A 10-rated company in a 10-rated industry group? It must be time for the Featured Stock Spotlight.
When it comes to our Long Term PowerRatings, you can't have more edges on your side than to stick with stocks that have high Long Term PowerRatings in industries with high PowerRatings. This combination is the one we recommend most highly to those who are building stock portfolios, and the combination that has been the most successful in our historical testing.
When we say "stocks that have high Long Term PowerRatings in industries with high PowerRatings," typically we mean stocks that have Long Term PowerRatings of 9 or 10 that come from industries that have PowerRatings of 7 or higher. Why? Because our research indicates that stocks with Long Term PowerRatings of 9 or 10 have been higher one year later more than 79% of the time. Because stocks with Long Term PowerRatings of 9 or 10 have tended to gain, on average, more than 18% in a year's time. Because on both counts—reliability and performance—stocks with Long Term PowerRatings of 9 or 10 are simply better bets for active investors and position traders than the average stock
What does the stock's industry group have to do with the stock's performance? This same research uncovered the fact that, all else equal, stocks in higher rated industry groups are likely to outperform stocks in average or lower rated industry groups. We found that industry groups with PowerRatings of 9 had an average annualized return of more than 24%.
Industry groups with PowerRatings of 10, our highest possible rating, performed even better. Compared to the 9-rated industry—and the average industry, which had an average annualized return of approximately 14.61%--industries with PowerRatings of 10 actually produced average annualized returns of more than 35% from 1995 to 2007.
So it is little surprise that a stock with a Long Term PowerRating of 10 in an industry group with a PowerRating of 10 would make it to our Featured Stock Spotlight. The stock: Centerpoint Energy (CNP | Quote | Chart | News | PowerRating).
Don't be surprised if you haven't heard about Centerpoint Energy before. The company is a member of the 10-rated Diversified Utilities industry, and is based out of Houston, Texas. Centerpoint Energy's main business is in the distribution and transmission of both electricity and natural gas—and it's the third largest operator in the industry. Centerpoint Energy serves over 5 million customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas, as well as other states in the Midwest.
The company is scheduled to announce first quarter earnings on April 30. Analysts are anticipating earnings of $0.40 per share.
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David Penn is Senior Editor for PowerRatings.net.
