In this edition of Watchlist Wednesday, we highlight a top stock qualifying for the Enterprising Investor screen.
This screen was made popular by Benjamin Graham in his book, The Intelligent Investor.
According to Graham, an enterprising investor buys from a list of common stocks "that can be identified as undervalued by logical and reasonably dependable standards."
The screen finds stocks which are "rather similar to those we suggested for the defensive investor, but not so severe."
The first criteria is concerned with the stock's price relative to recent earnings, and the next four are concerned with the company's "past performance and current financial position."
The last requirement values the stock based on the company's net tangible assets. Here is a stock with a low price to intrinsic value as found on The Stock Market Blueprint:
Stage Stores, Inc. (NYSE:SSI) - Stage Stores, Inc. operates as a specialty department store retailer in small and mid-sized towns and communities in the United States. Its merchandise portfolio comprises moderately priced brand name and private label apparel, accessories, cosmetics, footwear, and home goods. The company also offers merchandise direct-to-consumer through its ecommerce Website and send program. As of November 19, 2015, it operated 847 specialty department stores in 40 states and a direct-to-consumer channel under the BEALLS, GOODY'S, PALAIS ROYAL, PEEBLES, and STAGE nameplates. The company was founded in 1988 and is headquartered in Houston, Texas.
- Price/Earnings (NYSE:TTM): 9.6
- Current Ratio: 2.2
- (Working Capital x 1.1) - Long-Term Debt = $203.6 Million
- Positive Earnings Streak: 5+ Years
- Dividends Paid : $0.57/share
- Net Income % Growth, 5 Year CAGR: 1.4%
- Price/Intrinsic Value: 48.6% (closing price on 2/23/16)
Graham states that the enterprising investor strategy finds companies "that are making a good showing, have a satisfactory past record, but appear to hold no charm for the public."
He says a group of these stocks "should offer good promise of satisfactory investment results."
Obtaining this group can be accomplished by regularly investing equal amounts in the qualifying stock with the lowest price in relation to intrinsic value.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.