Seeking Solid Stocks
In early December I found myself with a bit of extra cash to
invest. So, I quickly thought of the many features that I wanted in a
stock and set off to the Internet to find them. My first task was to
find a good, no fee, stock screening utility. After all, I like it
when computers do the bulk of the work. It's even better when they do
it for free.
After hopping around web pages, I visited Microsoft's www.msn.com
and took a second look at their stock screener.
http://moneycentral.msn.com/articles/common/finderpro.asp
Many moons ago I visited this site, but was turned off. You see, to
use the msn.com screener you must first download a small program.
This time, I took the leap and downloaded the utility. A few moments
later I was quite impressed and began my search.
I started by looking for stocks that met Graham's defensive
investor criteria as outlined in The Intelligent Investor (See Figure
1). However, the msn.com stock screener only has 5 years worth of
data. Undaunted, I approximated and out came nine stocks: AIR, HVT,
LZB, RLC, RS, TG, THO, WNC and WSO (See Figures 2 & 3).
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Figure 1: Benjamin Graham's Criteria for the Defensive Investor |
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P/E Ratio less than 15.
P/Book Ratio less than 1.5.
Book Value over 0.
Current Ratio over 2.
Earnings growth of 33% over 10 years.
Uninterrupted dividends over 20 years.
Some earnings in each of the past 10 years.
Revenue of more than $100 Million (1950).
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| Source: The Intelligent Investor (pages 184-185). |
| Figure 2: Screening criteria used to approximate Graham's rules |
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P/E Ratio <= 15
P/Book Ratio <= 1.5
Book Value >= 0.01
Current Ratio >= 2
5 Yr Earnings Growth >= 15%
5 Yr Dividend Growth >= 0%
5 Yr P/E Low >= 0.01
1 Yr Revenue >= $400 Million
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Being of a suspicious nature, I immediately wondered if this list
was too good to be true. After all, I'm painfully aware that it can
take some time before an announced dividend cut makes it into the
average database. The same goes for earnings declines, revenue
shortfalls and all manner of other calamities.
The first thing I checked for were precipitous price declines
since they are a good sign that extra digging is required. As it
happens, none of the nine stocks showed sudden price plummets but many
had slowly declined. For instance, THO had dropped from a year high
near $30 down to $20. A recent news release explained the problem;
third quarter earnings were down 12.5%. Similarly, AIR had fallen
from $28.50 to $12. Why? Earnings had declined by 70% from the
previous year.
The moral of the story is that a good stock screener is just a
start. But it's a very handy start.
I've now happily played with the msn.com screener for many hours
and have been impressed with the robustness and depth of its data. My
only major disappointment is the lack of information on Canadian
companies. If you've come across a good, free, Canadian stock
screener please let me know. I'm still looking for a few more solid
stocks.
| Figure 3: Results of the Stock Screen |
| Symbol |
Company Name |
P/E |
P/B |
Book |
Current Ratio |
5-Year EPS Growth |
5-Yr DPS Growth |
5-Yr P/E Low |
Revenue ($M) |
| AIR | AAR CORP. | 11.9 | 0.95 | 12.63 | 3.00 | 19.97% | 1.27% | 7.6 | 920 |
| HVT | Haverty Furniture | 7.5 | 1.20 | 8.29 | 3.10 | 20.58% | 5.24% | 7.7 | 674 |
| LZB | La-Z-Boy Inc. | 10.0 | 1.42 | 11.23 | 3.10 | 18.90% | 6.21% | 8.1 | 2,077 |
| RLC | Rollins Truck | 5.7 | 1.18 | 6.80 | 2.30 | 19.67% | 15.82% | 3.6 | 720 |
| RS | Reliance Steel & Aluminum Co. | 11.3 | 1.50 | 17.30 | 3.40 | 18.54% | 26.12% | 5.2 | 1,689 |
| TG | Tredegar Corp. | 5.7 | 1.06 | 14.69 | 2.00 | 27.08% | 28.05% | 5.9 | 901 |
| THO | Thor Industries | 6.9 | 1.22 | 16.29 | 2.60 | 26.21% | 1.50% | 6.4 | 877 |
| WNC | Wabash National Corp. | 5.5 | 0.44 | 17.26 | 2.80 | 15.31% | 8.74% | 6.8 | 1,415 |
| WSO | Watsco, Inc. | 10.3 | 0.94 | 11.86 | 3.30 | 18.52% | 6.31% | 9.8 | 1,352 |
| Source: msn.com before the close on December 12 2000. |
Additional Resources:
- 7 Graham Stocks for 2011 (Canadian MoneySaver, Nov/Dec 2010)
- 8 Graham Stocks for 2010 (Canadian MoneySaver, Nov/Dec 2009)
- 4 Graham Stocks for 2009 (Canadian MoneySaver, Nov/Dec 2008)
- 5 Graham Stocks for 2008 (Canadian MoneySaver, Nov/Dec 2007)
- 8 Graham Stocks for 2007 (Canadian MoneySaver, Nov/Dec 2006)
- Graham Stock Gainers (Canadian MoneySaver, Nov/Dec 2005)
- H.P. Graham Stocks (Canadian MoneySaver, Nov/Dec 2004)
- Graham Stocks in Short Supply (Canadian MoneySaver, Nov/Dec 2003)
- 10 Graham Picks for 2003 (Canadian MoneySaver, Dec 2002)
- Graham's Guidelines Revisited (Canadian MoneySaver, Dec 2001)
- Seeking Solid Stocks (Canadian MoneySaver, Feb 2001)
- The Intelligent Investor, Revised Edition with Jason Zweig
First published in the Feb 2001 edition of the Canadian
MoneySaver magazine.
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