Buffett and Thorp, and Five Stocks to Consider

 In yesterday’s Forbes, Validea CEO John Reese profiles the mathematician and author Edward Thorp, describing him as “masterful at integrating his vast knowledge of probability and statistics into the world of investing.” In the article, Reese highlights how Thorp shared Warren Buffett’s penchant for gathering and using data to unveil market opportunities in the form of mispriced equities.

Using the stock screening models he created based on the strategies of Buffett and other investing gurus, Reese identifies the following five high-scoring stocks:

  • TJX Companies (TJX) is an off-price apparel and home fashions retailer in the U.S. and across the world. The company earns high marks for its long-term average return-on-equity and management’s use of retained earnings, as well as it’s favorable revenue base.
  • Bank of the Ozarks (OZRK) is a bank holding company that, through its subsidiary, provides a range of retail and commercial banking services. The company scores well based on its price-earnings ratio and revenue growth.
  • Biogen (BIIB) is a pharmaceutical company focused on discovering, developing, manufacturing and delivering therapies for neurological and autoimmune diseases. The company is favored for its ratio of price-earnings to growth in earnings-per-share (PEG ratio) as well as long-term average EPS growth.
  • Cerner (CERN) is a supplier of health care information technology that earns high marks for its price-earnings ratio as well as revenue and earnings growth.
  • Ulta Beauty (ULTA) is a beauty retailer that offers cosmetics, fragrance, skin, hair care products and salon services. The company’s debt-free balance sheet earns high scores, as does persistent growth in earnings-per-share over the past five years.