As the shares of good companies that were unfairly hammered start to rebound, we have a further look at some whose prices are firmly on the way back up.
I had a look last week at a few companies that had shown strong Relative Strength over the past three months -- that is, their share prices have risen a lot more strongly than the market average. My reasoning was that, as the stock market bounces back from a low point, good quality companies that have been unfairly marked down with the rest of the market are likely to be amongst the early risers.
This week I've been looking for a few more, and again leaving out the recovering banks and the companies involved in digging up gold and other shiny things, I found a few more interesting recovery stories.
Geared up
Torotrak (LSE: TRK) has been a technology favourite in Foolish circles for a few years now, having pioneered the idea of the Infinitely Variable Transmission for motor vehicles. Replacing the traditional gearbox, such a transmission can, in theory, allow an engine to always work at its most efficient point.
However, Torotrak has taken a long time to start to live up to its promise for investors. Even if we ignore the insane days of the technology boom, the share price has been disappointing, falling steadily from over £1 in 2004 to its recent low of under 10p in early 2008. But it looks like fortunes might be about to change as the share price has got off to a cracking start in 2009, climbing pretty steadily upwards to 32p today.
The reason? February's interim statement was positive, telling of expectations of strong revenues in the second half of the year with the fulfillment of orders by American joint venture company Infinitrak. And the company is finally expected to become profitable in 2010, with earnings per share of 1.6p expected by house broker Arbuthnot.
Today's share price puts Torotrak on a market capitalization of £49m, and a prospective P/E of 20 for 2010. But a company's P/E can appear very high in the year it turns from loss to profit, and in a few years time we might well be looking back on today as the start of a golden spell for Torotrak investors.
Traffic data
Continuing on the motoring theme, last month I took a look at Trafficmaster (LSE: TFC), and suggested that it might be ripe for recovery. At a price of 18p, I thought the very low P/E made the shares look cheap. From a different angle, Chris Menon also opined that the company looked cheap in terms of its Net Asset Value (NAV).
And I'm happy to say that the share price has moved steadily on upwards since then to 30p today, rating them now at just over 8 times 2008 earnings. If forecasts for 2009 come in favourably, that 30p might still be cheap.
Watching the watchers
Seeing Indigo Vision (LSE: IND) high up the Relative Strength rankings didn't really surprise me, as I have previously suggested the shares were a bargain, but I was a little astonished by the scale of the rise. My opinion was based on the price of 240p when I looked at them, and at the time of writing today they're up at 420p -- that's a rise of 75% in little more than 6 weeks. It's a shame I didn't buy any, as I was half thinking of doing.
Forecasts for 2009 and 2010 have been raised very slightly, suggesting EPS figures of 26p and 29p respectively, for prospective P/E ratios of 16 and 14 for the two years. That seems closer to fair value to me, but I still think it's a company that will reward investors over the long term.
I'll drink to that
My eye was also caught by Marston's (LSE: MARS), that brewer of such fine ales, being high up the Relative Strength list. But I only really noticed it because I finished the day yesterday with a couple of bottles of the company's excellent Old Empire India Pale Ale.
It'll be interesting to look back on these companies in a year's time and see if today's high relative strength really is an indicator of longer-term performance -- and if they do well, I might even send more money in the direction of Marston's and open another bottle or two to celebrate.
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