The major stock indexes look as if they will end the year barely in the black, but many savvy investors will do a whole lot better. Why? They selected good stocks. Our yearend Investment Outlook Scoreboard can help you make solid picks for the new year. The scoreboard, which is available at businessweek.com, amasses a trove of information on nearly 900 companies. The data run from historical measures, such as price-earnings ratios, price-cash-flow ratios, and price-sales ratios, to forward-looking earnings estimates for the current and upcoming year, as well as the long-term earnings growth rate. Whether you're a value buyer shopping for bargains or a growth-oriented investor searching for the next hot stock, the scoreboard has plenty to offer. We've run some screens to help you get started.
HEAD OF THE PACK
This list consists of only large-cap companies that lead their industries in return on equity and earnings growth. What makes them attractive is that many are able to fund their own capital investments and expansion, which is especially valuable when credit markets are tight.
Buying stocks that pay dividends is a conservative way to play the equity market. The emphasis is on quality: While yields on the big banks such as Citigroup (C), Bank of America (bac), Wachovia (WB), and Washington Mutual (WM) are tempting, the outlook for their shares—and those generous payouts—is murky. Our high-quality-yield stocks should provide a payout that is both sound and has growth potential.
In a slowing economy, some investors want to own companies whose products and markets are growing robustly. Technology and biotech stocks often fit that bill. They can be risky, though—a new product can flop with customers or be made obsolete by the next big thing. Still, when these equities do pay off, the numbers can be huge.
Who doesn't love a bargain? The problem is that cheap stocks often are cheap for a reason. Homebuilders were inexpensive this time last year, and they're even more so now. That's why, besides picking companies with low price-to-book values and price- earnings ratios, we added another qualifier: The stock had to have had a positive return in the past year.
Back to Investment Outlook 2008 Table of Contents