In this edition of Watchlist Wednesday, we highlight the top ranked stock qualifying for the Enterprising Investor stock screen (1).
This article appeared first on The Stock Market Blueprint Blog.
Enterprising Investor Description
According to Graham, an enterprising investor buys from a list of common stocks “that can be identified as undervalued by logical and reasonably dependable standards.”
The screen finds stocks which are “rather similar to those we suggested for the defensive investor, but not so severe.”
Below is a breakdown of the requirements a stock must meet to qualify for the Enterprising Investor screen.
The first criteria is concerned with the stock’s price relative to recent earnings, and the next four are concerned with the company’s “past performance and current financial position.”
The last requirement values the stock based on the company’s net tangible assets.
– P/E (TTM) < 10
– Current Ratio > 1.5 AND Long-Term Debt < 110% of Net Current Assets
– Positive Earnings Streak ≥ 5 Years
– Dividends Per Share (TTM) > 0
– Net Income % Growth, 5 Year CAGR > 0
Once a stock meets the above requirements, its intrinsic value is calculated by multiplying net tangible assets by 120%.
Top Ranked Stock
Here is the stock with the lowest price to intrinsic value as found on The Stock Market Blueprint:
Kelly Services, Inc. (NASDAQ:KELYA): Provides staffing solutions to professional and technical employees in the fields of education, legal, health care, and creative services.
– Price/Earnings (TTM): 5.83
– Current Ratio: 1.55
– Working Capital: $428 Million
– Long-Term Debt: $0
– Positive Earnings Streak: 5+ Years
– Dividends Paid (TTM): $0.25/share
– Net Income % Growth, 5 Year CAGR: 15.57%
– Price/Intrinsic Value: 59%
– Current Price: $20.03 (closing price on 11/15/16)
Graham states that the enterprising investor strategy finds companies “that are making a good showing, have a satisfactory past record, but appear to hold no charm for the public.” He says a group of these stocks “should offer good promise of satisfactory investment results.”
Due to the nature of deep value strategies such as the Enterprising Investor, average investors will find numerous reasons not to buy (2) the above stock. Disciplined investors, on the other hand, will find success following such a simple investment strategy (3).
You can build your own portfolio using the stock screens on TheStockMarketBlueprint.com.
Check out our Shadow Stock Portfolios to see real-world examples of how to implement systematic investment strategies.
Note: Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.