Strong Performance on the Cheap

This week's screen turned up 13 stocks, all with S&P's top investment ranking, that combine good profitabilty and value

By Numer de Guia

Investors remain concerned about whether the market remains overvalued, even after its slump in the last two years. But smart investors don't have to overpay for solid performance.

That's the idea behind our current stock screen. We looked for companies that provided a higher return on equity than the Standard & Poor's 500-stock index as a whole. And each had to have a higher indicated dividend yield than the average for the S&P 500.

But in this case, price was an object -- so each stock also had to have a price-to-book value ratio lower than the index average. We used this valuation measure since our first filter, return on equity, calculates a company's earnings per unit of book value.

We also applied one final criterion: Each company had to carry S&P's highest investment ranking of 5 STARS (buy), meaning that our analysts expect them to outperform the market over the next 6 to 12 months. Our search turned up 13 names:

Alliance Capital (AC )

Boeing (BA )

Commerce Bancorp (CBH )

ExxonMobil (XOM )

Fortune Brands (FO )

Kraft Foods (KFT )

Leggett & Platt (LEG )

Morgan Stanley (MWD )

National Commerce (NCF )

Newell Rubbermaid (NWL )

Sears (S )

TXU (TXU )

Wilmington Trust (WL )

De Guia is a portfolio services analyst for Standard & Poor's

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