On Dec. 11, our Value Investing Forum shared five good stock picks: Tractor Supply Co. (TSCO, Financial), Industrias Bachoco SAB de CV (IBA, Financial), Monsanto Inc. (MON, Financial), Carnival Corp. (CCL, Financial) and DaVita Inc. (DVA, Financial).
Background
GuruFocus offers several features to help our users find good companies, i.e., the “gems of the stock market.” While most users start with the predefined value screens, like Warren Buffett (Trades, Portfolio)’s Buffett-Munger Screener, the All-in-one Guru Screener allows users to generate custom screens, e.g., a simple screen containing five criteria for good companies as described in a previous article.
While the Screener lists companies that meet all criteria, the GuruFocus Checklist feature allows users to grade a specific company on a scale of 1 to 5 based on a set of criteria. To access the Checklist, first enter any stock symbol into the search bar and click the Checklist item as Figure 1 illustrates.
Figure 1
Figure 2 shows a sample “Five Criteria for Good Companies” checklist. You can create a new checklist by clicking on the “+ New Checklist” button located near the top-right corner of the Checklist feature. You can start with a predefined checklist or a blank checklist by clicking on one of the radio buttons listed in Figure 3. Cick on the blue “Create” button to create your checklist.
Figure 2
Figure 3
Checklist results
Tractor Supply had a checklist score of 4.2, the highest among the stocks listed on the Forum post. The specialty retail company received a grade of 5 for the following criteria: predictable earnings, expanding operating margins and solid revenue growth. GuruFocus ranked the company’s business predictability five stars as the company had consistent revenue and earnings growth over the past 10 years as Figure 4 illustrates.
Figure 4
Tractor Supply’s operating margin and net margin have increased approximately 4% per year over the past five years as Figure 5 illustrates. The company’s profit margins are outperforming approximately three-quarters of global competitors, contributing to an overall profitability rank of 8.
Figure 5
Despite consistent revenue growth, Tractor Supply’s Piotroski F-score ranks a modest 5, driven primarily by declining returns on assets and gross margins year over year. Figure 6 shows the company’s ROA for the past 10 years while Figure 7 shows the company’s gross margins. For both “strong balance sheet” and “good economic moat,” the remaining two criteria on my checklist, I assigned Tractor Supply a modest grade of 3.
Figure 6
Figure 7
Figure 8 shows Tractor Supply’s completed checklist while Table 1 summarizes the checklist scores for the other four companies.
Figure 8
| Company name (Ticker) | GuruFocus Checklist Score |
| Industrias Bachoco (IBA, Financial) | 3.8 |
| Monsanto (MON, Financial) | 3.6 |
| Carnival (CCL, Financial) | 3.2 |
| DaVita (DVA, Financial) | 3.0 |
Table 1
See also
The Forum post mentioned a sixth company, AerCap Holdings NV (AER, Financial). This company has a score of 2.6 according to my “five criteria for good companies” checklist, lower than any of the other five companies mentioned. Based on my checklist results, AerCap is not a good stock pick compared to the others.
As mentioned in a previous article, we did not have a top Forum post in November. Please continue adding quality posts to our Forum. If we get enough top Forum posts by the end of December, we can award a free copy of "Invest Like a Guru" to the best post for the month.
Disclosure: The author has no positions in the stocks mentioned.
