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Michael Cloherty is senior account manager for StockPointer at Inovestor Inc.

What are we looking for?

As a follow-up to a similar screen of Canadian-listed stocks in mid-September, today we're looking for U.S. companies with high economic value – companies creating the highest economic profit for their shareholders, and trading below their intrinsic value.

The screen

We searched for the top 20 U.S. stocks in StockPointer with a minimum market cap of $5-billion (U.S.) and looked at the following metrics:

– Economic performance index, or EPI, (return on capital divided by cost of capital) to find those companies that create the highest economic profit for investors. We want a ratio higher than 1.0 because it reflects wealth creation for shareholders.

– A price vs. intrinsic value ratio of less than 1.0 to ensure that the stock trading at a discount relative to its intrinsic value.

– Future growth value divided by market value (FGV/MV) – a ratio that helps determine whether the stock is trading at a discount or premium to its growth. A negative FGV/MV indicates the current market value is lower than the current value of the operations of the company.

– A market value-added ratio (MVA/MV) that is positive to ensure the invested capital is working properly. MVA is the total market value minus the capital that was invested in the company.

More about StockPointer

StockPointer is a fundamental analysis tool based on an EVA (economic value added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 6,500 companies (Canadian and U.S. stocks and American depositary receipts), StockPointer (stockpointer.ca) also allows investors to create personalized filters and build custom portfolios.

What did we find?

Some 70 per cent of the companies listed here come from the consumer staples and discretionary sectors. Two of the companies, DirecTV Group Inc. and Lorillard Inc., trade close to their intrinsic value because they are currently subject to takeover bids. Very few companies trade at a discount relative to their future growth value.

Investors are advised to do additional research prior to investing in any of the companies mentioned.

StockPointer screen for U.S. stocks with high economic value