If you follow stock market news, you’ve undoubtedly heard of the “Magnificent Seven,” seven megacap stocks that dominated the stock market, at least the S&P 500, last year. These include Apple (ticker: AAPL), Amazon.com (AMZN), Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).
Today, I’m going to nominate the “Glorious Six,” that is, six up and coming stocks that potentially could be this year’s winners. I found them by screening for financially solid players with unusually strong earnings growth prospects. Here are the details.
As is often the case, I used the free and user-friendly Finviz stock screening program to pinpoint these potential stock market stars. Here’s how you can do it.
Start at the Finviz home page (finviz.com). Select “Screener” from the top menu and then click on “All” to see the available screening filters.
Define candidate universe
The current Magnificent Seven are all Mega Cap stocks. That is, they have market capitalizations (value of all outstanding shares) exceeding $200 billion. So, I decided that the Glorious Six should currently be large cap stocks. They have market caps ranging from $10 billion to $200 billion. Use the “Market Cap” filter and specify “Large” to limit your candidates to large caps.
Strong earnings growth
I’ve found that share prices track 12-month per-share earnings (EPS) closer than any other single factor. So, I limited my list to stocks that analysts think have exceptionally strong short- and long-term EPS growth prospects.
Do that by specifying “over 20%” for “EPS Growth This Year,” “EPS Growth Next Year,” and “EPS Growth Next Five Years.”
Low debt and profitable
Unprofitable stocks or those carrying high debt typically underperform. In fact, all of the current Magnificent Seven are profitable companies carrying relatively low debt.
So, specify “Positive” for “Return on Equity to limit your list to profitable companies. Then specify “Under 0.8” for “Debt/Equity” to rule out stocks carrying high debt.
Follow smart money
Institutional investors such as mutual funds, hedge funds, and endowments have access to information that we’ll never see. Specify “Over 70%” for “Institutional Ownership” to limit your list to stocks that these “in the know” investors are buying.
Glorious six candidates
My screen turned up six Glorious Six candidates.
• Baker Hughes (BKR): Baker produces equipment for oil and natural gas exploration and production. Pays a 2.9% dividend.
• BioMarin Pharmaceutical (BMRN): BioMarin develops treatments for serious life-threatening medical conditions, mainly for children.
• Cameco (CCJ): Cameco specializes in uranium production and associated services.
• Incyte (INCY): Incyte produces pharmaceutical products for the treatment of cancer and inflammatory diseases.
• Service Now (NOW): Service Now offers cloud computing services that automate digital workflows to accelerate enterprise IT operations.
• Progressive Corp. (PGR): Progressive offers automobile insurance services. Pays a 1.7% dividend yield
These are my ideas, but do your own due diligence. The more you know about your stocks, the better your results.
Harry Domash of Aptos publishes the Winning Investing and the Dividend Detective websites. Contact him at www.winninginvesting.com or Santa Cruz Sentinel, 318 Encinal St., Santa Cruz, CA 95060. To see previous Domash columns, visit santacruzsentinel.com/topic/Harry_Domash.
