Quality Individual U.S. Companies: The Short List

We generally prefer investment funds over individual stocks to minimize investment selection risk (focusing more on asset allocation as the greater issue). However, when we do look at individual stocks, we focus on quality companies with financial strength, limited leverage, solid cash flow, and growing sales and dividends.

This short list consists of companies that are candidates for consideration. If you are a do-it-yourself investor who prefers individual stocks; and you have a non-speculative, conservative approach, this list may be worth researching further.

We identified those companies that S&P rated B+ or better for earnings and dividend strength, and which paid dividends continuously for at least 10 years. Subsequently, we ran that list through a fundamental filter (described below) to arrive at this list of six prospects.

These are not recommendations for purchase, but they are a list that has been “worked over” a bit from the data angle. We have not made a thematic evaluation and make no representation about the “story” for each company. That’s up to you to do that. You need to look into them more fully before deciding to own any of them. At a minimum, this list may save do-it-yourself investors some work.

The two tables that follow each contain the same list, but with different quantitative attributes.

Filter Results 11/06/2009 (click to enlarge)

Here are the screening criteria we used on the companies we first identified through S&P as strong and with 10 years or more of dividends payments:

Disclosure: We do not own any of the named securities.

Comments

[Alan Brochs...:]

Caution on TDW - they have a huge capex commitment ahead and have never really generated a lot of FCF. Fortunately, they have limited debt, but they are committed to spending another $540mm to bring on additional vessels between now and 2012. These commitments were made at a time when the economics were very different and will now serve as a drag. HRL, on the other hand, is very timely despite the rally over the past year. I can see it reaching 48 over the next year. JNJ should be fine too.

Nov 08 08:15 AM