Perhaps it’s the way I chastised bondholders earlier today during my hunger rage, but I’ve had debt on mind all evening. With good timing and prudence, debt can be a company’s best tool, allowing them to outpace their competition when times are good. Of course it cuts both ways and poor treasury management can make a bad situation worse fast.
Rates have to rise eventually. You know it, I know it. Havens like municipal debt are experiencing a rout. Pick your California waterfall: CXA, PWZ, CMF…brutal. The unprecedented actions by Detroit’s financial manager effectively cutting bondholders at the knees, it’s shocking.
Brutal action, potential for rates to rise, you get the point.
But we know there’s a Fed bid in the equities market. We know stocks have an upside bias until the whole shit house goes up in flames, and some of us (me) want to have names we can go long in this environment.
Enter The PPT.
Like Fly said earlier, trading without The PPT sucks. He said so much more eloquently. I’m not financial statement illiterate, but I like to spend my time digging into statistics and reviewing my trades and such. So I come to The PPT with a simple query, find me companies with a beautiful debt situation, fat profit margins, and enough cash on hand to operate. My thinking is companies not only will have to fork up higher interest rates on new debt, they’re going to have a harder time obtaining it. Resources that should be focused growing their business through innovation will be siphoned into the debt game.
You dig though 10-K’s and what have you, I set up a screen. Here are the bullet points of my screen:
MTD Return > 0% – I want stocks that took this selloff in stride, trading in a microcosm
Positive Total Cash per Share
Debt/Equity Score > 4 – I could fiddle with the other debt knobs, but I trust The PPT scoring system to do that for me
Hybrid Change (Daily) > 0% – In hybrid I trust, I want stocks that will move sooner than later, always
Profit Margin Score > 4 – Fat margins
ROE > 25 percent – I don’t know, “The Fly” always likes ROE
There are a few other qualifiers, the screen can be seen here by PPT members.
The list produces 11 matches today:
Then I grab the charts and see if I can wrap risk into any of them.
I like AOL vs 34
PSE sports awesome July stats, gapped huge on May earnings, and looks like it was a gift at 32.75
PCLN is coiled up tight with risk down to around 790 and tons of cash on hand
CBOE has a picture perfect trend higher, but feels like a chase (the best always do)
QCOR is a biotech, which I don’t dabble in much, but that chart looks great vs 42
These are just my back envelope notes. I’m open to any refinement of the screen, comments, or questions. Note also, given the hybrid screen I placed, the list may produce new results on a daily basis. However, I feel like the most recent action bared the brunt force of bond panic, making the listed stocks’ hybrid strength of notable importance.If you enjoy the content at iBankCoin, please follow us on Twitter