Back to top

The Bucket List Portfolio

Read MoreHide Full Article

Yesterday I watched Walk the Line, the movie about Johnny Cash starring Joaquin Phoenix, for the fourth time. Having seen Cash perform live, and having visited Sun Records' studio in Memphis, I'll watch that movie every chance I get. There's one scene that resonates with me each time. It's the one where Cash is auditioning for Sam Phillips at Sun Records, and Phillips, bored with the same old songs, stops Cash's trio a few verses in and requests something from the heart.

Phillips says "If you was hit by a truck and you was lying out there in that gutter dying, and you had time to sing ONE song. One song that people would remember before you're dirt... Cause I'm telling you right now, that's the kind of song people want to hear. That's the kind of song that truly saves people."

It got me thinking about my work offering stock picking strategies and the stocks identified by those strategies. So if I was hit by a truck and dying in a gutter, what strategies would I recommend people follow? What stocks would I highlight for someone to add to their portfolio? It's akin to creating a bucket list of strategies and stocks. You know, stocks that you should own now before you "kicked the bucket."

Give this premise to a hundred people and you'll probably get a hundred different answers. Most people are probably going to mention stocks like Apple (AAPL), Microsoft (MSFT), and Wal-Mart (WMT). But I'm much less attracted to the glamorous, well-known stocks. And because my style involves providing something that you can't find anywhere else, I like to discover the underdogs and those with hidden, outstanding characteristics that reveal a beauty within. And, thankfully, those are often where the potential gains and rewards are the biggest.

"I Was Hit by a Truck" Strategies

I began this task by looking at a variety of strategies in the Zacks Research Wizard. The goal was to find strategies that have been performing well, have a solid economic rationale, and offer a diversity of solutions that any investor could implement. These are strategies that could be employed for a lifetime and would allow you to build a nice nest egg if followed through thick and thin.

Here's the list of my bucket strategies in the Research Wizard:

  • ROE2 in the Screen of the Week (SoW) folder (64.1% 2012 YTD)
  • Value Method1 in the Value Strategies folder (55.2% 2012 YTD)
  • Filtered Zacks Rank2 in the All-Style Strategies folder (69.5% 2012 YTD)
  • Growth and Income Winners in the Growth and Income Strategies folder (18.9% 2012 YTD)
  • Analyst Anomaly in the Anomalies folder (22.6% 2012 YTD)

"I'm Dying in a Gutter" Stocks

Regarding a list of featured stocks, remember that I like to uncover the hidden gems -- the stocks not necessarily in the spotlight, but still onstage and presenting the best opportunities for success. The stocks listed below consist of a combination of stocks that occurred most frequently in the screens this week and those that I currently think have the potential for great profits. What I also admire about these stocks is that I can’t find anything wrong with them, which usually makes for a great investment.

GGC – Georgia Gulf Corp.

Georgia Gulf is a leading North American manufacturer and international marketer of two highly integrated product lines: chlorovinyls and aromatics. The primary products that the company sells externally include PVC resins, PVC compounds and caustic soda in the chlorovinyls segment, and phenol and acetone in the aromatics business. The stock of this company is up 112% YTD. Several valuation ratios are below market and industry averages, including Price/Sales, Price/Book and Price/Cash Flow. Profitability is also higher than the industry average. The company is also rated a Strong Buy by the Zacks Rank and a Buy by the average broker. Analysts have also been increasing earnings projections for Georgia Gulf.

LAD – Lithia Motors Inc.

Lithia Motors is a leading operator and retailer in the highly fragmented automotive industry. Lithia sells new and used cars and light trucks, sells replacement parts, provides vehicle maintenance, warranty, paint and repair services, and arranges related financing and insurance for its automotive customers. This Zacks #1 Rank (Strong Buy) company is also rated a Strong Buy by Wall Street analysts. This company is 7-for-7 in positive earnings surprises over the last seven quarters. Analysts have also been increasing earnings estimates for the next quarter and fiscal year. This company also pays a nice dividend and most valuation ratios are at or below industry peers. Thus far, the stock is up 49% for 2012.

STC – Stewart Information Services Corp.

Stewart Information’s primary business is title insurance. Stewart issues policies on homes and other real property through issuing locations in all fifty states, the District of Columbia and through several foreign companies. This company also sells computer-related services and information, as well as mapping products and geographic information systems, to domestic and foreign governments and private entities. This stock is a big winner this year, up 109%. Yet all valuation measures are still below industry averages. Recently analysts have made dramatic increases in earnings projections for the current fiscal quarter and for 2013. The company averages a Buy rating by Street analysts and a Strong Buy rating by the Zacks Rank.

CVI – CVR Energy Inc.

Headquartered in Sugar Land, Texas, CVR Energy is an independent refiner and marketer of high value transportation fuels and, through a limited partnership, a producer of ammonia and urea ammonia nitrate fertilizers. This company has a history of reporting positive earnings surprises and has experienced major upward revisions in earnings estimates for the next fifteen months. No wonder this company is a Zacks #1 Rank (Strong Buy). CVR Energy also has an ROE of 41% and a great valuation despite being up 112% YTD.

LBY – Libbey Inc.

Libbey is the leading producer of glass tableware in the U.S. and Canada. This firm’s products are sold to a broad range of foodservice, retail, industrial and premium customers and are exported to more than 100 countries. Both the Zacks Rank and Street analysts consider this company a Strong Buy. Its Price/Earnings of 8.7, Price/Sales of 0.5 and Price/Cash Flow of 5.3 paint a good valuation story. The stock price is up about 41% YTD. And as with any stock I recommend, Libbey has a solid history of positive earnings surprises and increasing earnings projections into next year.

Create You Own Bucket List of Stocks

No, I haven’t been hit by a truck and don’t lay dying in a gutter -- and I hope you aren’t either. But I think it’s an interesting way to approach life and investing. If I was to bequeath some investment ideas or select some of the best ideas from within the Zacks Research Wizard, those listed above are the ones I would emphasize.

Want to gain access to the high-performing strategies and screens I mention in this article? Want to see other stocks those strategies recommend to buy now? Think you could take your best shot and create your outperforming strategy?

Starting today, you are invited to do this free of charge. You'll have 14 days to create, tweak, and backtest your strategies. At the same time, you can see the latest picks from pre-loaded winning strategies, such as those mentioned above, that average gains of up to 67.4% per year.

Learn more about your Research Wizard free trial >>

Let’s make some money!

Kip Robbins is a Quantitative Analyst with He analyzes screens and strategies for Zacks customers and for use in Zacks Research Wizard which empowers individual investors to use market-beating screens, build their own, and backtest their results.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Stewart Information Services Corporation (STC) - free report >>

Libbey, Inc. (LBY) - free report >>

Lithia Motors, Inc. (LAD) - free report >>

More from Zacks Investment Ideas

You May Like