Serious Money: Fortune's 25 leaders, now 20

The following reiterates the prioritized twenty stocks accordingly to the price-to-book. If this were the sole criteria without further due diligence only one stock makes the grade and three others might be worth a glance. At the bottom end it would be laughable to consider investing at those ridiculous multiples, even though they are great companies.

1. ICICI Bank Limited (IBN) -- P/B 0.81
2. Whirlpool Corporation (WHR) -- P/B 1.44
3. General Electric (GE) -- P/B 1.49
4. FedEx Corporation (FDX) -- P/B 1.56
5. Deere & Company (DE) -- P/B 2.4
6. The Procter & Gamble Company (PG) -- P/B 2.59
7. China Mobile Limited (CHL) -- P/B 2.74
7. Intel Corporation (INTC) -- P/B 2.74
9. American Express Company (AXP) -- P/B 2.89
10. TNT Post UK Limited (TNTTY) OTC -- P/B 3.37
11. General Mills, Inc. (GIS) -- P/B 3.57
12. Eli Lilly & Company (LLY) -- P/B 3.83
13. 3M Corporation (MMM) -- P/B 4.23
14. McDonald's Corporation (MCD) -- P/B 4.67
15. Unilever ADR (UL) -- P/B 4.78
16. Infosys Technologies Limited (ADR) (INFY) -- P/B 6.46
17. International Business Machines Corporation (IBM) -- P/B 8.54
18. Lockheed Martin Corporation (LMT) -- P/B 9.45
19. Colgate-Palmolive Corporation (CL) -- P/B 13.64
20. PepsiCo, Inc. (PEP) -- P/B 14.52

Endeavoring to find more clarity, the next list was screened and prioritized by the most commonly used metric, the price-to-earnings ratio (P/E). Perhaps this is a much lower hurdle to cross because 1 through 10 are lower than the market average and 11 through 16 might be reasonable given the quality of the stocks. Interestingly two of the too-high P/E stocks had the most desirable P/B's.

1. Eli Lilly -- P/E 8.04
2. Lockheed Martin -- P/E 10.08
3. China Mobile Limited -- P/E 11.74
4. IBM -- P/E 12.96
5. General Electric -- P/E 14.36
6. TNT Post -- P/E 15.48
7. Unilever ADR -- P/E 15.5
8. General Mills -- P/E 15.99
9. McDonald's -- P/E 16.43
10. Procter & Gamble -- P/E 17.4
11. Deere -- P/E 18.44
12. PepsiCo -- P/E 18.65
13. 3M -- P/E 19.24
14. Colgate-Palmolive -- P/E 20.4
15. Whirlpool -- P/E 20.11
16. Infosys -- P/E 22.48
17. ICICI -- P/E 28.9
18. American Express -- P/E 33.2
19. FedEx -- P/E 38.09
20. Intel -- P/E 45.5

It has been substantially documented that measured over long periods of time, the price-to-sales (P/S) metric is a more reliable picture of value, since it is much easier to "fudge" the net earnings than the gross receipts. Here is the list screened by P/S.

1. Whirlpool -- P/S 0.17
2. FedEx -- P/S 0.53
3. Deere -- P/S 0.59
4. American Express -- P/S 0.67
5. ICICI -- P/S 0.67
6. Lockheed Martin -- P/S 0.81
7. General Electric -- P/S 0.90
8. Unilever -- P/S 1.1
8. TNT Post -- P/S 1.11
10. IBM -- P/S 1.12
11. General Mills -- P/S 1.54
12. 3M -- P/S 1.61
13. PepsiCo -- P/S 2.03
14. Eli Lilly -- P/S 2.16
15. Intel -- P/S 2.24
16. Colgate-Palmolive -- P/S 2.3
17. Procter & Gamble -- P/S 2.46
18. McDonald's -- P/S 3.03
19. Infosys -- P/S 3.37
20. China Mobile Limited -- P/S 3.42

After three screening rounds, we can glean some perspective. Not absolute clarity, but enough to whittle down the list. Each stock's rank 1 though 20 was aggregated and added together, the first number being the P/B, the second the P/E and the third the P/S. The best possible outcome therefore would be a 3 and the worst a 60.

As a testament to the accuracy of limited polling numbers, it is noteworthy that the higher ranked stocks offset the lower (a bell curve) and that exactly 30 was the score of middle stocks ranked 9,10 and 11. Only two stocks, GE and TNT, ended up in the top half for each of the three screens. Eleven others ranked in the top half two out of three times.

Like many other formula-driven ideas presented to us each day, numbers can be deceiving, so I will not pretend that this simple screening process will lead to predictable success. It is just the starting point and the rankings in each screen are not the same. For example in the P/B screen (the first number) only those stocks in the first 4 to 5 ranks might be considered, where as in the P/E list I might consider ranks through 15 or 16. It changes again in the P/S list, where I might limit my efforts to the 10 to 12 range.

General Electric: 3 + 5 + 7 = 15
Whirlpool: 2 + 15 +1 = 18
Deere: 5 + 11 + 3 = 19
ICICI: 1 + 17 + 5 = 23
TNT Post: 10 + 6 + 8 = 24
FedEx: 4 + 19 + 2 = 25.
Lockheed Martin: 18 + 2 + 6 = 26
Eli Lilly: 12 + 1 + 14 = 27
China Mobile Limited: 7 + 3 + 20 = 30
General Mills: 11 + 8 + 11 = 30
Unilever: 15 + 7 + 8 = 30
American Express: 9 + 18 + 4 = 31
IBM: 17+ 4 +10 = 31
Procter & Gamble: 6 + 10 + 17 = 33
Intel: 7 + 20 + 10 = 37
3M: 13 + 13 + 12 = 38
McDonald's: 14 + 9 + 18 = 41
PepsiCo: 20 + 12 + 13 = 45
Colgate-Palmolive: 19 + 14 +16 = 49
Infosys: 16 + 16 + 19 = 51

Starting with Infosys, the only stock placing in the bottom quadrant of the 20 in all three screens: it looks expensive. Perhaps the P/E in the low 20s might be rationalized, but given the entire picture it is not bad to remove this one from further review. Colgate-Palmolive, likewise does not appear to be a value opportunity at this time and will be cut. There is no doubt that these two stocks represent fine enterprises, but from an investment perspective they seem pricey.

The next screens will be price-to-cash flow (P/CF) and return-on-equity (ROE), which will be posted tomorrow.

Sheldon Liber is the CEO of a small private investmnt company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: At time of publication, I own shares and options in GE.