The market has roared by a hefty 52% since its March low. While rising prices wiped out some of the most appealing valuations seen in decades, this surge in stock prices doesn't mean you've missed the boat. And it shouldn't deter you from making a wish list of stocks you'd like to snag for your own portfolio.
If this truly is the beginning of a new bull market, then there's still more room to run from here. And if it's simply a fierce bear-market rally, then a pullback will correct prices. Despite a mixed bag of economic news, the market keeps treading higher, as investors who were sitting on the sidelines since financial Armageddon last fall use every pullback to get back in the market. That's a good sign, because it means the unprecedented amount of cash that was on the sidelines is now being put back to work.
Either way, if you research and build a list of stocks you'd want to own, you'll simply need to wait until each stock reaches your preferred price before you pounce. The volatility in this environment should provide you opportunities to do exactly that.
To start assembling my very own stock wish list, I used the Fool's CAPS screener to find premium companies such as Apple (Nasdaq: AAPL), which has outperformed the market by over a hefty annual 27 percentage points over the past 10 years.
To screen for some of the market's best stocks, I used the following criteria:
- Market caps greater than $10 billion, which suggests stability.
- A current ratio of at least 1, to ensure sufficient liquidity to meet current liabilities.
- Return on equity north of 15%, to demonstrate efficiency and profitability.
- Five-star ratings, our CAPS community's highest ranking.
You can review my results in full if you like, but here are some of the highlights:
| Company | Market Cap (in Billions) | Current Ratio | Return on Equity (Trailing 12 Months) |
|---|---|---|---|
| Diamond Offshore Drilling (NYSE: DO) | $12.7 | 3.7 | 37.8 |
| Johnson & Johnson (NYSE: JNJ) | $168.9 | 1.8 | 27.5 |
| Philip Morris International (NYSE: PM) | $91.7 | 1.5 | 64.7 |
| PepsiCo (NYSE: PEP) | $89.5 | 1.3 | 36.3 |
| Petrobras (NYSE: PBR) | $158.7 | 1.1 | 30.5 |
| Transocean (NYSE: RIG) | $25.1 | 2.0 | 23.9 |
Data from Motley Fool CAPS as of Aug. 25, 2009.
While the CAPS screen can suggest all kinds of promising companies, running a screen should be only the first step in your stock research. Investors should be mindful of the industry the company operates in, and whether that industry has growth prospects. From there you'll need to assess the company's products, positioning in the market, and market share, as well as its "financial vitals" -- what it has in terms of cash, revenue and earnings growth, free cash flow, and so on. Come and join our CAPS online investment community to delve further into these companies, and see whether they're right for your portfolio.
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