Conglomerates and Export Opportunities

In spite of the problems in the US and in Europe, US exports are running at record levels. And US companies with strong export markets are benefitting tremendously.

While it's true that US exports to Europe are expected to slow down next year, the Asian-Pacific region is expected to fully make up for that and more.

Yes, China's growth has 'cooled' to a number closer to 8% rather than the 9% of previous years. And it's also true that others are seeing similar revisions. But growth rates like those are still the envy of the world. And with those markets surging, some companies with exposure in these areas are looking at boom times.

And one of the best sectors to capitalize on this is the Conglomerates sector.

Since many conglomerates are large-cap stocks, we're going to tailor our screen to be accommodating of this, yet strict enough so as to only select the best ones from this group.

Screen

• Sector equal to Conglomerates
  Since we're screening for Conglomerates this is step one.

• Zacks Rank less than or equal to 3
  Since Zacks #1 Ranks (Strong Buys) and Zacks #2 Ranks (Buys) have a larger representation of small-cap and mid-cap stocks, we're expanding our screen to include Zacks #3 Ranks (Holds) since it can be harder for a larger-cap company to make it into the coveted Zacks Rank 1 or 2, slot.

  One of the reasons for this is that it's harder for a widely covered large-cap stock to score as high on the Agreement portion of the Zacks Rank than a lesser followed small-cap stock.

  For example, Agreement measures the percentage of analysts revising their earnings estimates in the same direction. So a company with 3 out of 4 analysts revising their earnings estimates upward means that 75% of the analysts are in agreement on the direction of estimate revisions. However, a company with 20 analysts for example, would need to see 15 analysts increasing their earnings estimates in the same direction to equal that same percentage.

  And quite frankly, some large-cap Zacks #3 Ranks, once you account for this, are actually better, in my opinion, than some smaller Zacks Rank 1s and 2s.

  But we're still excluding the Zacks #4 Ranks and Zacks #5 Ranks, which are Sells and Strong Sells, respectively.

• Price greater than or equal to 5
  A lot of fund managers won't even look at a stock if it's below $5. And since institutional investors are the ones that truly drive the market, it's a good idea to keep your stock candidates on their radar screen.

• Volume greater than or equal to 100,000
  This is a typical minimum for me. And you'll often see stocks with millions of shares traded on a daily basis coming thru this screen. But we nonetheless have this threshold because if there are too few shares traded each day, you will likely pay more on your ins and outs, not to mention be exposed to unnecessary volatility.

• Projected Growth Rate greater than or equal to S&P 500
  We're looking for market beating performance that should also encompass market beating growth rates.

This screen is not particularly complex. For one, the Conglomerates sector only has 44 companies in it to begin with. Make it too strict, and nothing will come thru. But once you add in the aforementioned parameters, including the growth rate and the Zacks Rank, that quickly narrows it down to only 10 of the best candidates.

If you need a tie breaker on a stock, look at the PEG ratio, EPS and sales surprises, and recent earnings estimates revisions for the current quarter and full year.

Stocks

Here are 5 stocks from that list:

CR - Snapshot Report Crane Co.
CSL - Snapshot Report Carlisle Companies Inc.
DHR - Analyst Report Danaher Corp.
TXT - Analyst Report Textron Inc.
TYC - Analyst Report Tyco International Ltd.

The Conglomerates sector, of course, isn't the only group with export exposure. There are plenty of other sectors. And plenty of other stocks, including small-caps and mid-caps too.

Once you run a screen, whether it be this one or something else, take a moment to read up on the company and see what portion of their business is done overseas. The extra few minutes you spend checking out the company could pay off handsomely many times more than the extra effort.

Get the rest of the stocks on this list and start finding more stocks to benefit from record exports. It's easy to do. You can do it.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: http://www.zacks.com/performance.

Read the full analyst report on CSL

Read the full analyst report on CR

Read the full analyst report on DHR

Read the full analyst report on TXT

Read the full analyst report on TYC