These Three Stocks Are Going Into My Portfolio (THFF, PSEC, ASTE)

What do Prospect Capital Corporation (NASDAQ:PSEC), Astec Industries, Inc. (NASDAQ:ASTE), and First Financial Corp. (NASDAQ:THFF) have in common? Not much, on the surface. In fact, were it not for something very specific to one particular person (me), they'd have nothing in common at all. This week though, THFF, ASTE, and PSEC all have at least one thing in common, and that's the fact that they're all going into my mental/hypothetical portfolio.

For regular readers of my commentaries [all three of you, and you too, mom], you'll know I run a sort-n-scan of every publicly-traded stock out there. The aim of the search is to find stock that fit a unique combination of technical and fundamental criteria suggesting a large gain is likely in the foreseeable future. The upside to this "blind" search approach is that I find off-the-radar names that I wouldn't have otherwise found, which means I don't have to focus on the overwatched and overtraded names the media crams down my throat. Most of the stocks that pop on my scans I ultimately dismiss. Some of them though - like First Financial, Prospect Capital, and Astec Industries this week - just look too good to pass up, and not pass along.

First Financial Corp. is a regional bank. At a trailing P/E of 14.3 and a forward-looking one of 14.7, it's not like THFF is a screaming bargain. In fact, earnings growth has been something of a struggle of late. This is a case where we have to trust the market though, which via the chart is saying First Financial has turned things around and will start to show better numbers soon.

Astec Industries makes all kinds of construction equipment. It's not a value stock either, but the pros say it's going to improve earnings by 20% next year. The concern with ASTE is that it's got something of a history of earnings misses, but this is a case where, again, we (I) have to trust the proven picking system.

Finally, Prospect Capital Corporation may be the most unusual addition to the portfolio I've seen in a while, because it's not a stock - it's a business development company. Think of a mutual fund that make (usually) higher-interest loans to a company, and/or exchanges money for ownership. They generally have limited upside, and PSEC is no exception. But, they're slow to deteriorate too, so the risk and reward is balanced. Again, the market's collective wisdom is saying better days are ahead, given the rising chart. 

If you'd like to know more about the details of how I'm handling First Financial, Prospect Capital, and Astec Industries in my model portfolio (like targets and stops), you can always check it out at my home page or pick page at the SmallCap Network site. For now, I just wanted to pass along some ideas; feel free to poach 'em.

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