Dividends and Why an auto-parts retailer tops Goldman’s list of highest quality stocks

We are all bias, which make lists from the investment banking houses interesting to note. Business writers often see investment bankers recommendations and David Berman wrote about Goldman picks. Goldman Sachs complied a list of US companies within the S&P 500 that have strong balance sheets, stable sales, growing earnings per share, high return on equities and a track record of mild sell offs. The companies have high gross profit margins and can pass along costs to customers.

Using a scale of 0 to 100, Goldman gave O’Reilly Automotive Inc a retailer of auto parts and tools for the do-it-yourself and professional installer markets. The company has 5.190 stores in 47 states and generated a profit of $366 million in the 3rd quarter. The same day sales per store increased 3.9% and the company is looking to open another 200 stores.

While O’Reilly received 94, Mastercard and VISA received 92, the average was 81 and 52 for the entire S&P 500.

Morgan Stanley also likes O’Reilly because the Do it yourself market is less discretionary, less promotional, and competitive pricing is generally benign.

The stock was down 5% in October, but is up 36% in 2018 to $320 area.

Linking to dividend paying stocks, there are opportunities in every sector, which makes doing your homework important. Most of us tend to look at 2 or 3 sectors because we pay attention to those sectors, but ensure you are looking past them, there are diamonds in the rough.

There are more questions than answers, till the next time – to raising questions.

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