Stock Picks – 52 Week Low Screen

Williams-Sonoma Inc. (WSM) is the only stock that passes this screen for the week:

Click on the links to research further.

OK – I need to defend my reluctance to follow the 52 Week Low strategy for WSM.  It clearly is trading at a discount, and is a very well run and financed company – so why am I not making a trade? WSM’s fortunes are tied to the Housing Market – which has been on a big upswing for many years now, but let’s look at the headlines today:

• CNBC – Plunging home improvement stocks raise questions about the …
• CNBC – Mortgage applications fall 4.1% as homebuyers pull back

Homebuyers are pulling back – and the Housing Market is looking a little shaky at this point in the cycle.  If the Fed does raise interest rates in December – that will also be a tail wind.

For these reasons, I am still taking a wait and see approach to WSM – with a yield over 3%, this well-run company is attractive – but I need a larger Margin of Safety to get invested.

52 Week Low stock picks are based on the following screen:

1. Morningstar analysis available.
2. Less than 5% above its 52 week low.
3. Greater than or equal to Narrow moat.
4. Free cash flow/enterprise value greater than 5% (should be above what the 10 Year Treasury Bond is yielding).
5. Financial Health Grade >= B.
6. Forward P/E <= 20.
7. Stock Industry not = Asset Management
8. Dividend Yield % >= 3
9. For candidates that have passed all the filters, review the individual stocks Return on Invested Capital (ROIC) for the previous 10 years to select the best long term candidates.

Extra:   Good article from Bloomberg about 401 K returns:

• The Next 10 Years Will Be Ugly for Your 401(k)