Screening For Compounders On Porter’s 3x Screen

An important part in our analytical toolbox is our stock screens, where we apply a list of criteria – relating to different financial, accounting, and performance parameters – to sift through the 3,000+ publicly traded stocks on U.S. markets. That’s how we identify the tiny fraction of U.S.-listed stocks that offer the best opportunities for creating huge returns.

We often use the results from these screens as a starting point for more in-depth analysis for possible inclusion in the Complete Investor portfolio.

This week, we’re revisiting a popular stock-filtering tool we call Porter’s 3x Stock Screen. Over the last 25 years, buying an equally-weighted basket of stocks generated from the 3x screen has tripled the return over the overall stock market (the S&P 500). Below we also show the names of significant stocks hitting 52-week highs and 52-week lows – a helpful list that we use to guide our analysis.

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Porter’s 3x Stock Screen

The 3x Screen was inspired by Porter himself, who challenged the Complete Investor analyst team to create a filtering tool to find companies with high capital efficiency, steady revenue growth, and that trade at reasonable valuations… and to backtest the results to ensure the screening criteria selected stocks that generated market-beating gains over time.

To see the criteria used to create Porter’s 3x Stock Screen, go here.

As of Thursday’s close, this screen produced the 31 stocks shown in the table below. We have displayed each of the criteria noted above along with each company and ticker symbol, as well as each stock’s beta (a measure of volatility versus the overall market). Note that beta is not used in the screening criteria, but rather to provide a reference point for noting the volatility of the stocks on the list.

Highs And Lows

Each week, we also monitor any stocks in the market making new 52-week highs. We do this because any stock on its way to generating 2x, 3x, or 10x returns will spend a lot of time making new 52-week highs along the way. Thus, the new 52-week-high list provides an opportunity to flag these potential high performers before they really break out, with a particular emphasis on lower-profile, less widely-followed stocks that might have otherwise gone unnoticed.

Notable stocks making a new 52-week high this week:

• Analog Devices (ADI)

• Archer-Daniels-Midland (ADM)

• Ameren (AEE)

• American Electric Power (AER)

• AES (AES)

• AGCO (AGCO)

• Applied Industrial Technologies (AIT)

• Akamai Technologies (AKAM)

• Allegion plc (ALLE)

• AMETEK (AME)

• A.O. Smith (AOS)

• ATI (ATI)

• Area Pharmaceuticals (AVIR)

• Avery Dennison (AVY)

• BridgeBio Pharma (BBIO)

• Brookfield Infrastructure Partners )BIP)

• BakerHughes (BKR)

• BorgWarner (BWA)

• Caseys General Stores (CASY)

• Caterpillar (CAT)

• Chubb Limited (CB)

• CenterPoint Energy (CNP)

• ConocoPhillips (COP)

• CSX (CSX)

• Curtiss-Wright (CW)

• Diamondback Energy (FANG)

• Dominion Energy (D)

• DuPont de Nemours (DD)

• Deere & Company (DE)

• Quest Diagnostics (DGX)

• DT Midstream (DTM)

• Dycom Industries (DY)

• Philip Morris International (PM)

• Ecolab (ECL)

• Edison International (EIX)

• EMCOR (EME)

• Merck (MRK)

• McDonald’s (MCD)

• Johnson & Johnson (JNJ)

• ExxonMobil (XOM)

• Coca-Cola (KO)

• Walmart (WMT)

• Travelers (TRV)

• Monster Beverage (MNST)

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