Select 10 stocks for long term

Screening Filters

1. Index Membership: is_index_component = ['GSPC', 'NDX'] (S&P 500 and Nasdaq 100)

   • Purpose: Focus on large, established U.S. companies.
   • Rationale:
     • The S&P 500 (GSPC) and Nasdaq 100 (NDX) are composed of leading U.S. companies by size and market importance.
     • These firms typically have stronger governance, better disclosure, and more diversified businesses—qualities that are attractive for long‑term investors.
     • This avoids very small, illiquid, or highly speculative names that are less suitable for long‑term core holdings.

2. Profitability: return_on_equity (ROE) ≥ 12%

   • Purpose: Ensure the companies are consistently generating solid returns on shareholder capital.
   • Rationale:
     • ROE measures how efficiently a company turns equity into profit.
     • A threshold of 12% focuses on businesses that historically have decent to strong profitability, a key ingredient for compounding over many years.
     • For long-term investment, sustained profitability is more important than short‑term price moves.

3. Balance Sheet Quality: debt_equity (D/E) ≤ 1

   • Purpose: Filter out companies that rely heavily on debt financing.
   • Rationale:
     • A D/E ratio under 1 means total debt does not exceed shareholders’ equity, indicating a more conservative capital structure.
     • Lower leverage reduces financial risk in downturns, which is important when you plan to hold a stock across economic cycles.
     • This improves the chance that the business can weather recessions without severe dilution or distress.

4. Growth Profile: revenue_5yr_cagr ≥ 5%

   • Purpose: Require a reasonable history of top‑line (sales) growth.
   • Rationale:
     • A 5‑year compound annual growth rate (CAGR) of at least 5% focuses on companies that are actually expanding their business, not just cutting costs or financial engineering earnings.
     • Long‑term returns are heavily driven by a company’s ability to grow revenues and profits over time.
     • This helps avoid stagnant or structurally declining businesses that may not be good long‑term holdings.

5. Valuation: pe_ttm between 10 and 30

   • Purpose: Avoid both extremely cheap (potentially distressed) and extremely expensive (potentially overhyped) stocks.
   • Rationale:
     • A P/E below 10 can sometimes signal deep problems or cyclical risk; above 30 can imply very high expectations already priced in, which increases downside risk if growth disappoints.
     • The 10–30 band targets a “reasonable” valuation range for profitable, growing companies—balancing quality and price for long‑term investment.

Why Results Match a Long-Term Investment Objective

• The focus on S&P 500 and Nasdaq 100 limits the universe to established, liquid U.S. companies suitable as core long‑term holdings.
• Profitability (ROE ≥ 12%) and growth (revenue CAGR ≥ 5%) target businesses with both quality and the ability to compound over time.
• Prudent leverage (D/E ≤ 1) improves resilience across economic cycles—crucial for multi‑year holding periods.
• Reasonable valuation (P/E 10–30) aims to reduce the risk of overpaying, supporting better risk‑adjusted returns over the long term.

Taken together, these filters narrow the list to U.S. blue‑chip or near blue‑chip companies that combine quality, growth, financial strength, and sensible pricing—characteristics well aligned with a long‑term investment strategy.