Seems like the well-known names and cannabis stocks are getting all the attention.
But there are attractive opportunities out there that the market
1. hasn’t caught onto
2. doesn’t care about because it isn’t sexy enough
Here are 3 that caught my eye and the criteria I’m using to find them.
Searching Criteria
While papers and overblown fears like the FB data saga provided some opportunities for me to buy more, I haven’t come across a whole lot of actionable investments from the papers.
Cannabis looks to be the new crypto and seeing how it’s not an area I want to be speculating in, my only option is to use the “old and outdated” method of searching for stocks with good fundamentals.
Here’s what I’m looking for. Nothing fancy.
Quality:
High Piotroski score: I use this as a filter to eliminate fundamentally weak and speculative companies. I’m not interested in investing in early stage, money-bleeding, and operationally weak companies.
Cash Return on Invested Capital (CROIC): A cash version of ROIC to determine whether the business is being well run.
FCF/Sales: This signals cash generation ability and efficiency. FCF/Sales has to be positive.
Value:
P/FCF: instead of using P/E, I want to see companies that are priced decently based on FCF.
EV/EBIT: Lower means cheaper, but not necessarily better. I’m looking for companies where EV/EBIT is not at absurd levels.
Growth:
Sales Change%: looking for companies that are growing revenues. Profitability is important, but I also want to see that companies are growing and not stagnating.
GPA – Gross Profit to Assets: Measures the growth of profitability. Answers the question, are the assets profitable? A GPA of 0.5 means the company is generating profits of $0.50 for every dollar of assets. The higher the ratio, the more profit is being extracted off every dollar of assets. This ratio is a great way to quickly compare competitors within the same industry.
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