Let’s work on an interesting hypothesis from the start of 2022 until the beginning of May. The major indices in the world have fallen.
The FTSE all-world index is down 18% during that period, and the S&P 500 is down 13%.
The German index is down pretty much the same as is the Chinese at around 12 to 13%. The Dow Jones Industrial Average is only down about 10%. It only has 30 companies in it. So interestingly, the index with more companies, the S&P 500, is down 14%.
Whereas the Dow, with just 30 stocks, is down only about 10%.
So what I did is I took all 10,000 companies listed in the United Kingdom, the United States, and overseas companies listed in the United States as well.
That’s 10,000 companies. Now, top of the pile company, you might not have heard of spurious ones like rent and guarantor Holdings PLC.
I’ve never heard of them. Lord knows what made them move up so much. So we’ll just put some of the odder ones out of the way.
How might we judge performances and decide whether or not these companies are worth buying now? While we might look at their cash flow, my favorite indicator is cash return on capital invested.
I want that to be as high a number as possible. How good are they at converting cash from capital? We might look at value, growth income, and valuation that’s profits relative to share price, revenue, growth, dividend deals, etc.
We might look at price, earnings, growth ratio, and other valuation measures. So which names have come up here?
I’ll run through; I won’t go through every stock, obviously, because out of the 10,000, the ones that are up so far this year are how many do you think?
Well, it’s 2,600, so 26% are up this year, 26% and one in four are up. It was not too bad.
Of these ones, which look like they have momentum (based on the monthly price chart MACD) and acceptable value, growth, income, and cash flow. Now, this does not mean the risk is mitigated, or they are bound to go up. But this was my short-list:
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Alpesh Patel OBE