Finding new stock ideas is challenging for all investors, but it's particularly difficult for new investors, who may not quite be up to speed on key financial metrics and accounting practices.
Sure, stock screens are great, but they're only as good as their users' input. If you're in the dark about what "return on equity" or "price to book" mean, for example, a screener won't help you much.
It's about to get easier
With that thought in mind, we at the Fool combined the investing knowledge of our top analysts, and data from our Motley Fool CAPS screener, to come up with four preset model screens -- Value, Dividend, Small Cap, and High Growth.
For our Small Cap screen, we asked Motley Fool Hidden Gems advisor Seth Jayson what he looks for in promising small caps. Among other things, Seth focuses on small stocks with modest debt, significant insider ownership, strong business models, and four- and five-star CAPS ratings.
That last point is particularly important, because we've found that these highly rated stocks have outperformed the market as a group by a respective seven and 12 points annually from November 2006 to July 2008.
And now, for the stocks...
Using the preset small-cap CAPS screen, here are five stocks for your watch list:
|
Company
|
CAPS Rating
|
Long Term Debt/Equity
|
Return on Equity (TTM)
|
Research
|
|
K-Tron International (Nasdaq: KTII )
|
*****
|
0.32
|
21%
|
KTII
|
|
RPC (NYSE: RES )
|
*****
|
0.42
|
16.7%
|
RES
|
|
Zumiez (Nasdaq: ZUMZ )
|
*****
|
0.00
|
15.7%
|
ZUMZ
|
|
NewMarket (NYSE: NEU )
|
*****
|
0.50
|
20.5%
|
NEU
|
|
Natco Group (NYSE: NTG )
|
*****
|
0.00
|
15.3%
|
NTG
|
Source: Motley Fool CAPS, as of Aug. 26, 2008. TTM = trailing 12 months.
Are these the next home run stocks? Only time will tell. But in the meantime, we invite you to learn more about these promising companies on Motley Fool CAPS. You can get started by heading to CAPS -- it's 100% free.
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