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Investors Cite Growth, Fundamentals and Valuation as Most Important Stock Qualities

This week’s Sentiment Survey special question asked AAII members about the most important qualities or characteristics they look for in a stock. Topping the list is growth, cited by more than a third of all respondents (35%). Earnings growth and dividend growth are particularly singled out. A close second (32% of respondents) is fundamental factors like dividends and cash flow. A little more than 30% of respondents say they focus on valuation, especially the price-earnings ratio. Twenty-five percent of respondents name business characteristics, particularly defensible market share. Many respondents list more than one trait or characteristic.

Here is a sampling of the responses:

  • “Rising earnings, persistent and rising dividends and a moderate P/E. Why? These spell low risk to me.”
  • “Free cash flow allows the company to grow its business and/or dividends.”
  • “Good value, nice dividend … these are the ones that have served me the best since I started investing.”
  • “Solid company with a stable history of increasing revenue and earnings.”
  • “Competitive advantage (moat); this is relatively easy to identify and to distinguish if it is eroding.”

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