Validea's Top Information Technology Stocks Based On Joel Greenblatt

Validea's Earnings Yield Investor model, based on Joel Greenblatt's value investment strategy, identifies HP Inc. (HPQ) and Western Digital Corp (WDC) as top-rated Information Technology stocks, with scores of 100% and 90% respectively, indicating strong interest based on underlying fundamentals and valuation; Leidos Holdings Inc (LDOS) and NetApp Inc (NTAP) failed the ranking with scores of 70% and 60% respectively. The Greenblatt strategy focuses on companies with high return on capital and earnings yields, and has historically demonstrated market-beating returns.

Analysis

Validea's Earnings Yield Investor model, which emulates Joel Greenblatt's strategy focusing on high return on capital and strong earnings yields, has identified HP Inc. (HPQ) and Western Digital Corp. (WDC) as highly rated Information Technology stocks. HPQ, a large-cap value stock in Computer Hardware, achieved a top score of 100%, signifying strong interest, despite its individual metrics for Earnings Yield and Return on Tangible Capital being rated as 'NEUTRAL'. Similarly, WDC, a large-cap value stock in Computer Storage Devices, scored 90%, also indicating strong interest, while its Earnings Yield and Return on Tangible Capital were also 'NEUTRAL'. Both companies passed the model's 'FINAL RANKING'. In contrast, Leidos Holdings Inc. (LDOS), a large-cap growth stock in Computer Services, received a 70% rating, and NetApp Inc. (NTAP), a large-cap growth stock in Computer Storage Devices, scored 60%; both failed the final ranking according to this specific strategy, with their individual Earnings Yield and Return on Tangible Capital also rated 'NEUTRAL'. The Greenblatt model, as noted, has a historical precedent of strong back-tested returns, suggesting its screening criteria can identify potentially undervalued companies with solid fundamentals, though the 'NEUTRAL' sub-ratings for the top-ranked stocks highlight the nuanced weighting within the model's overall assessment of fundamentals and valuation.

Key Decisions for Investors

• Investors employing a value-oriented strategy based on Greenblatt's principles should consider HPQ and WDC for further due diligence, given their high model scores despite 'NEUTRAL' ratings on the explicitly mentioned individual criteria.
• It is crucial to investigate the specific underlying fundamental and valuation factors that led to HPQ's 100% and WDC's 90% scores, particularly how the model reconciles the 'NEUTRAL' sub-component ratings with a 'PASS' in the final ranking.