ConocoPhillips, Cummins Have Value and Momentum: John Dorfman March 7 (Bloomberg) -- Do yo... ConocoPhillips, Cummins Have Val

Many people won't consider a stock unless it has ``a strong chart,'' in other words good price momentum. Others won't touch a stock that has spurted, figuring that they are too late.

The series started in 2000, and this is my 13th ``Value Plus Momentum'' list. One-year returns can be computed for the first 11 lists, and they have averaged a 12-month gain of 28 percent.

By comparison, the Standard & Poor's 500 Index has averaged 1.8 percent for the same 11 overlapping one-year periods. Nine of the 11 lists have beaten the S&P 500 and 10 have been profitable. Figures are total returns including dividends.

The list from a year ago returned 40 percent from Feb. 15, 2005, through March 3, 2006, thanks to an 83 percent return in Valero Energy Corp. (VLO) and a 77 percent return in Oregon Steel Mills Inc. (OS).

Intergraph Corp. (INGR) chipped in a 32 percent gain and Nelnet Inc. (NNI) 27 percent. The sole loser was General Maritime Corp. (GMR), down 17 percent.

To qualify this time, a stock had to be up at least 6.3 percent year-to-date through March 3 (double the S&P 500's gain), and up at least 10 percent in the past 12 months. It also had to sell for 15 times earnings or less.

From 40 qualifiers I've selected five to recommend: ConocoPhillips, Valero Energy (again), Cummins Inc., American Financial Group Inc. and Jakks Pacific Inc.

ConocoPhillips (COP), based in Houston, is the third-biggest U.S. oil company. In the past five years ConocoPhillips shares appreciated 147 percent, and some oil companies have gained considerably more.

Now, many people feel that it is time to take profits as the gravy train can't roll much longer. I disagree. Demand for oil continues to grow at a steady clip in the U.S. and worldwide. And the stuff is getting harder to find.

ConocoPhillips shares sell for 0.47 times revenue and six times earnings -- ratios that appeal to a cheapskate like me. I also like the balance sheet, with debt less than 24 percent of equity.

Valero specializes in refining. U.S. refineries have been running flat out for years and I anticipate they will continue to. In fact, sporadic shortages of gasoline during the next five years wouldn't surprise me.

Many people think of refining as a business with low profit margins and spotty earnings. Yet Valero has earned a profit in nine of the past 10 years.

Refiners outside the U.S. have lower costs, it's true. It isn't feasible, though, for the U.S. to depend totally on refiners in the Middle East or Latin America.

Cummins (CMI), with headquarters in Columbus, Indiana, makes diesel engines, mostly for trucks. It also makes natural-gas engines, engine components, filtration systems and exhaust systems.

Cummins has posted profits in eight of the past 10 years, and -- in spite of the current woes of the U.S. auto industry -- analysts expect it to report solid profit this year and next. The stock sells for 10 times earnings and 0.47 times revenue.

Some investors distrust Lindner, perhaps because he controlled Chiquita Brands International Inc., which went into bankruptcy in 2002. I don't consider his position at the helm of AFG to be a liability.

I'll round out the list with Jakks Pacific (JAKK), a toy maker based in Malibu, California. Its brands include Child Guidance, Road Champs and Remco.

Jakks is up 20 percent this year, yet still sells for 11 times earnings and 1.06 times revenue. In the past four years it has more than doubled its stockholders' equity, to about $525 million from about $284 million.

By way of disclosure, some of my clients own shares in General Maritime, Intergraph, Oregon Steel and Valero. In my personal portfolio I own General Maritime common stock and Oregon Steel call options.

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