Finding New Buys in this Fast-Moving Bull Market …

This past Saturday, my daughter’s preschool held their annual “Fun Fair” … an afternoon of pony rides, moonbounces, face painting, and general disarray.

After an hour spent volunteering at the make-your-own-tie-dye stand, I have to tell you — it was pretty darn hard to find my own kid among the little bodies running wild throughout the event!

Today, as U.S. markets continue enjoying their own wild run, conservative investors face a similar problem: Finding quality stocks still worth buying.

Fortunately, there ARE opportunities out there. And discovering them is a lot simpler today than it used to be.

One of my favorite ways to begin my own searches? A stock screen!

I’ve talked about this before, but let me recap how stock screens work …

You start with a filtering program on your computer or via the web.

Some of the very best ones cost quite a good deal of money and are typically only used by professional investors, but there are also high-quality free stock screeners available these days, too.

Then, with the program ready to go, you simply select certain criteria you’re looking for. These days you can choose from tons of different data points — everything from P/E ratios to insider buying numbers.

Once you’re done narrowing your list, you’ll end up with a group of stocks that have a number of good characteristics that you can research further.

For example, I recently ran a screen looking for the following criteria:

#1. Indicated annual yields above 1 percent — to make certain income would start flowing immediately.

#2. Dividend payout ratios at 60 percent or less — to ensure that the income would keep flowing going forward.

#3. A 5-year average return on equity of at least 20 percent — to prove that management was keeping the business moving in the right direction.

#4. And long-term debt as a percentage of capital under 30 percent — to indicate that the company’s balance sheet and overall financial health were in good shape.

Then, just with these four simple criteria, I was able to quickly come up with a short list of interesting stocks. Take a look …

Among these names are long-time bastions of quality — including some stocks that I’ve already recommended to my Income Superstars subscribers in the past.

Of course, as typically happens when I do screens like this, a few interesting niche plays also came out of the woodwork.

Take Ituran Location and Control, for example. This obscure Israeli company makes anti-theft products for vehicles and other GPS-related devices. And while it does a lot of its business in its home country, it also has a huge presence in Brazil.

Upon further digging, I found that the company is pretty tightly controlled by insiders whose primary mission seems to be doling out the steady cash flows in the form of dividends. That explains the well-above-average yield. And as you’ll see from my table, Ituran’s other financials look pretty good, too.

But ultimately, I decided not to recommend it to my subscribers.

Why not? The problem was really an issue of liquidity more than anything else — since just a couple thousand shares trade hands on a given day.

Meanwhile, it was also interesting to note the number of foreign firms on this list from China — Petrochina, CNOOC, and China Mobile Limited — as well as Brazil — Vale and Embraer. They hail from a wide range of sectors and industries, and I take this as another sign of the growth happening in emerging markets.

Another smaller stock that caught my eye is Total System Services. A quick look at this Georgia-based data processor’s chart indicated plenty of upside potential. I’d also note that two of this company’s better-known industry peers — Paychex and Automatic Data Processing — have turned out to be very solid buy-and-hold income stocks.

I also like that Starbucks made the grade, and not just because I’m a coffee fiend. The company boasts an enviable brand, and it has been executing quite a turnaround strategy.

More importantly, I believe CEO Howard Schultz will continue to find new ways to keep the company growing in the right direction — through selective expansion in the U.S., new overseas markets, and also product line extensions (such as the wine bar concept being tested in Seattle).

Ultimately, of course, it takes a lot more than a couple of good numbers — or some interesting elements — to make a stock a “buy.”

You need to know how near-term conditions (interest rates, consumer spending, etc.) may affect a given company’s business.

You have to dig deeper into the financials to make sure that other measures aren’t going south even if the criteria for this initial screen were met.

And most importantly, you have to consider how each potential new buy fits within your overall portfolio.

That’s precisely why I simply use these stock screens as a jumping-off point for further research.

But if you’re feeling a bit lost right now as the bull market charges on … I encourage you to make the search for quality stocks a lot easier by starting with a handful of characteristics you’re looking for and then using a stock screener to whittle away the dead wood.

Remember, the search can often be just as fun as the final result!

Best wishes,

Nilus

P.S. I did ultimately go on to recommend two of the stocks that appeared in this screen. To learn which ones — and WHY — just sign up for a risk-free trial to my Income Superstars newsletter by clicking here!