Stocks: Searching for Accelerating Profits
One of the best predictors of future stock price appreciation is earnings growth. In these troubled economic times, many companies are warning of a profit slowdown in 2008.
Things appear to be cooling more rapidly than investors would like. Standard & Poor's equity analysts expect the S&P 500 to show 8.3% profit growth in 2008, down from an earlier (Jan. 18) estimate of 16.2%.
But there are still companies that are poised to buck the broader trend. Amid the negative headlines about earnings warnings, S&P expects plenty of companies to post earnings increases in 2008, and a select few should post even higher growth in 2009.
And those were the companies we wanted to focus on this week. We looked for stocks that were forecast to have positive earnings growth in 2008 and an even greater rate of profit increase in 2009.
Then we wanted to make sure that the stocks were attractive based on fundamentals. So we scanned that list for those issues ranked 4 STARS (buy) or 5 STARS (hold) by S&P equity analysts. Stocks with those rankings are expected to outperform the broader market over the next 12 months and rise in price on an absolute basis.
Six stocks made the cut. Interestingly, most of them were non-U.S. companies with listed American Depositary Shares:
|Company||Ticker||S&P STARS Rank|
|Banco Bilbao Vizcaya||BBV||4|
|Huaneng Power International||HNP||5|
|Shanda Interactive Entertainment||SNDA||5|