One of my stalwart strategies mirrors James P. O'Shaughnessy's investment techniques. It's returned 7.9% since 2003, an outperformance of about one-third.
At this time, the strategy is recommending two automobile manufacturers, including one that regulators are looking at.
Given the regulatory issues both companies face, particularly regarding diesel emissions, these companies, though household names, should be considered somewhat risky investments. Depending on your taste for risk and how well you think the market has priced regulatory challenges in these companies' stock prices, any or both of these stocks might give your investment portfolio a good ride for its money.
While Volkswagen (VLKAY) has become infamous for its emission scandal, Also in the news is another German company, Daimler (DDAIF), maker of Mercedes autos, which is conducting an internal investigation into diesel emission certifications at the request of the U.S. Department of Justice. Owners of the company's diesel cars have filed lawsuits against the company, claiming it installed software designed to defeat emissions testing, much like Volkswagen did, though Daimler has said such lawsuits are without merit. Volkswagen has admitted wrongdoing. Daimler maintains it has done nothing wrong. The other auto maker liked by my O'Shaughnessy-like strategy is Japanese headquartered Honda (HMC).
The O'Shaughnessy strategy pits stocks against four hurdles: market cap, cash flow per share, number of outstanding shares and 12-month trailing sales. To be considered for a recommendation, a stock has to meet or beat the minimum requirements for each of these variables, such as cash flow per share that must be greater than the mean of the market's cash flow per share. Daimler and Honda both easily pass all of these tests.
Then the strategy adds one more test: dividend yield. Among all the stocks that pass the first four tests, only the top 50 based on yield earn a top recommendation. Daimler's 4.89% yield and Honda's 3.25% yield place both these auto makers into this coveted top-50 group.
No doubt, investing in these companies is a risky business, but my O'Shaughnessy strategy likes them. You may, too, if you buy them at this time.