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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