"While U.S. banks have struggled amid the credit and housing crises, Credicorp (NYSE: BAP) has excelled," notes John Reese, who assesses stocks based on the strategies of various well-known and time-tested gurus.
Here, the editor of the Validea newsletter looks at the Peru-based banking firm commerical banker and explains how it "passes the test" for four leading guru strategies: Peter Lynch, Martin Zweig, the Motley Fools, and William O'Neill.
"Credicorp's main subsidiary, Banco de Credito del Peru, actually grew its mortgage business 8.2% in the third quarter of 2007 (the most recent quarter for which data is available) as Peruvians' purchasing power continued to increase.
"My Peter Lynch-based strategy considers Credicorp a 'fast-grower' because of its 42.44% growth rate (based on the average of the three-, four-, and five-year earnings per share figures).
"Lynch famously used the P/E/Growth ratio to identify growth stocks selling on the cheap. By dividing Credicorp's 19.6 P/E ratio by that growth rate, we get a P/E/G of 0.46, which falls into my Lynch-based model's best-case category (below 0.5).
"Credicorp also gets approval from my Martin Zweig-based strategy, in large part because of its stellar earnings. Zweig targeted companies whose EPS have increased in each of the past five years, and over the past half-decade Credicorp has posted EPS of $0.57, $1.06, $1.70, $2.44 and $3.03, passing the test.
"Zweig didn't just like earnings to be increasing, though; he also wanted the rate of those increases to be accelerating. While Credicorp's historical growth rate is a strong 42.44% , its growth rate for the current quarter is an even-better 76.56%, a sign of earnings acceleration.
"Another reason my Zweig model is high on Credicorp: Its sales growth is also accelerating. Last quarter, the firm's sales grew at a 25.4% rate (compared to the year-ago quarter); this quarter, they are growing at 31.9%.
"Another model that is high on Credicorp is the growth strategy that I base on the writings of The Motley Fool's Tom and David Gardner. My Fool-based model likes Credicorp's 0.46 P/E/G, which falls into its best-case category, and the company's excellent profit margin (26.74%), which almost quadruples this method's 7% target.
"Another Fool-based criterion: insider holdings. This model requires insiders to own at least 10% of a company's outstanding shares, because high insider ownership indicates that insiders are confident that the company will do well. At 61.12%, Credicorp easily passes this test.
"Finally, Credicorp's strong recent performance has impressed the momentum strategy that I base on the writings of William O'Neil.
"O'Neil liked stocks whose relative strength -- the measure of how well they've performed in the past 12 months -- were at least 80, and preferably above 90; Credicorp's relative strength is 92, meaning it has outperformed 92% of all other stocks in the past year, passing this test.
"Another reason it scores high on this model: The stock's price is within 15% of its 52-week high, which O'Neil saw as a sign that a stock could be ready to break out to a new high."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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