Piotroski-Inspired Stock Ideas

Joseph Piotroski is a roll-up-your-sleeves market guru who combines academic and mathematical theory in his investment strategy. In an article forTheStreet, Validea CEO John Reese offers background on Piotroski and explains the stock screening model he developed based on this guru’s book-to-market value centered philosophy. Using this model, Reese identifies the following high-scoring picks:

  • Atwood Oceanics, Inc. (ATW) is an offshore drilling company that scores highly based on its return-on-assets of 8.97% and operating cash flow ($604.29 million) that exceeds net income ($430.72 million). Low leverage is also favorable (long term debt is 35% of assets).
  • Trinity Industries, Inc. (TRN), a diversified industrial company, scores well due to its operating cash flow ($939.70 million) compared to net income ($776.22 million) and return-on-assets which increased from 7.50% in the prior year to 8.73%.
  • KT Corporation (KT) is a telecommunications service provider that earns a perfect score under the Piotroski-based model due to a steady gross margin of 101% along with healthy operating cash flow ($3.77 billion) which exceeds net income ($367.28 million) by a healthy margin.
  • LG Display Co. Ltd. (LPL) manufactures thin-film transistor liquid crystal display and related technologies. The company has boosted profitability in the current year to 15%, and net income ($862.34 million) is amply covered by operating cash flow ($2.43 billion). Long-term debt is modest at only 12% of assets.