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In a market that’s gone mad, investors can embrace these dependable stocks

By Paul R. La Monica, CNN

Many people don’t have the time or inclination to do deep research on stocks.

It’s often easier to buy an exchange-traded fund that owns a basket of the top blue chips, like Apple, Microsoft and Amazon. Other investors like to bet on themes and memes instead of poring over a company’s financial statements and regulatory filings. Hence the recent craze for momentum stocks like GameStop and AMC.

But for old-fashioned investors with a little gray in their hair (and veteran business journalists like yours truly) there are other ways to find winning stocks for the long haul.

I’ve been running stock screens using market data software, first from FactSet and now from Refinitiv, on and off during the more than 20 years I’ve worked at CNN Business. (It was CNNMoney when I first started.)

I’ve typically done this stock picking feature in early to mid February as a Stocks We Love type of story, pegging it to Valentine’s Day. (Here’s the first one I did in 2002!) So they’ve often been littered with cheesy references to how romantic it is to find a reliable company you can count on for a long-term relationship.

Well, investing trends have changed a bit in the past two decades. Some would argue that active investing (actually choosing individual companies) is no longer in vogue thanks to the rise of passively run index funds.

And to be fair, the experts are right, mostly. Investors usually are better off owning an index ETF. If the goal is saving for retirement in particular, a diversified mix of companies is safer than trying the riskier strategy of identifying individual winners and losers.

Top stocks for the patient investor

But you know what they say about not being able to teach an old dog new tricks? I still believe there’s value in looking for quality stocks at bargain prices. Legendary investors like Warren Buffett and Peter Lynch of Fidelity fame would likely agree.

With that in mind, I ran one final stock screen for this Valentine’s Day. Like my past screens, I tried to find companies with strong fundamentals (solid sales and earnings growth), low levels of debt and high returns on equity. And perhaps most importantly, I screened for companies trading at a reasonable price based on their estimated earnings.

This screen wound up identifying 33 companies that could make sense as a buy-and-hold investment. All of them generated double-digit sales growth annually over the past five years and they are all expected to report profit growth of at least 10% a year for the next few years.

Some of the more prominent companies on the list? IT services/consulting giant Accenture made the cut. So did software leader Adobe, semiconductor manufacturer Analog Devices, chip equipment juggernaut Applied Materials and Venmo owner PayPal.

That’s a fair amount of exposure to the tech sector. But several other non-techs made my list too.

Auto insurer Progressive (hi Flo!), health insurer Humana, cosmetics retailer Ulta Beauty, UGG boots and Hoka sneakers maker Deckers Outdoor and trucker JB Hunt met my criteria.

As did financial services firm Raymond James, perhaps most famous for having its name on the Tampa Bay Buccaneers stadium Tom Brady briefly called home.

None of these stocks are likely to be moonshots that will surge because of comments that someone makes on Reddit. But they might offer a little more in the way of security and dependability. And after all, isn’t that what we all want from a long-term partner on Valentine’s Day?

Consumer shift?

The broader market has continued to rally, in large part due to hopes that inflation pressures (and more Federal Reserve rate hikes) will soon be things of the past. But consumers are still skittish when it comes to buying more costly items.

Meat processing giant Tyson Foods reported disappointing results last week, largely due to a pullback in consumer demand for pricier beef. Luxury apparel retailer Capri Holdings, which owns the Versace, Jimmy Choo and Michael Kors brands, also posted lousy numbers.

But shoppers still seem to be spending on more affordable goods. Pepsi reported sales and earnings last week that topped Wall Street’s targets. Fast food giant Yum! Brands, the owner of Taco Bell, KFC and Pizza Hut, issued solid results too.

That could bode well for several leading consumer companies that are on tap to report earnings this week, including Pepsi competitor Coca-Cola as well as Restaurant Brands, the parent company of Burger King, Popeyes, Tim Horton and Firehouse Subs.

Kraft Heinz, restaurant owner Bloomin’ Brands, Sam Adams brewer Boston Beer and food delivery service DoorDash are also scheduled to release their latest results this week.

The restaurant stocks in particular could do well.

“Consumers continue to trade goods for services,” said Jharonne Martis, director of consumer research for Refinitiv, in a report. Martis noted that the restaurant and broader leisure sector has continued to outperform other consumer-related industries this year.

Inflation is obviously still a concern for big consumer brands. Companies have to deal with the challenge of trying to pass on higher costs to customers without driving them away.

That could become less of a problem though.

The US government will report both its Consumer Price Index and Producer Price Index for January this week and economists are hoping for a further slowdown in year-over-year prices. Consumer prices rose 6.5% over the past 12 months through December, down from a 7.1% pace in November.

“There are positive signs. Inflation has passed the peak so there is a little bit of a respite,” said Kathryn Kaminski. chief research strategist with AlphaSimplex.

Higher prices were a problem for retailers during the holidays. Retail sales fell 1.1% in December from November, according to figures from the US government, following a 0.6% drop in November.

But retail sales are expected to bounce back as inflation becomes less of an issue. Economists are forecasting a 0.9% increase in retail sales for January when those numbers come out later this week.

Up next

Monday: Earnings from TreeHouse Foods, Avis Budget, FirstEnergy, IAC and Palantir

Tuesday: US CPI; Japan GDP; UK employment report; earnings from Coca-Cola, Asahi Group, Marriott. Cleveland-Cliffs, Restaurant Brands, Suncor Energy, Airbnb, Herbalife, GoDaddy and TripAdvisor

Wednesday: US retail sales; UK inflation; weekly crude oil inventories; annual meeting of Charlie Munger’s Daily Journal Co; earnings from Kraft Heinz, Lithia Motors, Sunoco, Sonic Automotive, Ryder, Barrick Gold, Biogen, Owens Corning, Krispy Kreme, Cisco, AIG, Shopify and Boston Beer

Thursday: US PPI; US weekly jobless claims: US housing starts and building permits; China housing prices; earnings from US Foods, Lenovo, Nestle, Paramount Global, Southern, Hasbro, Hyatt, Bloomin’ Brands, WeWork, Applied Materials, DoorDash, DraftKings and Redfin

Friday: Earnings from Deere, AutoNation, Sands China and AMC Networks

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