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TheStreet Open House

5 High-Quality, Low-Risk Stocks

MILLBURN, N.J. ( Stockpickr) -- Over the years have been consistent in the themes that I apply to my fundamental research. I tend to foucs on earnings growth at a reasonable price, a strong balance sheet and financial condition, and dividends -- though not always at the same time.

This week, I'm combining these themes to seek out the best companies that fit the following criteria:

  • Earnings-per-share revisions greater than the S&P 500 over the past month. I used the past month because that captured the heart of earnings season.
  • Price-to-earnings ratio less than that of the S&P 500 on a market-capital-weighted average.
  • Standard & Poor's credit rating of BBB or better; I was only interested in investment-grade companies.
  • Dividend yield greater than the S&P 500 dividend yield, which now stands at about 2.2%.
  • >>11 Worst-Run Companies of 2011

    The search, using the Bloomberg Professional Service, yielded 14 results based on those criteria. To refine that list, I decided to apply some disciplined analysis over and above those results.

    The first decision that I made was to exclude those stocks of financial companies because, as we have seen, with sovereign debt, banks, broker-dealers (witness what just happened with MF Global (MFGLQ: Pink Sheets), insurance companies and other financial institutions, the credit ratings agencies have a poor track record and are unreliable.

    I then carefully went through the data to insure accuracy of the data points, double-checking with other informational sources such as Telemet Orion, Yahoo! Finance and company financial reports. This process knocked out nine companies from the search results.

    Let's take a closer look at the following five high-quality stocks at reasonable valuations.

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