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Sorting quality shares from fools' gold

Quality tests are a starting point but investors need to dig further
Sorting quality shares from fools' gold

Gold miner Polymetal International (POLY) remains the only company scoring full marks on our large cap quality screen. The price of gold has potential to pull-back and be volatile but owning a slice of a company that pays a 3.8 per cent dividend, seems a decent way to play the secular trend of decline in fiat currency.

  • Reliable shares that score 8/9 include consumer goods giant Unilever (ULVR), hobby (and perhaps now intellectual property) star Games Workshop (GAW), IT firm Kainos Group (KNOS) and data business Experian (EXPN).
  • Steel business Evraz (EVR) is the share that sticks out in the 8/9 group. The high debt and dividend combination a risk that makes its high-ranking in our quality screen seem slightly incongruous.
  • When looking at companies listed on Aim, it is vital to do further research and not just buy on the strength of a stock screen. Some of the ideas flagged are quality companies but the tests they fail are a good indicator where to ask more questions. For example, YouGov (YOU) is a great data business, but our screen flags it has become more expensive relative to growth.
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