High market volatility, record correlation and slowing economic growth are just a few of the things that makes equity investing a more challenging endeavor.
Brian Peery, a portfolio manager at Hennessy Cornerstone Growth Fund, doesn't seem too concerned about the bears' doomsday predictions. "It's not about timing the market, it's about time in the market," he said in a recent interview.
"I've never been good at picking tops or bottoms. I'm going to invest for the long term, so I want to pick high-quality companies that are going to be around in five years and make sure I'm not paying too much for them."
His message: If you can separate the individual companies and their performance from the overall economy, there are plenty of good opportunities for long-term investors, regardless of the near-term market fluctuations.
But how can you find quality companies?
Luckily, Goldman Sachs' equity strategy team, led by David Kostin, has devised a "High Quality Stock Basket" which he recommends his clients buy into. He argues that the basket of 50 stocks ranks highly when it comes to balance sheets, sales growth stability, earnings growth reliability, and ROE. (Via Business Insider).
Furthermore, these names do not often experience high short-term sell-offs. They majority of the stocks also have "high dividend yields, significant foreign sales, and premium valuations."
Interested? Business Insider pulled the top off the list that scored the highest based on the team's screening. We took the top 10 and list them in detail below.
Without further ado, these are the highest quality stocks in the world, according to Goldman Sachs. (Click here to access free, interactive tools to analyze these ideas.)
1. Ecolab (NYSE: ECL ) : Market cap of $12.21B. Develops and markets products and services for the hospitality, foodservice, health care, and industrial markets primarily in the United States. Goldman gave this company a score of 94. Average ROE: 23%. 2012E Sales Growth: 6%. 2012E Earnings Growth: 13%. Percent U.S. Sales: 52%. Dividend Yield: 1.3%. Current price at $52.31. The stock is a short squeeze candidate, with a short float at 10.43% (equivalent to 5.65 days of average volume). The stock has had a couple of great days, gaining 5.09% over the last week.
2. Cognizant Technology Solutions (Nasdaq: CTSH ) : Market cap of $21.57B. Provides information technology consulting and technology services in North America, Europe, and Asia. Goldman gave this company a score of 93. Average ROE: 25%. 2012E Sales Growth: 22%. 2012E Earnings Growth: 20%. Percent U.S. Sales: 78%. Dividend Yield: 0%. Current price at $72.01. The stock has had a couple of great days, gaining 7.67% over the last week.
3. St. Jude Medical (NYSE: STJ ) : Market cap of $12.61B. Develops, manufactures, and distributes cardiovascular and implantable neurostimulation medical devices worldwide. Goldman gave this company a score of 89. Average ROE: 23%. 2012E Sales Growth: 7%. 2012E Earnings Growth: 11%. Percent U.S. Sales: 51%. Dividend Yield: 2.2%. Current price at $38.39. The stock has performed poorly over the last month, losing 11.74%.
4. Pepsico (NYSE: PEP ) : Market cap of $98.69B. Engages in the manufacture, marketing, and sale of foods, snacks, and carbonated and non-carbonated beverages worldwide. Goldman gave this company a score of 89. Average ROE: 35%. 2012E Sales Growth: 3%. 2012E Earnings Growth: 8%. Percent U.S. Sales: 53%. Dividend Yield: 3.4%. Current price at $62.05. The stock has lost 3.54% over the last year.
5. The TJX Companies (NYSE: TJX ) : Market cap of $21.91B. Operates as an off-price apparel and home fashions retailer in the United States and internationally. Goldman gave this company a score of 89. Average ROE: 43%. 2012E Sales Growth: 7%. 2012E Earnings Growth: 12%. Percent U.S. Sales: 77%. Dividend Yield: 1.3%. Current price at $57.27. The stock has gained 30.89% over the last year.
6. Southern Company (NYSE: SO ) : Market cap of $36.44B. Operates as a utility company that provides electric service in the southeastern United States. Goldman gave this company a score of 88. Average ROE: 15%. 2012E Sales Growth: 5%. 2012E Earnings Growth: 6%. Percent U.S. Sales: 100%. Dividend Yield: 4.4%. Current price at $42.8. The stock has gained 18.75% over the last year.
7. CH Robinson Worldwide (Nasdaq: CHRW ) : Market cap of $11.90B. Provides multimodal freight transportation services and logistics solutions to companies in various industries worldwide. Goldman gave this company a score of 88. Average ROE: 29%. 2012E Sales Growth: 12%. 2012E Earnings Growth: 16%. Percent U.S. Sales: 89%. Dividend Yield: 1.6%. Current price at $73.34. The stock is a short squeeze candidate, with a short float at 5.55% (equivalent to 6.24 days of average volume). The stock has gained 1.81% over the last year.
8. Walgreen (NYSE: WAG ) : Market cap of $29.84B. Engages in the operation of a chain of drugstores in the United States. Goldman gave this company a score of 88. Average ROE: 17%. 2012E Sales Growth: 3%. 2012E Earnings Growth: 11%. Percent U.S. Sales: 100%. Dividend Yield: 2.7%. Current price at $32.83. The stock has performed poorly over the last month, losing 10.07%.
9. Simon Property Group (NYSE: SPG ) : Market cap of $33.26B. Engages in investment, ownership, and management of properties. Goldman gave this company a score of 87. Average ROE: 15%. 2012E Sales Growth: 3%. 2012E Earnings Growth: 6%. Percent U.S. Sales: 100%. Dividend Yield: 2.8%. Current price at $115.13. The stock has gained 20.49% over the last year.
10. Coach (NYSE: COH ) : Market cap of $17.59B. Engages in the design and marketing of accessories and gifts for men and women in the United States and internationally. Goldman gave this company a score of 87. Average ROE: 43%. 2012E Sales Growth: 12%. 2012E Earnings Growth: 15%. Percent U.S. Sales: 70%. Dividend Yield: 1.5%. Current price at $61.31. The stock has had a couple of great days, gaining 6.73% over the last week.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above.
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