This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Another Screen for Safe, Cheap Stocks

After several weeks of exploring and experimenting with stock market ideas, I am back to focusing on the basics as the first half of the year comes to a close. Although I am constantly wandering around the corners of the markets, kicking over rocks and looking for ideas and methodologies that have the promise of profit, I always come back to my deep value roots.

On Thursday, I examined the old standby screen based on Walter Schloss' approach to the markets. Today I want to look at another old favorite screen that has served me very well over the years.

The screen is very simple and basic. I look for companies that trade below book value, pay a dividend, are currently profitable and have been able to grow sales and earnings for the past five years. This simple screen has provided some powerful ideas over the years, and I expect it will continue to do so.

The first thing I noticed was that the list has shrunk considerably since the first of the year. When I ran the screen in December 2011, about 80 names popped up as candidates. Today the list has fewer than 40 names. The feverish hunt for yield has driven many stocks higher in 2012, especially the larger-cap, more liquid dividend stocks. That's something of a warning sign in my eyes, and it makes me a little cautious about the overall direction of the market in the next few months.

The largest-cap name on the list is MetLife (MET - Get Report). The company has the same problems as other life insurance companies with a weak economy and low interest rates. In addition, MetLife has suffered from failing the stress test for bank holding companies and will not be able to raise its dividend or aggressively buy back shares in the near term. I expect to see it shed holding company status by the end of the year and get out from under FDIC restrictions. The life-insurance giant is seeing strong results in retirement plan products and its international sales efforts that should drive earnings for the foreseeable future. I have owned the stock since 2008 and missed my chances to sell higher. That's fine with me, as I expect the stock to eventually surpass the 2007 highs as the economy recovers and interest rates begin to rise.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free

Markets

Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs