Stocks for long term investment

Screening Filters

1. Market Cap ≥ $10B & Market Cap Category: Large / Mega

   • Purpose: Focus on established, financially stable companies suited for long-term holding.
   • Rationale:
     • Large- and mega-cap firms (>$10B) tend to have more diversified operations, stronger competitive positions, and better access to capital.
     • They are generally less volatile than small caps, which aligns with a typical long-term investor’s preference for stability and consistency over speculative upside.

2. Exchange Listing: NYSE (XNYS) and NASDAQ (XNAS)

   • Purpose: Limit the universe to major US exchanges to match “US market” and ensure liquidity and regulatory standards.
   • Rationale:
     • NYSE and NASDAQ are the primary US stock exchanges, with stricter listing requirements, better disclosure, and higher trading volumes.
     • This reduces issues like illiquidity and poor corporate governance, both important for long-term investors.

3. Return on Equity (ROE) between 10% and 1000%

   • Purpose: Identify companies that generate solid returns on shareholders’ capital (a marker of quality and efficiency).
   • Rationale:
     • A minimum ROE of 10% screens out many low-quality or structurally unprofitable businesses.
     • Strong and sustainable ROE often reflects competitive advantages, good management, and efficient capital allocation—all key for compounding over many years.
     • The very high upper limit (1000%) simply avoids excluding unusually high-ROE cases (e.g., asset-light or special-structure firms) without being too restrictive on the upside.

4. Debt-to-Equity (D/E) between 0 and 1

   • Purpose: Prefer companies with moderate or low leverage to reduce financial risk over long horizons.
   • Rationale:
     • A D/E cap at 1 filters out highly indebted companies that may struggle in downturns or rising rate environments.
     • Long-term investors typically want businesses that can weather economic cycles without needing constant refinancing or facing solvency risk.

5. Revenue 5-Year CAGR ≥ 5%

   • Purpose: Ensure that companies are not just stable, but also growing at a reasonable pace.
   • Rationale:
     • A minimum 5% compound annual growth in revenue over five years selects firms with consistent top-line expansion.
     • Long-term returns are heavily driven by earnings and revenue growth; this filter aims to find businesses with a demonstrated growth trajectory, not just mature but stagnant incumbents.

Why Results Match the User’s Query:

• The US market focus is met by restricting listings to NYSE and NASDAQ, the core US exchanges.
• Long-term suitability is addressed by:
  • Emphasizing large/mega caps for stability and resilience.
  • Requiring strong profitability (ROE ≥ 10%) to favor quality, capital-efficient businesses that can compound over time.
  • Limiting leverage (D/E ≤ 1) to reduce the risk that debt undermines long-term performance.
  • Requiring sustained revenue growth (≥ 5% 5-year CAGR) to identify companies with ongoing business momentum.

Taken together, the filters narrow the universe to established, relatively lower-risk, profitable, and growing US-listed companies—characteristics that align well with long-term investment objectives.