How our Successful Investor rating system helps you find the best U.S. stock market picks

Our Successful Investor rating system is a key guide we use to make stock market picks for our newsletters and investment services, including Wall Street Stock Forecaster, our publication that focuses on top-quality U. S. stock market picks.

Use our ratings to quickly spot the best U.S. stock market picks

We continue to recommend that Canadian investors hold 25% to 30% of their portfolios in well-established U.S. companies, like the stock market picks we recommend in Wall Street Stock Forecaster. To help you quickly and easily determine whether a U.S. stock is appropriate for your portfolio balance and risk tolerance, we display one of our six Successful Investor ratings next to every stock we cover in Wall Street Stock Forecaster.

Our top rating is Highest Quality, followed by Above Average, Average, Extra Risk, Speculative and, at the bottom of the scale, our riskiest, lowest-quality rating of Start-up.

We award these ratings on a point system, using nine key factors to determine a company’s ability to survive a business setback and go on to greater success when conditions improve.

Our nine key factors for assigning our Successful Investor ratings are:

• One point for a long-term record of profit;
• One point for a long-term record of dividends;
• One point for industry prominence — two points for industry dominance;
• One point for an attractive balance sheet, with adequate equity and working capital, and manageable debt;

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• One point for Canada-wide operations, or two points for multinational operations;
• One point for being able to serve all shareholders’ needs. To merit this point, firms must be free of excess government regulation, free of too much dependence on a single supplier, and free of insider abuses;
• One point for freedom from business cycles;
• One point for the ability to profit from a secular trend, or two points for the ability to profit from two or more secular trends. Secular trends (such as the global move toward economic liberty and free trade) go far beyond mere business cycles; they reflect ongoing changes in society;
• One point for offering products or services that profit from habitual behaviour.

Companies with 11 or 12 points fall into the top category: Highest Quality, and are the ones we focus on when we look for winning stock picks. Those with eight to 10 points are Above Average. Six or seven points mean they are Average. If a stock has just four or five points, it carries Extra Risk (that is, more risk than average); two to three points, Speculative; one or no points, Start-up.

Unlike computerized risk assessments, our ratings demand many judgment calls. But we find this system gives us a deep-seated measure that goes to the heart of a company’s staying power, and yields few unfortunate surprises.

To get our latest strategies for profiting in the fast-changing U.S. market, and clear, specific buy/sell/hold advice on dozens of U.S. companies, you should subscribe to Wall Street Stock Forecaster. Click here to learn how you can get a one month free trial.