High-Quality Investable Universe

Year-end 2024 | Using QVI's proprietary research checklist parameters, I screened for high-quality businesses. As always, less than 2% make the cut.

Dec 16, 2024

After running a screen to discover a potential stock pick for Quality Value Investing’s (QVI) next new idea, I decided to focus this series of posts on sharing the current wealth of enduring enterprises that emerged based on QVI’s checklist for quality business models.

Through its current wealth screening parameters, QVI has identified 95 enduring enterprises with high-quality business models.

The screening model intentionally excludes the QVI Real-Time Stock Picks, which are exclusive to premium and premium+ subscribers.

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The selected companies fall within QVI’s circle of competence: Communications Services, Consumer Discretionary, Consumer Staples, Financials, Health Care, Industrials, and Information Technology.

No companies were screened from the Energy, Materials, Real Estate, and Utilities sectors, as these are outside QVI’s expertise. Due to high geopolitical downside risks, no Chinese companies are included in the selected sectors.

The quality-driven screen does not include valuation parameters. In future posts, I will explore present value metrics for reasonable stock prices of select quality enterprises from the list below. Those that meet QVI’s current wealth and present value parameters will be eligible for initial coverage in the QVI Real-Time Stock Picks.

Current Wealth Quality Screener

Using the QVI research checklist to discover the companies’ current wealth, I screened for high-quality business models.

At the start of the screen, there were 8,754 publicly traded companies.

Company Profile

Sectors: Communications Services, Consumer Discretionary, Consumer Staples, Financials, Health Care, Industrials, and Information Technology

Exchanges: NASDAQ and New York Stock Exchange (NYSE) (no over-the-counter or OTC issues)

Market Capitalization: Large Cap, Mid Cap, or Small Cap (no microcaps)

Company profile screen net results: 1,456 companies.

Value Proposition

Morningstar Economic Moat: Wide or Narrow

Value Proposition Elevator Pitch: Are the company’s products or services understandable?

Value proposition screen net results: 502 companies.

Returns on Management

Revenue Growth (3-Year Trailing): Must be positive

Net Profit Margin (MRFY): Must be profitable

Return on Equity (TTM): 15% or higher

Return on Invested Capital (TTM): 12% or higher

Cash Flow Per Share (TTM): Must be positive

Returns on management net screen results: 144 companies.

Enterprise Downside Risks

Debt to Equity (MRQ): Less than 1.00

Current Ratio (MRQ): Higher than 1.00, except for the consumer staples, financials, and healthcare sectors, as those companies have unique accounting situations that can negatively affect current ratios.

Enterprise downside risk net screening results: 95 companies.

Basket of 95 High-Quality Business Models

The 95 businesses that survived the current wealth screening parameters are listed by sector below.

Company name | $Ticker symbol | Industry served | Market capitalization

Communications Services Sector (1)

Netflix Inc | NFLX 0.00%↑ | Moves & Entertainment | Large

Consumer Discretionary Sector (13)

Airbnb Inc | ABNB 0.00%↑ | Hotels & Resorts | Large

Aptiv PLC | APTV 0.00%↑ | Automotive Parts & Equipment | Mid

Chipotle Mexican Grill Inc | CMG 0.00%↑ | Restaurants | Large

Garmin Ltd | GRMN 0.00%↑ | Consumer Electronics | Large

Gentex Corp | GNTX 0.00%↑ | Automotive Parts & Equipment | Small

Gildan Activewear Inc | GIL 0.00%↑ | Apparel & Accessories | Small

Lululemon Athletica Inc | LULU 0.00%↑ | Apparel & Luxury Goods | Large

MercodoLibre Inc | MELI 0.00%↑ | Broadline Retail | Large

Ralph Lauren Corp | RL 0.00%↑ | Apparel & Luxury Goods | Mid

Ross Stores Inc | ROST 0.00%↑ | Apparel Retail | Large

Tesla Inc | TSLA 0.00%↑ | Automobile Manufacturers | Large

Tractor Supply Co | TSCO 0.00%↑ | Specialty Retail | Mid

Ulta Beauty Inc | ULTA 0.00%↑ | Specialty Retail | Mid

Consumer Staples Sector (5)

Brown-Foreman Corp | ($BF.B) | Distillers & Vintners | Mid

Hershey Co | HSY 0.00%↑ | Packaged Foods | Mid

Monster Beverage Corp | MNST 0.00%↑ | Soft Drinks | Large

National Beverage Corp | FIZZ 0.00%↑ | Soft Drinks | Small

Proctor & Gamble Co | PG 0.00%↑ | Household Products | Large

Financials Sector (11)

Cohen & Steers Inc | CNS 0.00%↑ | Asset Management | Small

Evercore Inc | EVR 0.00%↑ | Investment Banking & Brokerage | Mid

Factset Research Systems Inc | FDS 0.00%↑ | Financial Data | Mid

Interactive Brokers Group Inc | IBKR 0.00%↑ | Investment Brokerage | Large

Jack Henry & Associates Inc | JKHY 0.00%↑ | Payment Processing | Mid

Marketaxess Holdings Inc | MKTX 0.00%↑ | Financial Exchanges | Mid

Marsh & McLennan Companies Inc | MMC 0.00%↑ | Insurance Brokers | Large

PayPal Holdings Inc | PYPL 0.00%↑ | Payment Processing | Large

Raymond James Financial Inc | RJF 0.00%↑ | Investment Brokerage | Mid

SEI Investment Co | SEIC 0.00%↑ | Asset Management | Mid

T Rowe Price Group Inc | TROW 0.00%↑ | Asset Management | Mid

Health Care Sector (10)

Edwards Lifesciences Corp | EW 0.00%↑ | Health Care Equipment | Large

IDEXX Laboratories Inc | IDXX 0.00%↑ | Health Care Equipment | Mid

Intuitive Surgical Inc | ISRG 0.00%↑ | Health Care Equipment | Large

Medspace Holdings Inc | MEDP 0.00%↑ | Life Sciences Tools & Services | Mid

Merck & Co Inc | MRK 0.00%↑ | Pharmaceuticals | Large

Novo Nordisk A/S | NVO 0.00%↑ | Pharmaceuticals | Large

Regeneron Pharmaceuticals Inc | REGN 0.00%↑ | Biotechnology | Large

Resmed Inc | RMD 0.00%↑ | Health Care Equipment | Mid

Royalty Pharma PLC | RPRX 0.00%↑ | Pharmaceuticals | Mid

West Pharmaceutical Services Inc | WST 0.00%↑ | Life Sciences Tools & Services | Mid

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Industrials Sector (30)

Automatic Data Processing Inc | ADP 0.00%↑ | Human Resources | Large

AO Smith Corp | AOS 0.00%↑ | Building Products | Mid

Cintas Corp | CTAS 0.00%↑ | Comercial Services & Supplies | Large

Copart Inc | CPRT 0.00%↑ | Diversified Support Services | Large

Crane Co | CR 0.00%↑ | Machinery | Mid

Donaldson Company Inc | DCI 0.00%↑ | Machinery | Mid

Dover Corp DOV 0.00%↑ | Machinery | Mid

Eaton Corp | ETN 0.00%↑ | Electrical Equipment | Large

Enerpac Tool Group Corp | EPAC 0.00%↑ | Machinery | Small

Fastenal Co | FAST 0.00%↑ | Trading Cos. & Distributors | Large

Graco Inc | GGG 0.00%↑ | Machinery | Mid

Grupo Aeroportuano del Sureste SAB de CV | ASR 0.00%↑ | Airports | Mid

ITT Inc | ITT 0.00%↑ | Machinery | Mid

Landstar System Inc | LSTR 0.00%↑ | Cargo Ground Transport | Small

Lincoln Electric Holdings Inc | LECO 0.00%↑ | Machinery | Mid

Old Dominion Freight Line Inc | ODFL 0.00%↑ | Cargo Ground Transport | Large

Parker-Hannifin Corp | PH 0.00%↑ | Machinery | Large

Paychex Inc | PAYX 0.00%↑ | Human Resources Services | Large

Paycom Software Inc | PAYC 0.00%↑ | Human Resources Services | Mid

Paylocity Holding Corp | PCTY 0.00%↑ | Human Resources Services | Mid

Pentair PLC | PNR 0.00%↑ | Machinery | Mid

Robert Half Inc | RHI 0.00%↑ | Employment Services | Mid

Rockwell Automation Inc | ROK 0.00%↑ | Electrical Equipment | Mid

Snap-On Inc | SNA 0.00%↑ | Machinery & Supplies | Mid

Terex Corp | TEX 0.00%↑ | Construction Equipment | Small

Trane Technologies PLC | TT 0.00%↑ | Building Products | Large

Uber Technologies Inc | UBER 0.00%↑ | Passenger Transportation | Large

UL Solutions Inc | ULS 0.00%↑ | Research & Consulting Services | Mid

Watsco Inc | WSO 0.00%↑ | Trading Cos. & Distributors | Mid

WW Granger Inc | GWW 0.00%↑ | Trading Cos. & Distributors | Large

Information Technology Sector (25)

Accenture PLC | ACN 0.00%↑ | IT Consulting | Large

Adobe Inc | ADBE 0.00%↑ | Application Software | Large

Amphenol Corp | APH 0.00%↑ | Electronic Components | Large

Applied Materials Inc | AMAT 0.00%↑ | Semiconductor Equipment | Large

Arista Networks Inc | ANET 0.00%↑ | Communications Equipment | Large

ASML Holding NV | ASML 0.00%↑ | Semiconductor Equipment | Large

Cadence Design Systems Inc | CDNS 0.00%↑ | Application Software | Large

Check Point Software Technologies Inc | CHKP 0.00%↑ | Application Software | Mid

CGI Inc | GIB 0.00%↑ | IT Consulting & Services | Mid

F5 Inc | FFIV 0.00%↑ | Communications Equipment | Mid

Infosys Ltd | INFY 0.00%↑ | IT Consulting & Services | Large

Intuit Inc | INTU 0.00%↑ | Application Software | Large

Lam Research Corp | LRCX 0.00%↑ | Semiconductor Equipment | Large

Manhattan Associates Inc | MANH 0.00%↑ | Application Software | Mid

Monolithic Power Systems Inc | MPWR 0.00%↑ | Semiconductors | Mid

ON Semiconductor Corp | ON 0.00%↑ | Semiconductors | Mid

Qualcomm Inc | QCOM 0.00%↑ | Semiconductors | Large

Qualys Inc | QLYS 0.00%↑ | Systems Software | Small

ServiceNow Inc | NOW 0.00%↑ | Systems Software | Large

Shopify Inc | SHOP 0.00%↑ | Internet Services & Infrastructure | Large

Synopsys Inc | SNPS 0.00%↑ | Application Software | Large

TE Connectivity Ltd | TEL 0.00%↑ | Electronic Equipment | Large

Texas Instruments Inc | TXN 0.00%↑ | Semiconductors | Large

Wipro Ltd | WIT 0.00%↑ | IT Consulting & Services | Mid

Workday Inc | WDAY 0.00%↑ | Application Software | Large

Holes in the Screen

Be cautious when using screens to research stocks, limiting any use to separating the wheat from the chaff. Because of the propensity to eliminate quality enterprises, never use screeners for outright investment decisions. You are the stock selector, following further due diligence.

These calculations are available at online discount brokers or other free financial sites, such as Google Finance and Yahoo Finance. I have found Charles Schwab & Co., GuruFocus, and Morningstar to be helpful for individual stock research. However, these sites require assets under management or paid subscription upgrades to access certain levels of financial information.

Quality Names with Attractive Current Wealth

The 95 companies uncovered in this current wealth screen represent about one percent of the publicly traded investment universe. High quality is elusive in many aspects of our lives, including the stock market.

In the upcoming primary ticker research reports, I will use this watchlist and introduce additional screens to identify quality companies trading at fair or reasonable prices compared to their industry, sector, and overall market performance.

The current wealth screen updates on a semiannual or quarterly basis.

Comments and chat features are for premium subscribers only. Please share your insights on the companies in this report or suggest others. I’m always open to research suggestions.

Remember to conduct your due diligence and read the required disclosures.

Resources

The first three chapters of the draft manuscript for my upcoming fifth book, *Quality Value Investing: How to Pick the Winning Stocks of Enduring Enterprises*, cover the current wealth screening criteria used in this post.