It's no secret that this has been a tough market. Everyone, from professionals to amateurs, has felt the pain. When will it end? No one knows and opinions differ greatly. But what all investors can agree on is that it's more important than ever to find solid companies that can protect your portfolio against the forces of evil.

To separate the champs from the chumps, I ran a screen on CAPS, The Motley Fool's investor-intelligence database, looking for some of the best companies the market has to offer. These types of businesses could very well be the next Microsoft (NASDAQ:MSFT) or Dell (NASDAQ:DELL).

The criteria used for the search were simple:

  • I only wanted to consider stocks that are classified by our CAPS community as the best of the best. These businesses needed to have at least 900 active picks and four- or five-star ratings, the highest available.
  • Next, I wanted to make sure that the balance sheet was solid. A good way to do that is to look for businesses with debt-to-equity ratios of less than one.
  • Insider alignment with shareholders is also a critical consideration: Management should definitely have financial ties to the performance of their company. For that I required insider ownership higher than 5%.
  • Finally, a return on equity (ROE) of more than 20% is a must if you want to uncover potential market beaters. Warren Buffett believes that return on capital (ROE is a proxy when there is little debt) is key when he evaluates a company.

Here's what that our CAPS screen came up with. It appears to be a nice eclectic mix.


Debt to Equity

Insider Ownership

Return on Equity (TTM)

Allegheny Technologies (NYSE:ATI)









Ceradyne (NASDAQ:CRDN)




Coca-Cola (NYSE:KO)




Hansen Natural (NASDAQ:HANS)




Source: Motley Fool CAPS screen from 10/8/08. TTM = trailing 12 months.

Please note that these should be viewed as ideas for further research, not recommendations. Toward that end, let's look at what CAPS members have to say about a couple of these.

CAPS member GoingBatty had this to say about Ceradyne back in April:

Going into a recession where consumer stocks get hurt, it's always good to have a highly profitable, long term oriented company with stable management in your portfolio. Strong government contracts and large growth potential outside of government make this company not only stable but will launch it for the future. Plus a strong cash flow position and a low earnings multiple never hurts.

Regarding NVIDIA, joekelly123 wrote the following in the middle of February:

For gamers it's almost a necessity to own the most powerful card affordable and claim the bragging rights to go with it, no point in having the newest games if you haven't the rig to run it. There is tons of cash to be made selling high spec(high cost) peripherals to these fanatical gamers who would quite literally sell their grandmother.

Are these stocks ready to defend your portfolio or will they open it up to be plundered? Our CAPS community -- made up of some of the brightest minds around -- would like to know what you think. Sign up and give us your take on whether these stocks can defend your portfolio. It's 100% free.

More CAPS content and general Foolishness:

In the coming weeks, Fool co-founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. The service, which just launched, will rely heavily on proprietary CAPS "community intelligence" data to establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Wade Michels makes sure he's not the bad guy by disclosing the stocks that he owns. He doesn't own shares of any of the ones mentioned here. Microsoft, Coca-Cola, and Dell are Inside Value picks. NVIDIA is a Stock Advisor recommendation. The Fool disclosure policy is a journalism hero.