Melvin: Keep It Simple

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The last couple of weeks have been an ocean of potentially market-moving noise.

The situation in the Ukraine has gotten a lot of attention and spooked the markets, especially in Europe. The now-infamous six-months statement by Fed chief Janet Yellen this week scared some people. The "weather ate my economy" excuse has gotten a good deal of play as well in discussions about everything from FedEx (FDX) to housing starts.

Each and every day the market is open you could find some piece of news to use as a valid reason to buy or sell stocks and bonds. If you pay real close attention to the news swirling around the markets and try to correctly guess the market's reaction, I think you would be sedated and sent somewhere calm for a good, long rest in very short order.

I am something of a news junkie, so I have to force myself to pay attention to the only thing that really matters when investing in the stock: is it safe and is it cheap? Those are really the only two questions that matter. If you focus on just those two questions for the rest of your investing career, you will end up faring much better than trying to guess what is going to happen on a day-to-day basis in the stock market.

I sat down this morning and, after reading the paper and watching the headlines, I ran a screen of global stocks looking for some safe and cheap ones that might be worth additional research. As a starting point for identifying safe and cheap, I searched for stocks that trade at a discount to tangible book value, an Altman Z-score of more than 3 to indicate that the balance sheet is safe and the bills could be paid, as well as a Piotroski F-score of 6 or higher to indicate the financials and fundamentals were improving.

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