These are
tough times for investors who look for cheap companies. The Dow and S&P 500
jump from high to high, but this boom is credit-driven; it's the result of the
monetary easing policy of the world's major government banks.
The good
thing is that we can buy stocks in every market situation, whether the market
has a P/E level of 30 or 10. What we need to is to look at solid growth for the
single stock and not overpay for the future prospects of an asset.
When I look
at the market today, I see that the financial sector, conglomerates and basic
material stocks are the cheapest valued ones in terms of forward P/E, but the
highest growth is predicted for the Services and Technology sector, both of
which have the highest P/E ratios.
Tech stocks
have made many people rich, but if you recall the dot.com bubble in 2000, many
investors and private dealers lost their money because they believed that their
super high-flying stock could change the world.
Facebook, Twitter and Google dominate our world today, but will they do it in 10 or 20 years too? For sure,
Microsoft has survived over 40 years. Oracle, IBM and even Apple also developed into dominant players and
created a long track record, but technology is a fast changing business. You
can make billions in a year, but also lose all your money in the next
half-decade.
I own some
of the old-school technology stocks too, but I don't like to pay for the
uncertain future of a company more than it makes sense in an economic view. I
will not pay 500 times sales today because of the company's next revolutionary
product if I don’t understand how it works.
I want
dividends and a fair chance to make an 8 percent or more return, nothing else.
The market has enough opportunities to realize this goal, and it is easy to
succeed.
I've found
a new screener on Morningstar, but it seems only to work with Canadian and US
stocks. Morningstar has a great classification of companies, from financially
healthy to growth, so I tested it.
Today, I
was looking for fairly valuated growth stocks with a good dividend yield. In
addition, 5-year expected earnings growth had to be over 8 percent. The screen
delivered 25 results, and my focus is still on consumer stocks, as well as
non-cyclical dividend payers.
Below are 5
of my favorite picks. Do you like some of them? Please let me know what you
think from the screen.