A Winning Combination
By Massimo Santicchia
This S&P stock screen was built to combine two investing strategies. One is a "contrarian" approach focusing on stocks with a low price-to-earnings (p-e) ratio. The other: a "momentum" approach -- keying on stocks reporting upside earnings surprises.
Here's why. When stocks with low p-e ratios report positive earnings "surprises," they have more potential for appreciation in the following three, six and even 12 months than those that also report surprises but carry higher p-e multiples.
S&P selected S&P 500 stocks that reported an earnings surprise greater than 20% in the most recent quarter. Of the 37 stocks that made the cut, S&P chose the 20 with the lowest p-e ratios.
Here are the stocks that emerged:
Santicchia is a portfolio analyst for Standard & Poor's