In his Validea newsletter, editor John Reese picks stocks based on the long-standing strategies of "legendary" investors, including investment stars as Warren Buffett, Peter Lynch, and others known for long-term records of success.
Here, the advisor takes a look at Chevron (NYSE: CVX), based on the investment strategy of leading growth and value investor James O'Shaughnessy.
"O'Shaughnessy's approach, know as the Cornerstone Value Strategy, looks for large, well known companies whose market cap is greater than $1 billion. These companies exhibit solid and stable earnings. CVX's market cap passes this test.
"The second criterion requires that the company exhibit strong cash flows. Companies with strong cash flow are typically the value oriented investments that this strategy looks for.
"The company's cash flow per share must be greater than the mean of the market cash flow per share ($0.55). CVX's cash flow per share of $15.36 passes this test.
"This particular strategy looks for companies whose total number of outstanding shares are in excess of the market average (597 million shares). These are the more well known and highly traded companies. CVX passes this test.
"A company's trailing 12 month sales ($243,189 million) are required to be 1.5 times greater than the mean of the market's trailing 12 month sales ($17,254 million). CVX passes this test.
"The final step in the Cornerstone Value strategy is to select the 50 companies from the market leaders group (those that have passed the previous four criteria) that have the highest dividend yield. CVX, with a dividend yield of 3.83%, is one of the 50 companies that satisfy this last criterion."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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