Peter Lynch Screens Identify Opportunities for 2019

- By James Li

As the stock markets continue fluctuating over the first three weeks of 2019, investors continue seeking good opportunities for the months ahead.

According to the Peter Lynch price-earnings screen, the top three stocks are Hennessy Advisors Inc. (HNNA), Westlake Chemical Corp. (WLK) and Eagle Materials Inc. (EXP).

Dow begins rebounding from two-year low, yet volatility remains high

• Warning! GuruFocus has detected 7 Warning Signs with BTI. Click here to check it out.

• HNNA 15-Year Financial Data

• The intrinsic value of HNNA

• Peter Lynch Chart of HNNA

Despite trading near an intraday high of 24,854.36, up approximately 301 points from Thursday's close of 24,553.24, the Dow Jones Industrial Average closed at 24,737.20 on Friday, down approximately 117 points from the intraday high. Market volatility remains high on several ongoing factors, including the government shutdown, which was temporarily resolved on Friday, and the U.S.-China trade war.

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Stocks gained as President Trump announced a deal with Congress that funds the government until Feb. 15. CNBC columnist Michael Sheetz quoted two analysts with different perspectives: while Fundstrat Global Advisors strategist Tom Block said the reopening of the government is a "positive for Wall Street," KKM Financial CEO Jeff Kilburg said traders are expected to "take profits" as the D.C. dysfunction continues.

Value screeners recap

As we saw in previous articles, GuruFocus offers a wide variety of value screens, including Benjamin Graham's net-net screen and the Buffett-Munger screen, which selects stocks based on Berkshire Hathaway Inc. (BRK-A)(BRK-B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)'s investing criteria. Table 1 shows the value screener record counts for each of our value screens, located under the Screeners tab, over the past week for the U.S. region.

Screener	Jan. 21	Jan. 22	Jan. 23	Jan. 24	Jan. 25
Graham Net-Net	279	283	282	283	281
Undervalued Predict	68	69	67	71	71
Buffett-Munger	25	27	26	28	27
Peter Lynch PE	47	49	48	47	55
Peter Lynch PS	162	169	162	161	174
Peter Lynch PB	222	234	229	222	255
Lynch p2ebitda	226	225	215	219	249
Hist Low PS	44	46	49	47	44
Hist Low PB	62	63	63	62	60
High Div Yield	73	72	71	70	63
Magic Formula	4282	4286	4188	4254	4234

Table 1: Value screener record for the U.S.

Tables 2 and 3 show the value screener record counts for Europe and Asia.

Screener	Jan. 21	Jan. 22	Jan. 23	Jan. 24	Jan. 25
Graham Net-Net	296	272	272	276	275
Undervalued Predict	98	81	78	86	88
Buffett-Munger	47	41	39	43	44
Peter Lynch PE	56	45	44	46	44
Peter Lynch PS	153	128	119	137	132
Peter Lynch PB	203	162	163	168	175
Lynch p2ebitda	258	202	192	206	195
Hist Low PS	38	40	44	41	39
Hist Low PB	50	51	54	52	50
High Div Yield	103	101	102	101	99
Magic Formula	5953	5274	5182	5243	5293

Table 2: Value screener record for Europe

Screener	Jan. 21	Jan. 22	Jan. 23	Jan. 24	Jan. 25
Graham Net-Net	643	649	649	646	639
Undervalued Predict	69	71	73	70	69
Buffett-Munger	75	77	77	75	75
Peter Lynch PE	75	74	76	74	74
Peter Lynch PS	123	126	128	121	120
Peter Lynch PB	142	140	141	136	132
Lynch p2ebitda	148	153	152	149	147
Hist Low PS	128	125	128	41	130
Hist Low PB	139	132	142	52	133
High Div Yield	27	26	26	24	25
Magic Formula	12617	12634	12635	12632	12631

Table 3: Value screener record for Asia

Legendary investor Peter Lynch, author of "One Up on Wall Street," developed a chart containing two financial series: a company's stock price and the price at a price-earnings ratio of 15. GuruFocus displays a Peter Lynch Chart on each company's summary page: Figure 1 shows a sample chart for Apple Inc. (AAPL), Buffett's largest holding.

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Figure 1

Hennessy Advisors

Hennessy Advisors, the top stock on the Peter Lynch screen, is trading at a price-earnings ratio of 4.21, close to a 10-year low of 3.71.

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Hennessy Advisors manages a wide variety of funds, including the Hennessy Japan Fund (Trades, Portfolio) and the Hennessy Japan Small Cap Fund (Trades, Portfolio). GuruFocus ranks the asset management company's profitability 9 out of 10 on several positive signs, which include expanding profit margins and a dividend yield of 3.72%, close to a five-year high. Additionally, the company's Joel Greenblatt (Trades, Portfolio) return on capital of 7,529.05% ranks higher than 95% of global competitors.

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Westlake Chemical

Westlake Chemical, the second-highest ranked stock on the list, is trading at a price-earnings ratio close to a 10-year low of 5.87.

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The Houston-based specialty chemicals company produces fabricated products through two business segments: Olefins and Vinyls. GuruFocus ranks the company's profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 8 and a three-year revenue growth rate of 23.40%, a rate that outperforms 92% of global competitors. Additionally, Westlake Chemical's business predictability ranks a solid 3.5 stars out of five.

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Gurus with large holdings in Westlake Chemical include Jim Simons (Trades, Portfolio) and Chuck Royce (Trades, Portfolio); the latter is the keynote speaker at our value conference in May.

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Eagle Materials

Eagle Materials, the third-highest ranked stock on the list, is trading at a price-earnings ratio of 11.69.

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The Dallas-based company produces and supplies construction products, building materials and materials used in oil and gas extraction. GuruFocus ranks the company's profitability 8 out of 10 on several positive signs, which include expanding profit margins and a strong Piotroski F-score of 7.

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See also

Other top stocks on the Peter Lynch price-earnings screen include Southwest Airlines Co. (LUV), Marten Transport Ltd. (MRTN) and Universal Forest Products Inc. (UFPI).

Disclosure: No positions.

Read more here:

• Mario Gabelli Sees Strong Global Growth in 2020

• A Look at Valuations for Top European and Asian Markets

• Warren Buffett's Market Indicator Eclipses 130% Ahead of MLK Day

This article first appeared on GuruFocus.

• Warning! GuruFocus has detected 7 Warning Signs with BTI. Click here to check it out.

• HNNA 15-Year Financial Data

• The intrinsic value of HNNA

• Peter Lynch Chart of HNNA