What the Market Wants: Seek Undervalued Growth

Despite overwhelming damage to America’s global face, the dysfunctional politicians in Washington passed a temporary solution to the budget and debt ceiling problems at the very last minute.  But really they only kicked the ball two or three months down the road.  Imagine going through this again in early January after Congress takes its holiday break. Unless we can generate a more stable, more capable dialogue within our country to deal with the extremist attitudes of splinter groups hell-bent on getting their way regardless of the consequences, we are doomed to steadily growing interest rates and steadily deteriorating status globally.

It is possible that sufficient leadership remains within our domestic economy to “right the ship” (no pun intended) and regain some of our former admiration as a leading country on the cutting edge of culture, technology, and an example of democracy at its best.  We needn’t be the best or the greatest, but we are far from even moderate world respect.

Let’s hope that this close call with default brings us together to pursue a nation in which default is an anathema to be avoided at all costs.  If so, our markets can continue their global leadership example and our nation can prosper again.  Our markets over the past week have demonstrated how badly they seek stability and what rewards come with stability.

Market Stats

Small-cap Growth once again led the style/caps, up a robust 2.97% last week.  Large-cap Value, the diametric opposite style cap, was worst, but up a healthy 2.32%.  As you can see in the market stats, the Technology led the sectors with a gain of 3.01%, no doubt helped by the strong quarter from Google Inc. (GOOG).  Basic Materials was a close runner-up at 2.98%.  Frankly, only Utilities was much of a drag, gaining 1.12%. Note that the Energy fell sharply in our forward-looking SectorCast 30 day outlook, so we suggest caution in that sector.

We will proceed with continued caution and seek out undervalued growth companies.

3 Stock Ideas for this Market

I selected the following stocks from a custom search looking undervalued growth stocks with recent upward analyst revisions in MyStockFinder (*all data below from Yahoo! Finance):

NXPI Semiconductors (NXPI) –Technology

  • Trading for 101x current earnings and 9x forward earnings estimates
  • Positive earnings surprise in last three quarters
  • Reports earnings tomorrow, October 22
  • Analysts have revised earnings estimates up for next quarter in last 30 days
  • 46% projected EPS growth for current quarter, 84% next quarter, 29% over the next 5-years

iGate Corporation (IGTE)—Technology

  • Trading for 27x current earnings and 15x forward earnings estimates
  • All 8 covering analysts revised EPS estimates up in last 30 days for the current quarter
  • 2% projected EPS growth for the current quarter, 19% this year, 15% over the next 5 years

Genworth Financial Inc. (GNW)—Financials

  • Trading for 15x current earnings, and 9X forward earnings
  • Analysts revised EPS estimates up in last 30 days
  • Reports earnings on October 28
  • 4% projected EPS growth for the current quarter, 30% next year
david / Tag: NPI, IGTE, GNW /