IBD Stable 70 Screen
|IBD Stable 70||S&P 500|
|Five Year Return:||15.7%||13.3%|
|Ten Year Return:||8%||5.9%|
Many of our readers are familiar with William O'Neil's CAN SLIM growth approach for selecting and managing a portfolio of stocks. O'Neil founded Investor's Business Daily (IBD), a financial newspaper that presents stock and market information integral to the CAN SLIM system. Two years ago, the analysts and editors at Investor's Business Daily attempted to identify the characteristics of those companies that had weathered the recent economic and stock market downturn. The goal was to apply those factors going forward to identify "recession-proof" companies. The fruit of their efforts was the Stable 70 list, which consists of companies with strong and stable long-term earnings growth.
This article will discuss how to apply the IBD Stable 70 screen using AAII's Stock Investor Pro fundamental stock screening and database program, which covers a universe of approximately 8,000 NYSE, Amex, and Nasdaq National Market, Nasdaq Small Cap, and over-the-counter bulletin board or pink sheet stocks.
Stable 70 Screening Criteria
Investor's Business Daily applies the following criteria to its database of over 2,700 publicly held companies to arrive at the Stable 70 list:
- share price of at least $12;
- five-year earnings growth of at least 10%;
- year-on-year earnings growth of at least 10% for each of the last five fiscal years;
- quarter-on-quarter earnings and sales growth of at least 10%, as defined by growth between the latest fiscal quarter and the same quarter one year prior; and
- an "earnings stability" rate of 20% or less, which shows how a firm's annual earnings compare with the trend in earnings over the last five years—the lower the percentage, the more consistent its profit, year after year.
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