A lot of investors tell me they're frustrated by all the recent stock market strength. Why? Because they got caught sitting on the sidelines and now feel as though it's too late to buy in.
While I'll be the first person to admit that many companies are no longer the screaming buys they used to be, I do want you to know that there are still plenty of reasonably-priced stocks out there right now. The trick is knowing how to find them.
As I've pointed out in this column many times before, stock screens are one of the quickest and easiest ways to start the process of searching for new buys.
In a minute I'll show you the results of my most recent screen.
First, However, Let's Recap How Stock Screens Work ...
Stock screeners are filtering programs that draw on databases of stored information, allowing you to search for investments based on pre-determined criteria. They're both extremely useful and fun to play with.
In the old days, it took a proprietary system and either lots of tedious labor or a very powerful computer to perform a single stock screen.
Now, things are a lot different. Sure, investment professionals still have access to programs and software that give them more information than most. But the Internet has brought screening to masses, and many of the online tools are as powerful as some of the pro-level stuff.
In fact, plenty of websites now offer advanced tools and rich data sources absolutely free of charge. For example, Yahoo! Finance has an interactive stock screener that encompasses more than 150 different criteria. I think it's very impressive, and worth checking out.
Other sites have quality screeners, too. Zacks Investment Research offers up a custom screener as does Morningstar, which includes the company's analyst rankings as one of the possible criteria. Morningstar also offers a premium screener, which is available by subscription only.
You should also check to see if your broker offers its own proprietary screening tools. Fidelity provides one to its customers, for example.
Okay, But What Criteria Should You Use?
Here's the Most Recent Search I Did ...
In the screen below, I limited my search to shares with dividend yields of 3.5% or higher — a bar that is much higher than the current market average.
Then to ensure that the dividends were reasonably safe I also insisted on a payout ratio of 65% or less. That means, in the worst case, one third of the firm's earnings are still being retained for basic business needs.
Next, I weeded out any stock that was trading at a price-to-earnings ratio in excess of 16. Moreover, I also screened for five-year earnings growth of at least 5%. Together this means the companies below are both reasonably priced and showing healthy business gains.
And to make sure that none of the resulting names were loaded down with debt, I added one final criteria — a long-term debt-to-equity ratio of 50% or less.
As you can see, many of the names are lesser-known regional banks, which makes sense given the combination of characteristics I searched for. However, there are also plenty of non-financials — including Strayer Education, food distributor Sysco, and tobacco company Lorillard.
Now, I'm not saying you should rush out and buy any of these companies — a stock screen is just the first step in the research process.
But I CAN tell you that I recently recommended one of the companies above for my own dad's retirement account. And I'm sure other names in this list are good buys right now, too.
So if you feel like it's too late to put some stocks into your portfolio, I'd humbly suggest you just look a little harder ... and stock screens are a great way to do that.
|< Prev||Next >|
Current Headlines - Finance
Caution before Yellen's Jackson Hole speech crimps risk appetites
By Shinichi Saoshiro TOKYO (Reuters) - Caution ahead of a speech by Federal Reserve Chair Janet Yellen's speech at the annual gathering of central bankers in Jackson Hole, Wyoming, limited movements across global markets on Friday. Asian stocks tracked an overnight dip on Wall Street and edged down early in the session, while geopolitical tensions helped shore up crude oil prices. Risk markets were wary of the U.S. central bank hinting at near-term interest rate hike which could divert some of the massive liquidity that has drenched global markets.
Health care sector pulls stock market lower again
Italy earthquake death toll rises to 247
Clinton assails Trump's 'stream of bigotry'
Signs of Trump's sudden shift on immigration
Trump's data indifference hampering the GOP
Trump on Clinton: 'It's Watergate all over again'
Sibanye Gold H1 earnings surge, focus on safety
South African-focused bullion and platinum producer Sibanye Gold posted a six-fold surge in interim earnings on Thursday on a sharply higher rand-gold price and said it was refocusing on safety after a spike in fatalities. The company said it had appointed veteran executive Peter Turner to head up safety for the group. Safety has been back in the spotlight in South Africa, home to the world's deepest mines, after an increase in fatalities across the industry this year after the death toll had fallen for seven consecutive years.
Asia stocks hold gains before Yellen speech, dollar firm
By Saikat Chatterjee HONG KONG (Reuters) - Asian stocks edged higher on Thursday but clung to recent well-worn trading ranges while the dollar held firm against regional currencies ahead of a speech by Federal Reserve Chair Janet Yellen at a global central bankers' meeting. MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.3 percent higher. Japan's Nikkei was down 0.3 percent, pressured by losses on Wall Street overnight and investor caution ahead of Yellen's speech in Jackson Hole, Wyoming, on Friday.
Asian markets mixed ahead of speech by Fed's Janet Yellen
While Asian stock market indices were trading mixed on Thursday (25 August), the Shanghai Composite was down 0.88% at 3,058.72 as of 5.57am GMT. Traders are reportedly eager to listen to Fed Chair Janet Yellen's speech on Friday (26 August) at the annual economic policy symposium in Jackson Hole, US.