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Motorola Solutions, Inc. (MSI) is familiar, heavily researched stock. Should contrarian investors focus their research on a small number of stocks like MSI from beaten industries?

No. On the contrary, investment returns are ultimately driven by financial performance, not popularity. Regardless of interest in MSI, its earnings and future cash flows will determine its value. Its financial strength will determine its ability to weather economic downturns. Forget about popularity and focus on the following:

Financial Strength. Is the stock illiquid or insolvent? Has it and can it survive hard times?

Value. Is the stock attractively priced or is it expensive relative to what it is worth?

Growth. Is the firm likely to experience growing earnings or shrinking earnings in the next few years?

As a portfolio with better prospects than MSI, consider the following alternative stocks with strong track records and solid credit scores:

Ticker

Company

Industry

10-Year Average ROE

Altman Z-score

ADI

Analog Devices Inc.

Semiconductor - Integrated Circuits

16.3%

7.84

ADTN

ADTRAN Inc.

Communication Equipment

15.3%

13.09

ALTR

Altera Corp.

Semiconductor - Specialized

21.7%

8.03

APH

Amphenol Corporation

Diversified Electronics

42.2%

5.21

CSCO

Cisco Systems, Inc.

Networking & Communication Devices

18.2%

3.11

EBIX

Ebix Inc.

Business Software & Services

28.6%

8.63

IBM

International Business Machines

Diversified Computer Systems

38.9%

4.49

MSFT

Microsoft Corporation

Application Software

30.6%

5.15

ORCL

Oracle Corporation

Application Software

29.0%

4.84

PLT

Plantronics, Inc.

Processing Systems & Products

16.1%

11.92

QLGC

QLogic Corp.

Semiconductor - Integrated Circuits

16.5%

11.21

MSI

Motorola Solutions, Inc.

Communication Equipment

-2.2%

3.10

These alternative stocks are all categorized as "safe" according to the Altman Z-score,* indicating that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that these stocks have grown shareholder wealth at respectable annual rates.

These alternative stocks are better value investments than MSI on the basis of growth and value. These stocks are cheaper than MSI based on the price-to-book ratio and the price-to-sales ratio. What's more, each of these alternative stocks has higher growth prospects than MSI on the basis of analyst predictions and continuation of historical trends:

Ticker

P/E

EPS growth past 5 years

EPS growth next 5 years

ADI

14.26

14.8%

11.2%

ADTN

15.48

6.6%

12.5%

ALTR

15.4

27.5%

12.8%

APH

17.86

19.8%

10.5%

CSCO

17.32

5.6%

9.4%

EBIX

14.18

58.0%

15.0%

IBM

14.91

18.6%

10.7%

MSFT

10.8

17.6%

10.5%

ORCL

15.77

21.1%

12.2%

PLT

16.39

5.9%

11.7%

QLGC

12.17

12.7%

11.3%

MSI

21.15

-43.0%

8.5%

It is clear that these eleven alternative stocks are high quality stocks capable of weathering bad times and delivering positive long-term results. What's more, they are better growth candidates which trade at lower PE multiples. Rather than restrict yourself to concentrated investments in one notable stock like MSI, consider a diversified mix of these eleven securities as a more attractive alternative.

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Source: 11 Stocks To Beat Motorola Solutions