- Historical performance, which looks at the company’s historical financials over the past 10 years, where discounts are given for poor performance and inconsistency;
- Profitability, which looks at profitability ratios such as return on equity, return on assets and margins;
- Yields and valuation, which compares the company’s fundamental yields against the risk-free rate and its relative valuation to peers;
- Financial safety, which examines the company’s balance sheet, comprising of liquidity and solvency ratios, the quality of its shareholder equity, and any external credit rating on the company;
- Sentiment, which looks at analyst ratings and forward price ratios on the company;
- Price-to-value aspect, which compares the price growth to the weighted value growth over multiple periods. This weighted value includes revenue, net income, and cash flows in ascending order.
The highest scoring companies are the stocks investors ought to examine further for qualitative analysis and consider for their portfolio.
Table 1 shows the scores for the “Price of Sin” stocks, which are sin-themed companies, excluding defence stocks.
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Table 2 shows the scores for the “Stocks to Die For” stocks, which are purely defence-themed stocks.
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The highest-scoring company in both tables is Shenzhen-listed Wuliangye Yibin, which manufactures and markets liquor. Similarly, the second-highest scoring company is Shanghai-listed Kweichow Moutai, which manufactures and sells alcoholic spirits. A strongly undervalued company is Korea-listed KT&G Corp, which produces and sells cigarette and tobacco products.
