Love Bear Markets – Look at All the Value It Has Brought Us! Part 1


Although most investors hate bearish stock market activity, value investors – like yours truly -relish them. Moreover, bearish market activity becomes especially welcome after extended periods of high valuation like we have been experiencing since calendar year 2014. High valuations make it very difficult for value investors to find attractive common stock investments. Consequently, a nice dose of bear market activity brings welcome relief as a result of previously overvalued stocks becoming viable investments again.

However, it is also important to point out that, as I customarily do, it is a market of stocks and not a stock market. Therefore, I would also like to point out that I still consider that the overall market as measured by the S&P 500 remains moderately overvalued. On the other hand, recent bearish market activity has brought a lot more choices for the valuation-oriented investor to choose from.

Therefore, I have recently engaged in a simple screening looking for value over the overall market based on industry classifications and subindustry classifications reported by FactSet Research Systems Inc. In each article in this series I will be providing a listing of screened research candidates from each of the following industry sectors:

FactSet Sectors – Subsectors

A Simple Valuation and Quality Screening Process

With this series of articles, I will be presenting a screening of companies that have become attractively valued primarily as a result of the bearish market activities experienced in 2018 from each of the above sectors. I will be applying a rather simple valuation and quality-oriented screen across each of the sectors. First, I have screened for investment grade S&P credit ratings of BBB- or above. Next, I have screened for low valuations based on P/E ratios between 2 and 17. Finally, I have screened for long-term debt to capital no greater than 70%.