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With the stock market not really going anywhere at this point of time and the economy starting to deteriorate, stocks with value, strength and stability are really a treasure and are hard to find. Therefore, the criteria used for this screen are:

1. Stability

  • Large Caps (>10B in Market Cap)

There is nothing much to elaborate here. Large caps are chosen as they are more stable and are not as volatile like stocks with smaller market capitalizations, and therefore more resilient to any big drops in the general market.

2. Stability

  • EPS growth past 5 years >5%
  • ROE >15%
  • LT Debt/Equity <0.3
  • Current Ratio <1

One may find the EPS growth of 5% for the past 5 years lower than desired, but one has to keep in mind that these stocks are large caps and matured companies with less growth and more stability. Nevertheless, I feel that a high ROE number is still necessary as it ensures that a company is making good use of the shareholders' investments. Low debt is also a need to me as it ensures that the company is generating enough revenue to expand itself.

3. Value

  • P/E below 20
  • P/B below 2

Stocks priced too expensively would not be ideal. Stocks too expensive are more prone to decline, as they may already be priced for perfection. One example of a large cap like this was Chipotle Mexican Grill (CMG). It had a P/E of more than 50 a while ago until it plunged horribly after missing two earnings estimates. It is almost down 50% from its high. We do not want something like that to happen, therefore, this aspect of value is unquestionably important.

4. Strength

  • Year-To-date Performance at least +10%
  • Month Up

I also want a stock to be rising steadily and outperforming the market over the past year (DJIA up 9% YTD) . This gives the stock momentum, or strength. Whereas, in the past month, when the market has actually gone nowhere, I want the stock to have gone up at least.

5. Dividends >2%

Dividends, to me, are also a need. This is needed to boost shareholder returns and is also a way to gauge how healthy the company is financially. A sustainably high, steadily increasing dividend indicates that the company actually is healthy financially and that its business is still growing.

Based on the above criterion, here are the three large-cap stocks.

1. AFLAC Inc. (AFL)

Snapshot:

Price (19.10.2012)

$49.69

Market Cap

23.27B

Income (2011)

2.56B (P/E: 9.1)

(Forward P/E: 7.19)

Sales (2011)

24.11B (P/S: 0.97)

Book Value Per Share

$30.28 (P/B: 1.64)

EPS Growth Past 5 Years

7.20%

ROE

19.96%

Dividend

$1.32 (2.66%)

(click to enlarge)

Courtesy of bigcharts.com

Sector: Financial
Industry: Accident & Health Insurance
Country: USA

AFLAC provides life and health insurance and operates mostly in Japan and the USA . It also offers a variety of other insurance products including cancer plans, loss-of-income products, fixed benefit care plans. AFLAC stands for the American Family Life Assurance Company of Colombus.

Pros:

-Good Value
-Steadily Increasing Dividend
-High ROE and Good Fundamentals
-No preferred shares
-Shares Outstanding reduced over past 10 years
-EPS in strong uptrend

Cons:

-Lower profit margin in 2011 compared to 2010
-Exposure To Europe and Japan, both have declining economies

2. Bank Of Nova Scotia (BNS)

Snapshot:

Price (19.10.2012)

$54.63

Market Cap

64.44B

Income (2011)

5.81B (P/E: 10.69)

(Forward P/E: 10.63)

Sales (2011)

17.88B (P/S: 3.60)

Book Value Per Share

$32.81 (P/B: 1.67)

EPS Growth Past 5 Years

5.52%

ROE

19.06%

Dividend

$2.32 (4.25%)

(click to enlarge)

Courtesy of bigcharts.com

Sector: Financial
Industry: Money Center Banks
Country: Canada

The Bank Of Nova Scotia offers various personal, commercial, corporate and investment banking services in Canada and internationally. The company, founded in 1832, also includes retail and small business banking, which provides mortgages, loans, credit card, investment, insurance, and other day-to-day banking products. It also operates a network of 1,000 branches and 3,000 automated banking machines (ABMs) in Canada. Overseas, it also operates 2,000 branches along with 3,700 ABMs.

Pros:

-Good Value
-High Dividend
-High consistency in price (52w range: $43.94-55.83)
-Strong Balance Sheet (Assets)
-EPS in strong uptrend

Cons:

-Liabilities Increasing Fast (Refer To Balance Sheet)
-Existence of preferred shares
-Diluting shares

3. Royal Bank Of Canada (RY)

Snapshot:

Price (19.10.2012)

$58.91

Market Cap

85.09B

Income (2011)

7.07B (P/E: 12.12)

(Forward P/E: 11.22)

Sales (2011)

21.29B (P/S: 4.00)

Book Value Per Share

$30.61 (P/B: 1.92)

EPS Growth Past 5 Years

5.77%

ROE

19.31%

Dividend

$2.43 (4.12%)

(click to enlarge)

Courtesy of bigcharts.com

Sector: Financial
Industry: Money Center Banks
Country: Canada

The Royal Bank Of Canada provides personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services under the RBC name worldwide. Through its various segments, it also provides customers with personal or business financial services and wealth and asset management. Its insurance section also provides disability, long-term care insurance and property and casualty insurance. The company, based in Toronto and founded in 1864, also operates overseas.

Pros:

-Good Value
-High Dividend
-High Price Consistency (52w range:40.13-59.83)
-EPS growing consistently
-Fast growing assets (Balance sheet)

Cons:

-Dilution of shares
-Existence of preferred shares
-High short-term debt/equity ratio of 1.49

All in all, the companies listed here are big and established companies that will not give investors any big moves for trading. These stocks are more for the long haul. This is evident from their high dividends and stability in stock price. It is recommended that one holds the stocks here for at least 3-5 years. Please also do your due diligence before investing and use this list as a starting point for deeper and further research.

Source: 3 Large Caps With Value, Strength And Stability