By JACK HOUGH
U.S. stocks have rallied fiercely since Thanksgiving, but the S&P 500 index is still 8% below its 2011 high, reached in May. The stocks listed below have done better. On Monday, they all hit new highs for the year.
That doesn't make these stocks expensive. In fact, they turned up in a search among large, mid-size and small U.S. companies for stocks that were both hitting new 2011 highs and selling for less than the S&P 500's price of 13 times forecast earnings.
Value investors can think of these three as modestly priced shares that happen to have gained of late. Momentum traders can think of them as recent risers that happen to still be cheap.
2011 Price-to-Earnings Ratio: 10
But David Windley, who covers Humana stock for investment bank Jefferies & Company, called looming cuts "relative child's play" in a note last month to clients. Humana has survived worse threats to its bottom line in recent years, according to Windley, and the outlook in Washington, D.C., offers "more certainty now than in the last five years." Medicare Advantage is "increasingly viewed by friend not foe" by policymakers looking for savings. Humana's goal is to run its Medicare Advantage plans at a 15% savings to Medicare, with the extra funds used to reduce premiums and add benefits (thereby luring customers) and to bolster profits (thereby offsetting budget cuts).
The company has beaten earnings estimates by more than 30% in each of its past two quarters.
2011 P/E Ratio: 13
Lithia Motors (LAD)
Lithia's earnings per share are expected to double this year on a 26% increase in revenues. Last quarter the company bought two dealerships and sold one, reduced expenses as a percentage of gross profit, bought back shares and paid a dividend. It also projected that sales at longstanding stores would increase 9% next year.
2011 P/E Ratio: 12
Kenneth Stumphauzer, who covers the stock for Sterne Agee, an investment bank, wrote in a note to clients that Macy's is set up for a strong December, too. November was the most difficult comparison month for the year, he wrote, and an unseasonably warm Black Friday might have cut into sales of cold-weather clothing. Those sales should shift forward, he reckons, helping December's numbers. And compared with last year, December this year gets an extra shopping day before Christmas.