26 Stocks for an Overextended, Stock Pickers' Market

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 |  Includes: ABT, AEP, CB, CMS, CVX, D, ES, ETR, EXC, FE, FPL-OLD, GIS, HCBK, JNJ, KMB, LO, MO, PCG, PEG, PG, POM, SCG, SRE, T, TRV, XEL
by: David I. Templeton, CFA

As I have noted in my previous two posts (Investor Sentiment Suggesting Caution and Markets And Their 200 Day Moving Average) the broader market indices are approaching extended levels on the upside. In this environment, investors might consider investing in equities that do not have valuations that are extended relative to the overall market.

Below is a list of 26 companies in the S&P 500 Index that was generated using the following criteria:

  • current P/E less than 15

  • dividend yield greater than 2.5%

  • beta less than .7

The P/E for the S&P 500 Index based on inflation adjusted earnings (Robert Shiller methodology) over the last ten years is 20.22. I chose the lower beta variable to provide companies that might hold up better in the event the market does experience a downward correction. Six of the stocks on the list are Dividend Aristocrats. As with all stock screen lists, this list is not a buy list, but a starting point for investors to begin more in depth research.

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