Screen Of The Week 03/03/2011: Great Stocks Often Have Great Peers

We've mentioned it here before, but it's worth saying again: nearly half of a stock's price movement is tied to the performance of its respective group (Sector and Industry).

That being said, most great stocks from great groups often have some great peers as well.

If you find yourself in a killer trade (or wished you were in one), take a look at the characteristics of THAT STOCK and then hunt within its group to find OTHER STOCKS that share the same characteristics.

Does a certain outstanding stock exhibit great sales growth? I'm sure there are at least a few within its group that are showing similar numbers.

What about increasing margins? If the stock is doing well, it's likely that the industry itself is experiencing meaningful increases in margins too.

This type of screening is often called 'modeling'. Figure out the components of what makes something successful and concentrate on that.

If you're in love with a certain stock or sector, but it's doing nothing...or worse, moving against you...then move on.

If you see great stocks in great groups while you're stuck in laggards or non-movers, find what stocks are successful and model them.

If the winningest stocks in a particular sector or industry are trading at PE ratios that you generally wouldn't consider...instead consider this: if you had considered them, they would be winning for you.

For example, here's the top performing stock in the Oil Machinery-Services-Drilling Industry:

HERO - Snapshot Report Hercules Offshore, Inc.

Now here are 5 others that have very similar characteristics:

DVR - Snapshot Report Cal Dive International, Inc.
IO - Snapshot Report ION Geophysical Corp.
KEG - Snapshot Report Key Energy Services, Inc.
MTRX - Snapshot Report Matrix Service Co.
PDC - Snapshot Report Pioneer Drilling Co.

If you're looking for new stock-picking ideas, find a top sector or a top stock and start looking at its peers with the same or similar characteristics.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

By: Kevin Matras

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Kevin Matras is the Research Wizard Product Manager and weekly contributing Editor at Zacks Investment Research who creates and writes the Zacks Commentary Screen of the Week and Know Your Options. For more information, visit www.zacks.com.