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Dec. 12, 2019, 2:24 p.m. EST · CORRECTED

30 momentum stocks that are actually cheap enough to buy

Look at the holdings of the Hennessy Cornerstone Mid Cap 30 Fund

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By Michael Brush, MarketWatch

1 2

Cheap momentum names to favor

Kelly doesn’t like to single out names among his group of 30, and I get the logic. Part of the point of putting 30 names in the portfolio is to stay diversified, and you never know in advance which of them will be the really big winners.

Here’s the full list:

Holdings  Ticker Percentage of net assets Market cap, in billions of dollars Price/
sales
1-year price change Sector
Aecom ACM /zigman2/quotes/204198156/composite ACM   3.5% 6.7 0.3x 36% Industrials
American Financial Group  AFG /zigman2/quotes/204294782/composite AFG   3.1% 9.7 1.2x 7% Financials
Brighthouse Financial, BHF /zigman2/quotes/205830158/composite BHF   3.2% 4.3 0.5x 4% Financials
Crown Holdings CCK /zigman2/quotes/202459264/composite CCK   3.7% 10.2 0.9x 56% Materials
First American Financial FAF /zigman2/quotes/210452372/composite FAF   3.3% 7.0 1.2x 35% Financials
Hanover Insurance Group THG /zigman2/quotes/204392149/composite THG   3.1% 5.3 1.2x 26% Financials
Itron, Inc.  ITRI /zigman2/quotes/208442969/composite ITRI   3.4% 3.1 1.3x 53% Information Technology
Jabil  JBL /zigman2/quotes/203847835/composite JBL   3.3% 5.9 0.2x 60% Information Technology
KB Home  KBH /zigman2/quotes/206220859/composite KBH   3.4% 3.1 0.7x 70% Consumer Discretionary
Landstar System LSTR /zigman2/quotes/207418022/composite LSTR   3.2% 4.4 1.0x 6% Industrials
Lithia Motors (Class A)  LAD /zigman2/quotes/202974783/composite LAD   3.9% 3.7 0.3x 97% Consumer Discretionary
LPL Financial Holdings, LPLA /zigman2/quotes/202092656/composite LPLA   3.4% 7.3 1.4x 49% Financials
MasTec MTZ /zigman2/quotes/207965492/composite MTZ   3.1% 5.0 0.7x 52% Industrials
Meritage Homes MTH /zigman2/quotes/209069331/composite MTH   3.2% 2.6 0.7x 77% Consumer Discretionary
NCR  NCR /zigman2/quotes/203631053/composite NCR   3.1% 4.2 0.6x 30% Information Technology
News Corp.  NWSA /zigman2/quotes/201755982/composite NWSA   3.1% 7.5 0.7x 0% Communication Services
Old Republic International  ORI /zigman2/quotes/204736448/composite ORI   3.0% 6.8 1.0x 8% Financials
Owens Corning  OC /zigman2/quotes/202113551/composite OC   3.2% 7.3 1.0x 33% Industrials
Packaging Corp. of America  PKG /zigman2/quotes/207413697/composite PKG   3.4% 10.6 1.5x 16% Materials
RH RH /zigman2/quotes/200286355/composite RH   3.4% 3.7 1.5x 81% Consumer Discretionary
Scientific Games SGMS /zigman2/quotes/202731508/composite SGMS   3.9% 2.6 0.8x 62% Consumer Discretionary
Skechers U.S.A. SKX /zigman2/quotes/201784799/composite SKX   3.3% 6.2 1.2x 48% Consumer Discretionary
SunPower SPWR /zigman2/quotes/200243424/composite SPWR   2.7% 1.2 0.6x 16% Information Technology
Synaptics SYNA /zigman2/quotes/208827271/composite SYNA   3.4% 1.9 1.4x 59% Information Technology
Syneos Health SYNH /zigman2/quotes/207981284/composite SYNH   3.1% 5.4 1.2x 10% Health Care
SYNNEX SNX /zigman2/quotes/208755595/composite SNX   3.4% 6.2 0.3x 61% Information Technology
Taylor Morrison Home TMHC /zigman2/quotes/209743863/composite TMHC   3.1% 2.4 0.5x 38% Consumer Discretionary
Toll Brothers TOL /zigman2/quotes/201912487/composite TOL   3.1% 5.6 0.8x 22% Consumer Discretionary
Whirlpool  WHR /zigman2/quotes/200296850/composite WHR   3.1% 9.0 0.4x 19% Consumer Discretionary
Williams-Sonoma WSM /zigman2/quotes/202067350/composite WSM   3.1% 5.1 0.9x 26% Consumer Discretionary
Note: Holdings as of Oct. 31
Market data as of Nov. 22        

I suggest using his portfolio as a short list of names to research. (The fund rebalances once a year and it just did so on Oct. 18. So the names are fresh as a buy list.) And we can still learn a lot about how to position in the market now, based on what his screens are telling us.

Here are some key lessons:

•  Own cyclicals. The big-picture takeaway is that it makes sense to overweight cyclical names, or those economically sensitive companies that do the best when economies are recovering or strong. As I wrote in a column favoring cyclicals in August ahead of their big move up, there’s been a lot of fear about global recession. It still has many investors shunning cyclicals.

But cyclicals still have room to do well because economic indicators around the globe are improving. This is no surprise given the amount of stimulus dumped on the global economy. Aside from increased government spending in many countries, the ratio of central banks cutting rates to those hiking rates has flipped to 5.7 this year from 0.5 last year, notes Mark Vaselkiv, the chief investment officer for fixed income at T. Rowe Price.

•  Own tech. A lot of technology names have gotten attractive because of recession fears. So tech now represents 20% of the Hennessy Cornerstone Mid Cap 30 Fund, up from 0% two years ago and 10% last year. The Hennessy fund favors hardware, manufacturing and semiconductor equipment companies over software names.

This means names like Jabil /zigman2/quotes/203847835/composite JBL -2.25%  in electronics manufacturing, NCR /zigman2/quotes/203631053/composite NCR -0.45% in retail payments systems and ATMs, SunPower /zigman2/quotes/200243424/composite SPWR -5.44%  in solar energy equipment), Synaptics /zigman2/quotes/208827271/composite SYNA -0.11% in device screen technology and Synnex /zigman2/quotes/208755595/composite SNX -1.09%  in storage and networking equipment.

“We think consumer spending will continue and that will be helpful to these companies,” says Kelly. Companies are also spending to upgrade their technology, and that will help, too.

•  Own housing-related names. Warren Buffett’s Berkshire Hathaway /zigman2/quotes/208872451/composite BRK.A +0.51%   /zigman2/quotes/200060694/composite BRK.B +0.15%  recently confirmed this theme with the purchase of a big position in home good retailer RH /zigman2/quotes/200286355/composite RH -0.20%  (previously known as Restoration Hardware), a name the Hennessy Cornerstone Mid Cap 30 Fund has held since last year. “RH is a turnaround story. A bricks-and-mortar chain surviving in the online world,” says Kelly.

Seven of the 10 consumer discretionary names in the portfolio are housing-related, including KB Home /zigman2/quotes/206220859/composite KBH +0.76% , Taylor Morrison Home /zigman2/quotes/209743863/composite TMHC +1.13% Toll Brothers /zigman2/quotes/201912487/composite TOL -1.10% , Whirlpool /zigman2/quotes/200296850/composite WHR +0.09% and Williams-Sonoma /zigman2/quotes/202067350/composite WSM +0.04% .

The housing sector benefits from several tailwinds including low mortgage rates, strong employment and wage growth, a continuing home building expansion, and rising home prices that support housing starts. Building permits, a leading indicator for housing starts, hit their highest level in over a decade in October.

And millennials are starting to buy houses more often. About 38% of them owned homes in the third quarter, up from 36% in the prior quarter. “That is still a far cry from the 65% ownership overall, but that just means there is a long way to go,” says Kelly.

•  Own financials. Banks and insurance companies sold off when the yield curve flattened and briefly inverted last summer. But it looks like economic growth will stay on track, and this group benefits from solid economic strength which improves loan growth and investment returns. Two names in this group are actually stealth housing sector plays: Old Republic International /zigman2/quotes/204736448/composite ORI +0.38% and First American Financial /zigman2/quotes/210452372/composite FAF +0.24% . They offer title insurance and home mortgage guarantees.

“A lot of home-building and housing-related stocks permeate the portfolio,” says Kelly.

At the time of publication, Michael Brush had no positions in any stocks mentioned in this column. Brush is a Manhattan-based financial writer who publishes the stock newsletter Brush Up on Stocks.

/zigman2/quotes/204198156/composite
US : U.S.: NYSE
$ 47.79
-0.05 -0.10%
Volume: 1.08M
Feb. 14, 2020 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$7.58 billion
Rev. per Employee
$233,128
loading...
/zigman2/quotes/204294782/composite
US : U.S.: NYSE
$ 112.81
0.00 0.00%
Volume: 261,313
Feb. 14, 2020 6:30p
P/E Ratio
11.44
Dividend Yield
1.60%
Market Cap
$10.19 billion
Rev. per Employee
$1.02M
loading...
/zigman2/quotes/205830158/composite
US : U.S.: Nasdaq
$ 46.65
+0.67 +1.46%
Volume: 1.28M
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$4.95 billion
Rev. per Employee
$6.35M
loading...
/zigman2/quotes/202459264/composite
US : U.S.: NYSE
$ 80.00
+0.03 +0.04%
Volume: 592,998
Feb. 14, 2020 6:30p
P/E Ratio
21.17
Dividend Yield
N/A
Market Cap
$10.85 billion
Rev. per Employee
$338,273
loading...
/zigman2/quotes/210452372/composite
US : U.S.: NYSE
$ 65.49
+0.16 +0.24%
Volume: 989,421
Feb. 14, 2020 6:30p
P/E Ratio
10.52
Dividend Yield
2.69%
Market Cap
$7.36 billion
Rev. per Employee
$314,786
loading...
/zigman2/quotes/204392149/composite
US : U.S.: NYSE
$ 137.78
+0.02 +0.01%
Volume: 111,108
Feb. 14, 2020 6:30p
P/E Ratio
13.08
Dividend Yield
1.89%
Market Cap
$5.29 billion
Rev. per Employee
$1.08M
loading...
/zigman2/quotes/208442969/composite
US : U.S.: Nasdaq
$ 86.79
-0.21 -0.24%
Volume: 110,362
Feb. 14, 2020 4:00p
P/E Ratio
59.33
Dividend Yield
N/A
Market Cap
$3.43 billion
Rev. per Employee
$297,015
loading...
/zigman2/quotes/203847835/composite
US : U.S.: NYSE
$ 38.24
-0.88 -2.25%
Volume: 1.05M
Feb. 14, 2020 6:30p
P/E Ratio
29.35
Dividend Yield
0.84%
Market Cap
$5.82 billion
Rev. per Employee
$119,508
loading...
/zigman2/quotes/206220859/composite
US : U.S.: NYSE
$ 39.77
+0.30 +0.76%
Volume: 1.12M
Feb. 14, 2020 6:30p
P/E Ratio
13.90
Dividend Yield
0.91%
Market Cap
$3.56 billion
Rev. per Employee
$2.37M
loading...
/zigman2/quotes/207418022/composite
US : U.S.: Nasdaq
$ 108.18
-2.27 -2.06%
Volume: 279,827
Feb. 14, 2020 4:00p
P/E Ratio
18.91
Dividend Yield
0.68%
Market Cap
$4.27 billion
Rev. per Employee
$3.53M
loading...
/zigman2/quotes/202974783/composite
US : U.S.: NYSE
$ 131.00
+0.13 +0.10%
Volume: 199,090
Feb. 14, 2020 6:30p
P/E Ratio
11.29
Dividend Yield
0.92%
Market Cap
$3.05 billion
Rev. per Employee
$866,481
loading...
/zigman2/quotes/202092656/composite
US : U.S.: Nasdaq
$ 94.66
-0.39 -0.41%
Volume: 363,463
Feb. 14, 2020 4:00p
P/E Ratio
14.33
Dividend Yield
1.06%
Market Cap
$7.65 billion
Rev. per Employee
$1.23M
loading...
/zigman2/quotes/207965492/composite
US : U.S.: NYSE
$ 60.50
-0.25 -0.41%
Volume: 328,818
Feb. 14, 2020 6:30p
P/E Ratio
14.22
Dividend Yield
N/A
Market Cap
$4.62 billion
Rev. per Employee
$363,654
loading...
/zigman2/quotes/209069331/composite
US : U.S.: NYSE
$ 72.19
-0.70 -0.96%
Volume: 421,824
Feb. 14, 2020 6:30p
P/E Ratio
11.28
Dividend Yield
N/A
Market Cap
$2.76 billion
Rev. per Employee
$4.61M
loading...
/zigman2/quotes/203631053/composite
US : U.S.: NYSE
$ 32.93
-0.15 -0.45%
Volume: 634,767
Feb. 14, 2020 6:30p
P/E Ratio
10.25
Dividend Yield
N/A
Market Cap
$4.21 billion
Rev. per Employee
$188,382
loading...
/zigman2/quotes/201755982/composite
US : U.S.: Nasdaq
$ 14.60
+0.20 +1.39%
Volume: 1.75M
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
1.37%
Market Cap
$8.59 billion
Rev. per Employee
$354,893
loading...
/zigman2/quotes/204736448/composite
US : U.S.: NYSE
$ 23.49
+0.09 +0.38%
Volume: 1.06M
Feb. 14, 2020 6:30p
P/E Ratio
6.70
Dividend Yield
3.41%
Market Cap
$7.13 billion
Rev. per Employee
$701,733
loading...
/zigman2/quotes/202113551/composite
US : U.S.: NYSE
$ 63.82
-0.62 -0.96%
Volume: 793,476
Feb. 14, 2020 6:30p
P/E Ratio
13.95
Dividend Yield
1.50%
Market Cap
$6.94 billion
Rev. per Employee
$352,850
loading...
/zigman2/quotes/207413697/composite
US : U.S.: NYSE
$ 98.94
-1.04 -1.04%
Volume: 432,048
Feb. 14, 2020 6:30p
P/E Ratio
13.47
Dividend Yield
3.19%
Market Cap
$9.37 billion
Rev. per Employee
$467,640
loading...
/zigman2/quotes/200286355/composite
RH
US : U.S.: NYSE
$ 238.18
-0.47 -0.20%
Volume: 469,346
Feb. 14, 2020 6:30p
P/E Ratio
30.28
Dividend Yield
N/A
Market Cap
$4.52 billion
Rev. per Employee
$481,742
loading...
/zigman2/quotes/202731508/composite
US : U.S.: Nasdaq
$ 28.82
-0.39 -1.34%
Volume: 570,811
Feb. 14, 2020 4:00p
P/E Ratio
22.62
Dividend Yield
N/A
Market Cap
$2.69 billion
Rev. per Employee
$346,722
loading...
/zigman2/quotes/201784799/composite
US : U.S.: NYSE
$ 37.83
-0.93 -2.40%
Volume: 1.68M
Feb. 14, 2020 6:30p
P/E Ratio
16.82
Dividend Yield
N/A
Market Cap
$5.93 billion
Rev. per Employee
$368,418
loading...
/zigman2/quotes/200243424/composite
US : U.S.: Nasdaq
$ 8.34
-0.48 -5.44%
Volume: 8.83M
Feb. 14, 2020 4:00p
P/E Ratio
425.51
Dividend Yield
N/A
Market Cap
$1.40 billion
Rev. per Employee
$261,528
loading...
/zigman2/quotes/208827271/composite
US : U.S.: Nasdaq
$ 81.36
-0.09 -0.11%
Volume: 421,704
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.76 billion
Rev. per Employee
$759,626
loading...
/zigman2/quotes/207981284/composite
US : U.S.: Nasdaq
$ 65.62
-0.27 -0.41%
Volume: 214,394
Feb. 14, 2020 4:00p
P/E Ratio
80.59
Dividend Yield
N/A
Market Cap
$6.81 billion
Rev. per Employee
$182,922
loading...
/zigman2/quotes/208755595/composite
US : U.S.: NYSE
$ 142.42
-1.57 -1.09%
Volume: 339,214
Feb. 14, 2020 6:30p
P/E Ratio
14.62
Dividend Yield
1.12%
Market Cap
$7.33 billion
Rev. per Employee
$86,588
loading...
/zigman2/quotes/209743863/composite
US : U.S.: NYSE
$ 27.78
+0.31 +1.13%
Volume: 1.80M
Feb. 14, 2020 6:30p
P/E Ratio
11.78
Dividend Yield
N/A
Market Cap
$2.94 billion
Rev. per Employee
$1.84M
loading...
/zigman2/quotes/201912487/composite
US : U.S.: NYSE
$ 47.58
-0.53 -1.10%
Volume: 4.36M
Feb. 14, 2020 6:30p
P/E Ratio
11.78
Dividend Yield
0.92%
Market Cap
$6.24 billion
Rev. per Employee
$1.50M
loading...
/zigman2/quotes/200296850/composite
US : U.S.: NYSE
$ 152.16
+0.13 +0.09%
Volume: 528,797
Feb. 14, 2020 6:30p
P/E Ratio
8.26
Dividend Yield
3.15%
Market Cap
$9.55 billion
Rev. per Employee
$228,663
loading...
/zigman2/quotes/202067350/composite
US : U.S.: NYSE
$ 74.02
+0.03 +0.04%
Volume: 375,616
Feb. 14, 2020 6:30p
P/E Ratio
17.15
Dividend Yield
2.59%
Market Cap
$5.73 billion
Rev. per Employee
$204,014
loading...
/zigman2/quotes/203847835/composite
US : U.S.: NYSE
$ 38.24
-0.88 -2.25%
Volume: 1.05M
Feb. 14, 2020 6:30p
P/E Ratio
29.35
Dividend Yield
0.84%
Market Cap
$5.82 billion
Rev. per Employee
$119,508
loading...
/zigman2/quotes/203631053/composite
US : U.S.: NYSE
$ 32.93
-0.15 -0.45%
Volume: 634,767
Feb. 14, 2020 6:30p
P/E Ratio
10.25
Dividend Yield
N/A
Market Cap
$4.21 billion
Rev. per Employee
$188,382
loading...
/zigman2/quotes/200243424/composite
US : U.S.: Nasdaq
$ 8.34
-0.48 -5.44%
Volume: 8.83M
Feb. 14, 2020 4:00p
P/E Ratio
425.51
Dividend Yield
N/A
Market Cap
$1.40 billion
Rev. per Employee
$261,528
loading...
/zigman2/quotes/208827271/composite
US : U.S.: Nasdaq
$ 81.36
-0.09 -0.11%
Volume: 421,704
Feb. 14, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.76 billion
Rev. per Employee
$759,626
loading...
/zigman2/quotes/208755595/composite
US : U.S.: NYSE
$ 142.42
-1.57 -1.09%
Volume: 339,214
Feb. 14, 2020 6:30p
P/E Ratio
14.62
Dividend Yield
1.12%
Market Cap
$7.33 billion
Rev. per Employee
$86,588
loading...
/zigman2/quotes/208872451/composite
US : U.S.: NYSE
$ 340,224
+1,724 +0.51%
Volume: 121.00
Feb. 14, 2020 6:30p
P/E Ratio
20.66
Dividend Yield
N/A
Market Cap
$554.66 billion
Rev. per Employee
$637,113
loading...
/zigman2/quotes/200060694/composite
US : U.S.: NYSE
$ 226.80
+0.33 +0.15%
Volume: 2.51M
Feb. 14, 2020 6:30p
P/E Ratio
20.64
Dividend Yield
N/A
Market Cap
$554.62 billion
Rev. per Employee
$637,113
loading...
/zigman2/quotes/200286355/composite
RH
US : U.S.: NYSE
$ 238.18
-0.47 -0.20%
Volume: 469,346
Feb. 14, 2020 6:30p
P/E Ratio
30.28
Dividend Yield
N/A
Market Cap
$4.52 billion
Rev. per Employee
$481,742
loading...
/zigman2/quotes/206220859/composite
US : U.S.: NYSE
$ 39.77
+0.30 +0.76%
Volume: 1.12M
Feb. 14, 2020 6:30p
P/E Ratio
13.90
Dividend Yield
0.91%
Market Cap
$3.56 billion
Rev. per Employee
$2.37M
loading...
/zigman2/quotes/209743863/composite
US : U.S.: NYSE
$ 27.78
+0.31 +1.13%
Volume: 1.80M
Feb. 14, 2020 6:30p
P/E Ratio
11.78
Dividend Yield
N/A
Market Cap
$2.94 billion
Rev. per Employee
$1.84M
loading...
/zigman2/quotes/201912487/composite
US : U.S.: NYSE
$ 47.58
-0.53 -1.10%
Volume: 4.36M
Feb. 14, 2020 6:30p
P/E Ratio
11.78
Dividend Yield
0.92%
Market Cap
$6.24 billion
Rev. per Employee
$1.50M
loading...
/zigman2/quotes/200296850/composite
US : U.S.: NYSE
$ 152.16
+0.13 +0.09%
Volume: 528,797
Feb. 14, 2020 6:30p
P/E Ratio
8.26
Dividend Yield
3.15%
Market Cap
$9.55 billion
Rev. per Employee
$228,663
loading...
/zigman2/quotes/202067350/composite
US : U.S.: NYSE
$ 74.02
+0.03 +0.04%
Volume: 375,616
Feb. 14, 2020 6:30p
P/E Ratio
17.15
Dividend Yield
2.59%
Market Cap
$5.73 billion
Rev. per Employee
$204,014
loading...
/zigman2/quotes/204736448/composite
US : U.S.: NYSE
$ 23.49
+0.09 +0.38%
Volume: 1.06M
Feb. 14, 2020 6:30p
P/E Ratio
6.70
Dividend Yield
3.41%
Market Cap
$7.13 billion
Rev. per Employee
$701,733
loading...
/zigman2/quotes/210452372/composite
US : U.S.: NYSE
$ 65.49
+0.16 +0.24%
Volume: 989,421
Feb. 14, 2020 6:30p
P/E Ratio
10.52
Dividend Yield
2.69%
Market Cap
$7.36 billion
Rev. per Employee
$314,786
loading...

Michael Brush is a Manhattan-based financial writer who publishes the stock newsletter Brush Up on Stocks. Brush has covered business for the New York Times and The Economist group. He attended Columbia Business School in the Knight-Bagehot program.

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