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Cory -

In my haste to provide a list of interesting candidates above, I should have said they all pass the FIRST of the three screens; that is, they all possess earnings power.

As for sustainability of competitive advantage and valuation, these are grayer areas. For a company like ARO, heck if I know what gives it a moat. I do not shop there. But, the teen retailer's chart is impressive. So I intend to buy a starter position and learn more about the business.

One of the items I look for when doing my 5-minute test is year 5 enterprise value/free cash flow yield. I take today's EV/FCF yield, then calculate what this yield will be five years from now if the company achieves growth long-term estimates. If five years from now the yield is over 10%, then I am interested. My list of companies all had Year 5 EV/FCF yields over 10%. But as always, please double-check my work.

I am a big fan of Morningstar's work, including their estimates of intrinsic value.


Hewitt
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