7 Shots at Superior Returns

• Email
• Share
• Print

Finding those superior investment ideas for putting your hard earned dollars to work can be quite intimidating. Value? Momentum? Five-star? What factor will give you that edge to find a 10-bagger?

One service you can enlist on your side is Motley Fool CAPS and something we call CAPShot. It starts with the predictive ranking of CAPS, then mixes in some additional metrics to pull out the very best companies for further research. Here are the criteria for today's screen:

• CAPS1000: Among the top 1000 investors in CAPS -- those who have proven themselves in the hurlyburly of the market by successfully making the right calls -- what percentage of those who rate a particular company have it as "outperform?" We want at least 80%.
• CAPS rating: Over the three years we've been tracking companies, four- and five-star companies as a group have outperformed the broader market. We want to pick members of that group.
• Return on equity: The company has to make it worthwhile for the investor to put his or her money on the line. The minimum here is 15%.
• Debt-to-equity: Of course, too much debt can overburden a company. Especially in these troublesome times. The maximum we're screening for today is 0.45.
• Average revenue growth: We want companies that can grow their sales in good times and bad. Over the past five years, 10% per year is the threshold.
• Gross margin: And of those sales, how much passes further into the income statement? No less than 35% meets this screen's approval.

The resulting list is a set of companies that have performed well over the past several years and are expected by our community to continue to perform well going forward. Here's a sample of what this CAPShot screen pulled up today.

Company	CAPS1000	Rating (Out of 5)	ROE (TTM)	Debt-to-Equity	Avg. Revenue Growth, 5 Years	Gross Margin (TTM)
EnCana (NYSE: ECA)	94.4%	****	24.0%	0.37	21.1%	50.0%
Helmerich & Payne (NYSE: HP)	98.4%	****	16.5%	0.17	31.0%	46.3%
ICON (NYSE: ICLR)	100.0%	*****	17.1%	0.23	26.2%	43.4%
Paychex (Nasdaq: PAYX)	100.0%	****	39.8%	0.00	10.6%	71.5%
Petrobras (NYSE: PBR)	99.5%	*****	30.5%	0.44	31.3%	36.9%
Southern Copper (NYSE: PCU)	96.3%	****	16.0%	0.38	24.2%	42.0%
Taiwan Semiconductor Manufacturing (NYSE: TSM)	98.0%	*****	23.1%	0.01	10.4%	67.0%

Source: Motley Fool CAPShot. TTM = trailing 12 months.

Remember, these are just suggestions for further research. But by doing some of the heavy lifting for you, CAPS can improve your odds of finding a superior investment idea.