One approach to stock selection is to find stocks with valuation ratios below their normal valuation. Not all will revert to their normal levels, but some will. Beginning research from a list of those companies that have the potential to revert is a reasonable thing to do.
Here is a list of the 11 companies that [as of 12/01/2006] had a yield of 2% or more, market capitalization of $1 billion or more, and whose P/Div, P/E and P/B are each at least 20% below their 5-year average levels.
Some of these may provide opportunity for gain, based on return to their 5-year average valuation ratios.
There are surely winners and losers in this list – more examination is required to say which may be which. The companies are listed in descending order of market capitalization.
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Disclosure: Author does not own any of the above-mentioned stocks.
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