There are 21 companies included in the FTSE All Share index that also pass all nine of our Quality screen criteria. As often mentioned, however, screens are a starting point for research and the preponderance of housebuilder shares should be questioned – as I outlined in my magazine column, “Time to pay up for High Quality” (18.09.2019). The incredible run enjoyed by these companies in terms of earnings, combined with the fact that they’re priced as cyclicals (still enabling them to score well on the screen’s PEG criteria), means they pass tests; but that can’t mask vulnerability to asset write-downs if conditions turn sour.
Other companies that score full-marks and have traditional quality/defensive characteristics, although aren’t cheap, include Unilever (ULVR), Reckitt Benckiser (RB.) and Diageo (DGE). Domino’s Pizza (DOM) also scores 9/9. It is worth remembering Domino’s did comparatively well in the last recession, although sentiment towards the shares isn’t what it was.
The Aim market is where Domino’s first floated and we also screen the FTSE Aim All Share for companies that show signs of quality. Several companies score 9/9 on our screen – which is a good first step although much more analysis is needed. Aim companies that newly get top marks this month are Judges Scientific (JDG), who own subsidiaries manufacturing various scientific instruments, and Bioventix (BVXP) who manufacture sheep antibodies for use in blood tests. Both are quality businesses but neither looks especially cheap.
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