on dividend yield. Vodafone makes it into this top 50 group by having a 6.83% yield.