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Alberto Abaterusso
Alberto Abaterusso
Articles (2279) 

3 High-Quality Picks for the Value Investor

These businesses have robust balance sheets

July 26, 2020 | About:

Benjamin Graham, the pioneer of value investing, suggested to screen for stocks that have a current ratio of more than 2 and more working capital than long-term debt, as these measures indicate robust balance sheets.

A current ratio of more than 2 indicates that a company has sufficient financial resources to pay its short-term creditors. The ratio is calculated by dividing the total current assets by the total current liabilities.

When the working capital surpasses the long-term debt by a fair amount, it means that the business can produce more than what is required to pay its long-term creditors. The working capital is the difference between total current assets and total current liabilities.

Thus, investors may be interested in the following stocks, as they possess the above listed criteria.

Microsoft Corp

The first stock that holds the criteria is Microsoft Corp (NASDAQ:MSFT), a Redmond, Washington-based developer, manufacturer, licensor and seller of computer software, personal computers and consumer electronics.

The stock has a current ratio of 2.52, which appeals more than the industry median of 1.78.

Microsoft Corp has a trailing 12-month working capital of about $109.61 billion and long-term debt of $59.6 billion as of the most recent full fiscal year.

GuruFocus assigned a very good rating of 7 out of 10 for the company’s financial strength and a very high rating of 9 out of 10 for its profitability.

The stock price traded at $201.30 per share at close on Friday for a market capitalization of $1.52 trillion, a price-book ratio of 13.02 and a 52-week range of $119.01 to $216.38.

Skyworks Solutions Inc

The second stock that makes the cut is Skyworks Solutions Inc (NASDAQ:SWKS), an Irvine, California-based manufacturer and marketer of semiconductor products in the U.S. and internationally.

The stock has a current ratio of 2.48, which is more compelling than the industry median of 2.22.

Skyworks Solutions Inc has a trailing 12-month working capital of $1.83 billion and no long-term debt as of the most recent full fiscal year.

GuruFocus assigned a high rating of 8 out of 10 for both the company’s financial strength and its profitability.

The stock price traded at $131.61 per share at close on Friday for a market capitalization of $21.96 billion, a price-book ratio of 5.3 and a 52-week range of $66.29 to $139.88.

Xilinx Inc

The third company that meets the criteria is Xilinx Inc (NASDAQ:XLNX), a San Jose, California-based developer of programmable devices and associated technologies to global original equipment manufacturers and electronic manufacturing service providers.

The stock has a current ratio of 2.68, which is more appealing than the industry median of 2.22.

Xilinx Inc has a trailing 12-month working capital of $1.82 billion and long-term debt of $747.11 million as of the most recent full fiscal year.

GuruFocus assigned a good rating of 7 out of 10 for the company’s financial strength and a high rating of 9 out of 10 for its profitability.

The stock price has traded at $102.66 per share at close on Friday for a market capitalization of $24.97 billion, a price-book ratio of 10.81 and a 52-week range of $67.68 to $141.60.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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