Enterprising Investor Forum

In order to have a good basket of stocks that we would be willing to research in detail, we have to make sure that they are in the best possible condition to get through this difficult economic cycle. As with the first time we ran this screen, our aim is to look for and highlight strong players in specific industries – instead of looking across the board, we really wanted to focus on companies that are outperforming and more solid than their competitors.

Keeping the above in mind, we used the MSN Money Deluxe Stock Screener to find companies that are profitable, efficient and not uniquely focused on leverage to fuel their growth:

• Return on Equity >/= to Industry Average Return on Equity
• Price/Book </= to Industry Average Price to Book
• P/E Ratio </= to Industry Average P/E Ratio
• Income per Employee >/= to Industry Average Income per Employee
• Inventory Turnover >/= Industry Average Inventory Turnover
• Debt to Equity Ratio </= Industry Average Debt to Equity Ratio
• Dividend Payout Latest Fiscal Year >/= Industry Average Dividend Payout Latest Fiscal Year
• Net Profit Margin >/= Industry Average Net Profit Margin

And finally, we checked for even more distress, adding:

• Previous Day’s Closing Price ‘Near’ 52-Week Low

The only companies to come out where:

• Total Systems Services Inc. (TSS) – it provides electronic payment processing and related services to financial and non financial institutions -> Quite a tricky sector to try and understand seeing the possible ramifications of all the different dynamics currently in play.
• Microsoft Corp. (MSFT) -> definitely worth looking into.
• Norfolk Southern Corp. (NSC) – rail transportation of raw materials, intermediate products, and finished goods primarily in the United States -> Well, pretty straight forwards and despite the slowdown, rail remains a cost effective way to transport goods and we are fairly bullish most operators as we already discussed in the past.

Our feeling is that Microsoft is and will remain a driving force in the tech sector. The main factors that support this view is that they have a dominant position, a good pipe-line and an extremely solid balance sheet… they are bound to emerge from this crisis with an even greater advantage over their competitors.

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