What stocks are working right now? While most eyes are focused on recession proof names like those in the drug and personal products industries, a pair of stocks from the world of print media may be among some of the overlooked gems in the current market.
Writing about our Long Term PowerRatings over the past several weeks had been an exercise in practice making perfect. The force of the correction that began in October 2007 put a tremendous premium on those stocks that are best able to withstand the slowing economic momentum of an economy teetering on the brink of recession.
As such, even many of the medical stocks we have offered late in 2007 have become less attractive investments and long term trades as investors seek more and more secure "recession proofing" for their portfolios.
This is where a number of low volatility stocks with good financial fundamentals have started to come to the fore. Many of these companies, as readers of our Featured Stock Spotlight have undoubtedly noticed, come from typical recession-beating industries such as the major drug manufacturing, personal product making and utilities. However, this morning we noticed a few stocks with high Long Term PowerRatings in a few places we would not have expected to find them. The Publishing industry is just such a place and both Meredith Corporation (MDP | news | PowerRating | PR Charts ) and E.W. Scripps Company (SSP | news | PowerRating | PR Charts ) are the companies.
First, let's take a look at the Periodicals/News Publishing industry as a whole. This industry includes some stocks that investors should know more about, such as Meredith and E.W. Scripps above. The industry also includes a few stocks that investors should certainly avoid for the time being. These stocks include R.H. Donnelley Corporation (RHD | news | PowerRating | PR Charts ) and Martha Stewart Living Omnimedia (MSO | news | PowerRating | PR Charts ), both with Long Term PowerRatings of 2.
Why are these stocks to avoid? Our research, which looked at thousands and thousands of simulated trades between 1995 and 2007, found that stocks with Long Term PowerRatings of 2 were among the worst performing stocks relative to the average stock. Specifically, we found that 2-rated stocks were not only higher one year later less than 42% of the time. Also, 2-rated stocks tended to gain less than 8% after one year.
Compare that to the average stock, which was higher one year later closer to 60% of the time, and which tended to gain, on average, 12.81% after one year.
Fortunately, both of the high Long Term PowerRatings stocks in today's report are far more likely to impress than disappoint - as these two 2-rated stocks are almost bound to do. With both Meredith and E.W. Scripps having Long Term PowerRatings of 9 and 8 respectively, both stocks belong to that class of stocks that, according to our research, have been higher one year later more than 74% of the time (more than 79% of the time for 9-rated Meredith). Moreover, both stocks have tended to gain more than 17%, on average, after one year (more than 18% for 9-rated Meredith).
Meredith Corporation. Long Term PowerRating 9.
E.W. Scripps Company. Long Term PowerRating 8.
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David Penn is Senior Editor for PowerRatings.net.
