Investors need to embrace these stocks that we love

It’s often easier to buy an exchange-traded fund that owns a basket of the top blue chips, like Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN). Other investors like to bet on themes and memes instead of poring over a company’s financial statements and regulatory filings. Hence the recent craze for momentum stocks like GameStop (GME) and AMC (AMC).

I’ve typically done this stock picking feature in early to mid February as a Stocks We Love type of story, pegging it to Valentine’s Day. (Here’s the first one I did in 2002!) So they’ve often been littered with cheesy references to how romantic it is to find a reliable company you can count on for a long-term relationship.

Well, investing trends have changed a bit in the past two decades. Some would argue that active investing (actually choosing individual companies) is no longer in vogue thanks to the rise of passively run index funds.

And to be fair, the experts are right, mostly. Investors usually are better off owning an index ETF. If the goal is saving for retirement in particular, a diversified mix of companies is safer than trying the riskier strategy of identifying individual winners and losers.

Top stocks for the patient investor

But you know what they say about not being able to teach an old dog new tricks? I still believe there’s value in looking for quality stocks at bargain prices. Legendary investors like Warren Buffett and Peter Lynch of Fidelity fame would likely agree.

With that in mind, I ran one final stock screen for this Valentine’s Day. Like my past screens, I tried to find companies with strong fundamentals (solid sales and earnings growth), low levels of debt and high returns on equity. And perhaps most importantly, I screened for companies trading at a reasonable price based on their estimated earnings.

This screen wound up identifying 33 companies that could make sense as a buy-and-hold investment. All of them generated double-digit sales growth annually over the past five years and they are all expected to report profit growth of at least 10% a year for the next few years.

That’s a fair amount of exposure to the tech sector. But several other non-techs made my list too.

None of these stocks are likely to be moonshots that will surge because of comments that someone makes on Reddit. But they might offer a little more in the way of security and dependability. And after all, isn’t that what we all want from a long-term partner on Valentine’s Day?

Consumer shift?

The broader market has continued to rally, in large part due to hopes that inflation pressures (and more Federal Reserve rate hikes) will soon be things of the past. But consumers are still skittish when it comes to buying more costly items.

The restaurant stocks in particular could do well.

“Consumers continue to trade goods for services,” said Jharonne Martis, director of consumer research for Refinitiv, in a report. Martis noted that the restaurant and broader leisure sector has continued to outperform other consumer-related industries this year.

Inflation is obviously still a concern for big consumer brands. Companies have to deal with the challenge of trying to pass on higher costs to customers without driving them away.

That could become less of a problem though.

“There are positive signs. Inflation has passed the peak so there is a little bit of a respite,” said Kathryn Kaminski. chief research strategist with AlphaSimplex.

Higher prices were a problem for retailers during the holidays. Retail sales fell 1.1% in December from November, according to figures from the US government, following a 0.6% drop in November.

But retail sales are expected to bounce back as inflation becomes less of an issue. Economists are forecasting a 0.9% increase in retail sales for January when those numbers come out later this week.

Up next