8/8/2014 8:15 PM ET
Beaten-down Eaton among 10 stocks to watch
Shares of the industrial giant got pummeled 13 percent after a sluggish profit forecast and analyst downgrades. Has the stock become a bargain?
Compiled from StockScouter ratings by Verus Analytics
Investors punished Walgreen (WAG) this week, driving share prices down by double digits after the pharmacy chain decided not to move its headquarters abroad to save money on corporate taxes – a move often called a tax inversion.
Meanwhile, industrial conglomerate Eaton (ETN) suffered a similar fate, for a slightly different reason. Eaton already performed a tax inversion in 2012, when it acquired Ireland-based Cooper Industries and moved its corporate headquarters from Cleveland to Dublin. But Wall Street analysts had been hoping Eaton would unload its vehicle business in a tempting tax-free spinoff.
Those hopes were dashed when the company reported second-quarter earnings on July 28. Eaton CEO Alexander Cutler said such a move was out of the question for the next few years, due to rules governing the original inversion maneuver. "Any spinoff would result in a very significant tax liability," Cutler said.
Eaton also lowered its full-year profit forecast, spooking both analysts and investors. Shares tumbled 13 percent, and Goldman Sachs, Deutsche Bank and JPMorgan Chase all issued downgrades on the stock.
But CNBC’s Jim Cramer defended the stock, saying, "When everyone downgrades a stock, what have we learned? . . . It’s probably closer to a bottom than a top."
Eaton gets a '10' from the StockScouter rating system on MSN Money, the highest score possible, and appears on StockScouter's latest list of 10 recommended stocks. Based on StockScouter’s analysis, shares of Eaton are expected to significantly outperform the market over the next six months with less than average risk.
Read the full Scouter report on Eaton here.
StockScouter Top 10 for Aug. 8, 2014
Southwest Airlines (LUV)
Union Pacific (UNP)
Cognizant Technology Solutions (CTSH)
Itau Unibanco Banco Multiplo S.A. (ITUB)
|Regional banks, Latin America||0.5%||9.2||10|
Teva Pharmaceutical Industries (TEVA)
Taiwan Semiconductor Manufacturing (TSM)
StockScouter beats the market
We think the StockScouter rating system developed by Verus Analytics for MSN Money is one of the best tools you can use when you're trying to decide where to invest.
StockScouter looks for stocks whose business fundamentals, price behavior, valuation and stock-ownership characteristics appear to predict a rising price in the future, based on how those factors have influenced stock prices in the past.
The system assigns each stock an expected six-month return and balances that return against the stock's expected volatility.
Scouter rates stocks on a scale of 1 to 10, and ratings can change daily. Ratings and data in the chart above were current as of this article's publication date.
In addition to the daily top 10 list described above, StockScouter is used by investment research firm Verus Analytics (previously known as the quantitative business unit of Gradient Analytics) to generate a monthly benchmark portfolio of stocks that, refreshed monthly, has outperformed the market since its inception in August 2001.
An investor who began in 2001 by investing in each of the benchmark portfolio's top 10 stocks at the start of the month, selling them at the end of the month and then starting fresh with a new group of 10 stocks, would have generated returns, before trading costs and taxes, of 1,084 percent through June 30, 2014.
Writer Jon Markman, at the time a columnist for MSN Money, collaborated with company researchers on the tool.
Markman suggested rolling over the top 10 stocks every six months to hold down trading costs, a strategy that might be a better fit for most investors; that would yield different results, which would vary based on your starting point.
Performance through June 30, 2014
Full 50 position portfolio
Top 10 portfolio
Inception: August 2001
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Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).
Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, ... More
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