The 5 Criteria for Picking Great Stocks
1. Valuation - Stocks with low valuations will outperform the market over the long haul. Therefore, we recommend companies trading with P/Es and Price to Book (P/B) multiples below their peers.
2. Management Effectiveness - We evaluate the fiscal health of the company, with a particular emphasis on how effectively it is managed. Our research shows that Return On Equity [ROE] is the best measure of this. So we seek out companies generating an ROE that is superior to their industry peers.
3. Recent Analyst Upgrades – Our research clearly shows that stocks that have recently received a recommendation upgrade from brokerage analysts will continue to outpace the market. Most of that benefit is felt in the short run. However, quite often a stock that receives one upgrade is likely to get more in the future, which keeps pushing the stock higher.
4. Best Industries - Even the best-looking stock will underperform the market if it's in an out-of-favor industry. That is why we overweight stocks from the best industries, and sectors.
5. Attractive for the Long Term -