• BusinessWeek
• BusinessWeek Exchange

Search all of BusinessWeek.com:

Stock Screens

By Michael Kaye, CFA

Safe Plays for an Uncertain Market

This week, S&P looks for refuge from the tumult in stocks that have solid fundamentals and strong profits

  STORY TOOLS

Printer-Friendly Version

E-Mail This Story

Reader Comments

  RELATED ITEMS

Stock Screens Archive

  PEOPLE SEARCH

Search for business contacts:

First Name :

Last Name :

Company Name :

PREMIUM SEARCH
Search by job title, geography and build a list of executive contacts

With stocks feeling a keen downdraft in the past few weeks, investors are understandably nervous. Rising interest rates and the threat of a slowing economy are casting doubt on the future strength of corporate profits. What's an equity investor to do? How about this: Relax, take a deep breath, and take a look at our latest screen.

This week, we decided to find companies with strong profitability, attractive valuation, and a nice dividend payout to boot. Stocks with those qualities could hold up relatively well in a period of market weakness.

Our first filter: profitability, as measured by gross margin. That's what's left over after subtracting the cost of goods sold from revenues, expressed as a percentage. The stocks on our list had to have a gross margin greater than 25% for the most recent full fiscal year, greater than the average for the S&P 500 index.

DIVIDEND CHECK.  Next, return on equity, which is basically a measure of how efficiently a company employs its capital. We looked for outfits with an ROE of 25% for the most recent full fiscal year, also above the average for the S&P 500.

Then we took care of the value part. To ensure that these were reasonably valued stocks, each had to trade at a price-to-earnings ratio (based on the most recent 12-month reporting period) below the S&P 500's multiple of 15.

During a period of wobbly markets, it's nice to own a stock that pays a solid dividend. So we next looked for those issues with a dividend yield above the index's yield of 1.9%.

AND THE WINNERS ARE...  Finally, we reached into our own toolkit. We searched for those issues ranked 4 STARS (buy) or 5 STARS (strong buy) by Standard & Poor's equity analysts. Stocks with those designations are expected to post total returns exceeding the total return of the S&P 500 index over the coming 12 months, and to rise in price on an absolute basis.

When we completed our screen, these nine names made the cut:

Company	Ticker	S&P STARS Rank
Altria Group	MO	4
Bank Of Hawaii	BOH	4
BT Group ADR	BT	4
CNOOC ADR	CEO	4
Commonwealth Telephone	CTCO	5
TCF Financial	TCB	4
Telefonica ADR	TEF	4
Telefonos De Mexico ADR	TMX	4
TXU Corp.	TXU	4

Kaye, an analyst for Standard & Poor's Portfolio Services, is the author of The Standard & Poor's Guide to Selecting Stocks

 BW MALL   SPONSORED LINKS

• Mutual Funds at Fidelity  Benefit from years of mutual fund management experience.
• Secure Recruiting Platfrom  Complete SaaS Talent Platform Software (Pre/Post-Hire) View a FREE DEMO now!
• Your Customers Speak Email: Do You?  You Already Have What You Need to Maximize ROI: Your Current Customers.
• 7.09%-12.97% Annual Yield Notes  Not FDIC Insured. $1000 Minimum. NASDAQ Issuer. Free Investment Kit.
• ORDER A PITNEY BOWES POSTAGE METER  Try It Free for 60 Days And Receive $100 in Postage. Perfect For Small Business!

Buy a link now!

Get BusinessWeek directly on your desktop with our RSS feeds.

Add BusinessWeek news to your Web site with our headline feed.

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

To subscribe online to BusinessWeek magazine, please click here.

Learn more, go to the BusinessWeekOnline home page

Advertising | Special Sections | MarketPlace | Knowledge Centers

Terms of Use | Privacy Notice | Ethics Code | Contact Us

Copyright 2000- 2009 by The McGraw-Hill Companies Inc.
All rights reserved.