Sometimes a city becomes a hotbed of innovation and success, such as Venice, Italy, at one time, and Paris at another.
I am not saying Seattle is in a league with Venice and Paris, but certainly in recent years, it has produced an uncommon number of innovative and successful businesses that have become major corporations, if not household names. These include Nordstrom (JWN), Starbucks (SBUX), Amazon (AMZN), REI, Zillow (Z), Expedia (EXPE), Eddie Bauer, Paccar (PACR, maker of Kenworth and Peterbilt trucks), and Weyerhaeuser (WY), among others.
You might want to ride the tailwinds of Seattle's success by investing in some of its progeny. In searching for companies in the Seattle area that meet the requirements of my guru strategies -- which are automated strategies I modeled on the writings of some of history's greatest investors -- I found three companies worth considering as additions to your investment portfolio. All are based in or near Seattle and earn a recommendation from one of these guru strategies.
Upscale department store chain Nordstrom is one. An operator of 117 full-line department stores and 167 clearance outlets called Nordstrom Rack, Nordstrom is over 100 years old, though it is only in the last three or four decades that the company expanded beyond its initial Pacific Northwest market and became a national retailing force.
The strategy I base on James P. O'Shaughnessy's writings is a Nordstrom fan. O'Shaughnessy outlined two strategies, one for value stocks and the other for growth stocks. Nordstrom is a growth stock and the strategy likes the company's large market cap ($15 billion), earnings per share, which have increased in each of the past five years, and price-to-sales ratio (a measure of how well priced a stock is) of 1.14 (1.5 is the maximum allowed).
Among the stocks that pass these three tests, the strategy picks the top 50 to recommend based on their relative strength. Relative strength calculates how well a stock performed compared with the overall market during the past 12 months. With a relative strength of 86, Nordstrom makes it into this coveted top-50 group of stocks.
Another O'Shaughnessy growth strategy favorite is discount warehouse powerhouse Costco (COST). In Costco's favor: a market cap of $65 billion, earnings per share that have increased in each of the past five years, and a nice-and-low P/S ratio of 0.57. Its relative strength of 84 places it in the top-50 group of stocks.
Another Seattle area company favored by the O'Shaughnessy strategy (only this is for its value-strategy version) is software giant Microsoft (MSFT). Microsoft makes the grade because of its market cap ($361 billion), sizable cash flow per share and shares outstanding, and large trailing 12-month sales ($93 billion). The strategy then takes all the stocks that pass these criteria and picks the top 50 based on their dividend yield. With a 2.82% yield, Microsoft is in this top-50 cohort.
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