McDonald's - Why Not?

I'm running a very simple screen - all companies growing EPS at 8% selling at below 25 fwd P/E. And with over $1B in market cap. Rationale being that I don't want to buy businesses that are shrinking, and also don't want to buy stocks are TOO overpriced. One of the top ones on the list - MCD. Surprising that the revenues are only $23B, but that's probably cause the company is mostly franchises - the actual sales of restaurants are much higher. Valuation is reasonable at 15x LTM P/E, and with strong history of expanding profits, I'm a believe they can keep growing at 10% earnings. And there's also 3% dividend, and pretty low beta - MCD hardly lost any value while the stock market tanked completely. I'm somewhat a believer in potential here to generate high risk-adjusted returns, although on absolute basis they might be comparable to the market.

Lab Corp of America

Not overly expensive at ~15x EPS, with attractive market growth (5-6%) driven by increasing penetration of genomic and other esoteric (don't know exactly what!) testing, with significant opportunity of margin expansion as fixed costs are sizable at ~$1B on revenues of 7B. Second largest lab company in the US after Quest, customer split between managed care, individual patients, some Medicare/Medicaid. Lots of small labs - presumably opportunity to gain share over time, although may be cost competitive eating into margins. Limited risk of being impacted by healthcare bill (that's now toasted anyway), although near-term volume trends are not favorable according to some checks (volume may be flat to down slightly). Pretty low beta stock, I would expect to trade at 18x P/E. Next year's earnings projected to be 5.50, so could get to $100 a share - vs 73 currently.

Resuming... Quanta Services

Found this one on Fortune Top 10 stocks for 2010. Not sure whether it'd be a top one for me, but the idea is definitely worth exploring: Quanta Services is a contractor servicing electric power lines, gas, telecom, some other minor segments. Electric services include transmission (slight majority) and distribution - they design, maintain and built stuff. Utilities are expected to ramp up their spending, incentivized by the government. Another favorable trend - increasing outsourcing by utilities. Quanta also has a small business constructing wind and solar farms, fast growth here obviously. The struggling segments are gas - with prices down and housing market still in the doldrums (and part of the business is distribution - connecting houses with gas pipes), the market recovery timing is unclear.

Analyst expect very rapid recovery in gas - unclear why. I believe the story on electric power, but with current EPS at ~0.8, and share price at 20, there seem to be better opportunities to invest, especially given the uncertainty on timing of market recovery. Worth keeping an eye on though.