How to identify top performing stocks in your favorite industry

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For an investor, buying quality and growth oriented stocks at fair price points is a key for making money in the market. But with so many options, selecting such stocks can be an uphill task for individual investor. Moreover, going through each and every income statement and balance sheet to identify fundamentally strong companies within the sector is a daunting task.

Understanding this need, Heckyl launched Peers screen to help investors distinguish between good and bad companies within any industry. Peers screen measures the performance of each company within the sector on three key parameters – quality (assess balance sheet strength), growth (how the company has grown over the years) and value (spot stocks with cheap or expensive valuations).

Based on the score combination of Quality vs Value, Value vs Growth and Quality vs Growth, each industry player is placed in one of the four square matrices. In addition, Peers screen presents tabular view so that user can check numeric score for the selected company and its close competitors.

One can judge whether the stock might outperform or underperform by quickly looking at company’s position in the matrix.

Let us see how one can use Peers screen. We have scanned through Peers screen for Sun Pharma to check whether the India’s largest drug maker is the best bet in the pharma industry or not. Check below image for Sun Pharma’s Peers screen:
Peers Snapshot Small

Based on Quality vs Value score combination, Sun Pharma was placed in matrix for fair quality and overvalued stocks, which tends to underperform. Meanwhile, Value vs Growth score combination suggested likely underperformance from Sun Pharma due to expensive valuation and slower growth. Quality vs Growth score combination also signaled underperformance from Sun Pharma due to fair quality and slower growth. By looking at score (Quality: 6/20; Growth: 0/20; and Value: 0/20) and four square matrix, one can reconsider decision to invest in Sun Pharma.

At the same time, one can explore other alternatives highlighted in the matrix for “Stocks tend to outperform”. Let us have a look at alternatives in the table below:
Score Snapshot

Lupin secured place in the matrix for “Stocks tend to outperform” for all three score combinations (Quality vs Value, Value vs Growth and Quality vs Growth). Moreover, Lupin topped the list for two out of three score combinations (Value vs Growth and Quality vs Growth). The score (Quality: 16/20; Growth: 14/20; and Value: 14/20) suggests Lupin is the fast growing company with excellent balance sheet quality. At the same time, the stocks is undervalued presently. By exploring Peers screen, one can conclude that Lupin is one of the better bets in the pharma industry.

The Bottom-line:
Peers screen is the powerful tool to scan companies within the industry. It not only helps investor to distinguish between fundamentally strong and weak companies, but also helps in identifying better investment alternatives in the sector.

By using Peers Screen, existing investors can find out whether they are holding on to top performers in the industry or not. On the other hand, new investors can use Peers screen to invest only in top performing stocks.

So don’t wait, start exploring Peers screen now.

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