GuruScreen Movers - March 10th: Focus on US Cyclicals

The American labour market is gaining momentum. Recent figures from the US Department of Labour show that the American economy expanded by 295,000 jobs in February, compared to 239,000 jobs in January. The unemployment rate has now fallen to 5.5%, the lowest level since 2008 - but is that good or bad news for the stock market?

The S&P 500 and Dow Jones have both lost ground during 2015. There are some suggestions that the latest job figures have spooked investors, who think that the Fed may soon hike interest rates. However, the other side of the coin is that higher employment levels could provide an added boost to consumer cyclical stocks, which tend to do well in improving economic conditions. So let's take a look at US cyclicals that make the grade for Stockopedia's GuruScreens.

Foot Locker (FL)

Foot Locker is breaking out after posting better-than-expected results. The sportswear retailer was up nearly 5% last Friday, while the Dow Jones was down 1.5%. Sales were up by 9% thanks in part to the opening of over 80 new stores, and the remodelling of another 300 older outlets. Foot Locker also expanded internationally, opening 51 franchised stores in the Middle East and East Asia, not to mention nearly 30 Runners Point and Sidestep stores in Germany and Switzerland. Investors are also getting excited as Foot Lockers' Board recently approved a new $1bn share repurchase program. The sharp share price appreciation has helped Foot Locker qualify for the CAN-SLIM-esque screen, which seeks to identify stocks with fast earnings growth and share price momentum.

Best Buy Inc (BBY)

Best Buy - the multi-channel consumer electronics retailer - qualifies for the Lakonishok Momentum Screen, as well as the O'Shaugnessy Growth Screen. The company managed to grow earnings by 56% in 2014. This was driven by several factors, including the firm's supply chain efficiency enhancement program, and the focus on providing high-end consumer electronics brands. The firm also continued its exit from China and in order to focus on North American markets. To round it all off, Best Buy announced a $1bn share repurchase over the next three years. Investors and analysts have responded positively to this news. Since February, EPS estimates have risen from $2.49 to $2.56. Best Buy shares have also beaten the market by 6% over the last month.

Douglas Dynamics (PLOW)

Douglas Dynamics - the manufacturer of snow and ice control equipment - qualifies for nine GuruScreens in the US, including the Piotroski F-Score screen. This screen filters for companies with an improving financial health trend. Douglas Dynamics controls nearly 60% of the North American market and enjoys wide profit margins (23%) as well as a high Return on Capital Employed (19%). Since 2012, EPS figures have grown from 30 cents to $1.63, thanks partly to a series of acquisitions. Indeed, the firm has recently acquired TrynEx and Henderson, a manufacturer of of snow low equipment. Douglas Dynamics expects the acquisition of Henderson to be earnings enhancing in 2015. Brokers are also optimistic. Since March 2014, EPS estimates have risen from 81c to $1.63. It will be interesting to see how this pans out.

Want to learn more?

If you are interested in US shares, you might want to check out our free ebook, Getting Started in US Shares, which can be downloaded here. We explain why the states may be the perfect hunting ground for stock market investors and also offer guidance on how to find an appropriate stockbroker to trade US markets. Also bear in mind that Stockopedia subscribers can filter the US markets for good quality companies trading at bargain prices by using our GuruScreens and other powerful screening tools. As always - these are not share tips and should not be read as investment advice. Please do your own research before investing.

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