Covestor model manager Richard Moore uses a buy and hold approach in his Market Comparables model. When choosing positions, Moore looks for price movement and valuation and then examines each potential position’s financial forecast to determine whether there is any hidden value or prospect for growth.
One of the first top holdings in the Market Comparables model that we’ll look at today is Alamo Group Inc (NYSE:ALG). According to their website, Alamo Group has spent more than 40 years as a leader in designing, manufacturing and distributing agriculture and right-of-way maintenance equipment like tractors, mowers, snow removal equipment and excavators. Their practical equipment includes items like street sweepers which can be used in very urban environments as well as more remote areas. This helps them keep a continual business without succumbing to seasonal woes. Reviewing their balance sheet, you can see that their liabilities reduced in 2009 and their shareholder equity increased by more than 25% in the same year. Their stock price dipped substantially mid-2009 but since then their price has been increasing steadily.
Another top holding in the model is Lexmark International Inc (NYSE:LXK). Lexmark specializes in providing printing and imaging products and accessories to businesses. While these products can help a business streamline their process and increase productivity, they are not always popular during times of economic crises. Unfortunately, a look at Lexmark’s cash flow and income statement shows that their net revenues and net income have been steadily declining since 2007. However, their liabilities decreased in 2009 while their stockholder equity increased. Their price to earnings ratio is also significantly lower than some of their competitors’. In July of 2009, their stock price hit a low of $14.23, a price not seen by the stock since the late 1990’s.