March's Single Best CCC Stock In Each Industry


The only filter used being in the top-scoring 50% of David Fish's All CCC companies.

Not all industries filled a spot as they didn't have any companies after filtering.

I usually do a monthly best-by-sector. This month, I did something a little different – by industry.

CCC stocks are dividend "Champions. Contenders and Challengers." They are companies that have raised, not just paid, their dividends for 25, 10 and 5 consecutive years, respectively. The list is maintained and published monthly by SA contributor David Fish. The latest version can be found here.

To produce enough stocks to make it through the filtering process, I normally would have used all 747 stocks in David's 2017 All CCC list. But for "best" recommendations I now only recommend stocks that fall into the top-Dugan-scoring-half of the list, which this time is 374 companies.

The Dugan Scoring System is a tool to identify the overall quality of CCC companies. I believe there is a strong correlation between Dugan Scores and the quality of individual stocks. Those companies' stocks earning high Dugan Scores are high quality stocks which should produce better investing results, going forward, than otherwise would be attained by simply filtering for desired characteristics. This proved true in 2015, the 3 different challenges done during 2016, the results of which can be found here and so far in 2017 ( found here).

In this context, highest quality means companies which have:

  • STRONG CURRENT CONDITIONS, as exemplified by: great value as measured by relative Graham number, low payout ratio, low debt/equity ratio and high most recent dividend increase %.
  • EXCELLENT FUTURE PROSPECTS, as exemplified by: high EPS growth forecasts for this year, next year and 5 years out, and excellent dividend growth histories.

The Dugan Scoring System isn't a popularity contest. It is a disciplined, systematic and dispassionate approach that evaluates each CCC stock based on a wide variety of investment criteria from four broad categories: Risk, Value, Past Performance and Future Performance Expectations.

So, the purpose of the scoring system is to determine the all-around quality of a stock for buying, holding or selling purposes.

But, no stocks, like no people, are perfect. Even high quality and high scoring stocks have weaknesses, the same as low scoring and low quality stocks have some strengths. So, a Dugan Score is a balanced, holistic picture of a stock, which includes its strengths and weaknesses.

You can see from the above explanations, the Dugan Stock Scoring System is about the current condition, and expected future performance, of a company's stock; not necessarily the company itself. And, it doesn't matter how well a company's stock has performed for its owners in the past. What only matters are the current condition and expected future performance of the stock.

The table below is a summary of the metrics used in the Dugan Stock Scoring System, along with each metric's relative weighting in the overall formula. The weightings are my assessment of each metric's relative importance in calculating the company's overall quality. For a few months I'll show both 2016's and 2017's formulas for comparison purposes. 2017 was used for this article.

After calculating the Dugan Score, a small bonus, or penalty, is applied to the earned score for each CCC stock, based on four brokers'/analysts' recommendations for current sector weightings (Fidelity, S&P Capital IQ, Ned Davis and Lance Roberts ( here)). The base bonus or penalty calculation is simple: market weight earns zero points, overweight earns 1 point, underweight earns minus 1 point, net/net from each of the 4 sources.

Using the DSSS, and the single filter of being in the top-scoring half of the "All CCC" list, produces the following lists as the highest scoring March 2017 CCC companies, by industry, broken into two halves for easier reading:

best by industry 1 of 2

And the second half best-of-industries:

2 of 2

For perspective about any company on the lists, I always find it helpful to compare how well that company's performance in any column compares to the averages shown at the bottom of the table. Doing this will answer most questions about why a company may have achieved the Dugan Score it earned.

I hope you found the information valuable and enjoyed this journey. Comments are encouraged. Successful investing.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation. (Borrowed from Chuck Carnevale.)

Disclosure: I am/we are long ADM, AIZ, GLW, CVS, LNC, MGA, MHLD, PRU, SCS, TSO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.