Silver Wheaton Corp. (USA) (SLW), Rosetta Resources Inc. (ROSE): How to Make Money with Fat Stocks

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Sure you want to be thin and rich in real life, but you don’t want your stocks to be rated Underweight!  Finding Overweight stocks with low PEGs isn’t easy in the torrid run-up of the last year. Screening for mid-caps with Wall Street Outperforms, gross margins over 25%, trailing P/Es under 15, and EPS growth rates of 30% over the last three years elicited only seven names out of a possible 1,674. Using the free stock screen at Motley under the CAPS tab I further screened for CAPS with four star rankings or better, bringing it down to five.

Silver Wheaton Corp. (USA) (NYSE:SLW)Those five names were Cirrus Logic, Inc. (NASDAQ:CRUS), NetEase, Inc (ADR) (NASDAQ:NTES), Silver Wheaton Corp. (USA) (NYSE:SLW), Rosetta Resources Inc. (NASDAQ:ROSE), and Oil States International, Inc. (NYSE:OIS). Tossing out NetEase, Inc (ADR) (NASDAQ:NTES) because it’s a volatile Chinese internet stock with the highest PEG, that left two oils and a precious metals company. Semiconductor Cirrus Logic, Inc. (NASDAQ:CRUS) also came up, but its fortunes are too dependent on Apple Inc. (NASDAQ:AAPL) and it seems to fall harder and faster from the tree when Apple Inc. (NASDAQ:AAPL) declines.

The not too rich or too thin winners

Silver Wheaton Corp. (USA) (NYSE:SLW) may be the most intriguing company on the list, as it is the only one with yield at 2.10% and a beta of exactly one despite being a silver and precious metal streaming company. It doesn’t actually mine itself; it has 20 long term silver and gold purchase contracts.  It is close to its 52 week low as silver and gold has declined dramatically in price recently.

However, it has very low overhead (only 27 employees and based in Vancouver), a gross margin of 85.08%, and a PEG of .78. Over the past three years revenue and EPS growth has been 39.40% and 46.39%, respectively.

Analysts have a median price target of $38.30 for serious upside from its June 16 close of $23.31. They are bullish, with 10 Wall Street Outperforms, more so since Silver Wheaton Corp. (USA) (NYSE:SLW) has diversified into gold contracts lately, inking a deal with Vale SA (ADR) (NYSE:VALE), the Brazilian miner.

Silver Wheaton Corp. (USA) (NYSE:SLW) comes in under a 15 P/E by the skin of its teeth at 14.3 with a forward P/E of 13.55, but it also merits a four star CAPS ranking. Caveats with Silver Wheaton Corp. (USA) (NYSE:SLW) are the same risks associated with any company exposed to silver and gold, as well as a significant decline in net operating cash flow from $249 million in Q4 2012 to $167 million for Q1 of 2013. Fool Dan Caplinger has a video detailing other risks, like possible competition and counterparty risk.

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