Our quality screen can be thought of as serving a dual purpose. On the one hand it highlights larger companies that fit the traditional mould of a quality long-term holding; and on the other, it provides a sense check before investing in smaller companies or those in more volatile sectors.
- High ranking companies like consumer staples giant Unilever (ULVR) or data business Experian (EXPN) fall firmly in the former camp. Unilever no longer passes 9/9 (it now looks expensive on our price-to-earnings growth criteria) but although it will never shoot the lights out as a growth stock, its defensive characteristics remain attractive as there is plenty of economic uncertainty.
- The screen is also a useful starting point for monitoring potential recovery stories. Of course, common sense should apply – it would be bold indeed to buy indoor entertainment business Hollywood Bowl (BOWL) on the strength of this screen – but quality signals are reassuring should the trading environment improve and provide a catalyst for shares to re-rate.
