Congratulations to Andy Reid and the Kansas City Chiefs for last night'southward Super Bowl Victory. The team had not won the big game since Super Basin Iv on January 11, 1970. To put it into some historical financial market perspective, the S&P 500 closed at 92.4 on the Friday prior to that Super Bowl (1/nine/1970), and the volume that day was 9.38 1000000 shares. Fast forward just over 50 years to this by Friday, and the S&P closed at 3225.52 on volume of more than iv.v billion shares. The Alphabetize cruel 58 points that twenty-four hour period, a drop which represented 63% of the January nine, 1970 endmost price. The 50 year bound in the Southward&P from 92 to 3225 seems monumental, merely it equates to an average annual gain of 7.35%.
Now that football flavor is done, comes the purgatory I typically experience between the end of football game season and the offset of baseball season. Equally a child in the 1970's, that meant resorting to watching pro bowling on Saturdays. I don't know if they fifty-fifty broadcast that whatsoever longer. Or, information technology only ways a lilliputian more than fourth dimension to plow over rocks in the pursuit of some value diamonds in the rough.
To that stop, after the big game ended final nighttime, I reluctantly ran one of my favorite stock screens based on Benjamin Graham'southward "stocks for the defensive investor" methodology that he laid out in the Intelligent Investor first published in 1949 (18 years before the first Super Bowl) - reluctantly considering it has born piffling fruit recently, revealing few candidates.
However, there was a new name (to this screen, anyway) that fabricated the cutting, Methode Electronics (MEI) , which happened to be a large winner (+61%) in last year'southward Tax Loss Selling Recovery Portfolio. MEI has had a rough get of it so far in 2020, downwards 16.v% including a 6.5% drop last Friday, but is trading at 9x next twelvemonth's consensus estimates.
The other names that make the cut, Hooker Furniture (HOOK) and Nucor (NUE) , have appeared in this screen so often that they may be "perennials", or names that simply happen to trade at relatively cheap valuations.
Screening criteria for my version of Graham's "stocks for the defensive investor" are below.
- Adequate size. A company must accept at to the lowest degree $500 one thousand thousand in sales on a trailing 12-month basis. (Graham used a $100 million minimum and at least $l million in total assets.)
- Stiff financial condition. A firm must accept a current ratio (current assets divided by electric current liabilities) of at least ii.0. It too must have less long-term debt less than working capital.
- Earnings stability. A business must have had positive earnings for the past seven years. (Graham used a x-year minimum.)
- Dividend record. The company must have paid a dividend for the past seven years. (Graham required 20 years.)
- Earnings growth. Earnings must have expanded by at least 3% compounded annually over the past seven years. (Graham mandated a one-third proceeds in earnings per share over the latest x years.)
- Moderate toll-to-earnings ratio. A stock must accept had a 15 or lower average P/E over the past three years.
- Moderate ratio of toll to avails. The price-to-earnings ratio times the price-to-book value ratio must exist less than 22.5.
- No utilities or retailers
I'll go along screening, and perhaps market volatility will milkshake out some additional candidates.
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