US - Bargins set for a rise this year

When selecting stocks, "I don't worry" about whether they are rising or falling, as long as they're a bargain, says John Dorfman on www.Bloomberg.com. But many investors prefer their value stocks "with a whiff of momentum". And while "we all know" there is no magic formula for finding winning stocks, this approach has proved highly successful over the past few years. Dorfman's eight previous semi-annual portfolios containing cheap and rising stocks have all been profitable, with returns ranging from 23% to 140% and averaging 65%. What's more, they have all out- performed the S&P 500 index, with an average margin of victory of more than 48%. So consider his latest "value and momentum" picks, all of which sell for 15 times earnings or less and have gained at least 8% so far in 2004.

Engineering and construction group Perini (PCR), whose projects have included casinos in Las Vegas and tunnels in Boston, has climbed by about 40% this year on news of additional casino projects and new contracts in Iraq, where it is helping to rebuild the electricity grid. Yet thanks partly to a lack of coverage - no Wall Street analysts follow the stock - this small cap is still trading at "modest multiples": ten times earnings, 0.3 times revenue and 2.9 times book value.

InVision (INVN) makes luggage-screening equipment for airports. Earnings per share hit $4.40 in 2002 as the government ordered airports to beef-up security, yet, despite a share-price upswing this year, concern that "it could take five years or more" for the company to equal its 2002 performance has hampered the stock. But InVision is now so cheap "it doesn't have to equal 2002's earnings to make money for investors" - it trades at just seven times earnings, 1.2 times revenue and 2.3 times book value.

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Abercrombie & Fitch (ANF) is a clothing retailer that concentrates on the teen market. Analysts expect it to report earnings growth of just 6% for 2003, its worst performance since it went public in 1996. But considering the tough environment, "any earnings growth at all is a good sign". Note, too, that Abercrombie has grown profits by 32% over the past five years and posted an impressive 29% return on equity in fiscal 2003. It is also debt free. Given all this, the stock - up 11% this year - looks "pretty reasonable" at 13 times earnings.

Finally, toymaker Jakks Pacific (JAKK), whose offerings range from action figures to dolls, is also on a roll, having gained about 10% in 2003. Toy stocks are notoriously volatile, and Jakks is no exception: it slid by 2.4% last year and 29% in 2002, but more than doubled in 2001. Nonetheless, at just 14 times earnings and just under book value, it looks worth a punt.