Best long term investing

Screening Filters

1. is_index_component: GSPC (S&P 500 companies)

   • Purpose: Limit the universe to companies that are part of the S&P 500 index.
   • Rationale:
     • The S&P 500 contains large, established U.S. companies with stricter listing and index-inclusion standards.
     • For long‑term investing, these tend to be more stable, better‑governed businesses with stronger disclosure and liquidity than small or micro caps.
     • This aligns with a long‑term, core-portfolio approach rather than speculative stock picking.

2. debt_equity: max 1.0 (Debt-to-Equity ≤ 1)

   • Purpose: Exclude companies that are highly leveraged (too much debt relative to their equity).
   • Rationale:
     • High debt can be dangerous in downturns: interest costs become a burden, refinancing risk rises, and bankruptcy risk increases.
     • A debt/equity ratio ≤ 1.0 favors companies with more conservative balance sheets, which is important for surviving recessions and compounding over many years.
     • This supports the user’s interest in long‑term durability rather than short‑term upside.

3. return_on_equity: min 12 (ROE ≥ 12%)

   • Purpose: Focus on businesses that generate strong profits relative to shareholder equity.
   • Rationale:
     • ROE is a key measure of how efficiently a company turns shareholders’ capital into profits.
     • A 12%+ ROE is generally viewed as a sign of a high‑quality or at least above‑average business.
     • Over long periods, companies with consistently high ROE tend to compound shareholder value more effectively, matching the goal of long‑term wealth accumulation.

4. eps_5yr_cagr: min 7 (5‑Year EPS Growth ≥ 7% annually)

   • Purpose: Ensure the company has a solid track record of growing earnings per share over the past five years.
   • Rationale:
     • Long‑term stock returns are heavily driven by growth in earnings.
     • A minimum 7% compound annual growth rate in EPS suggests the business is expanding faster than inflation and the broader mature-economy average.
     • This helps identify companies that not only are profitable today but have demonstrated the ability to grow, which is crucial for multi‑year or multi‑decade investing.

5. pe_ttm: min 5, max 35 (P/E Ratio between 5 and 35)

   • Purpose: Filter out stocks that are either extremely cheap (potentially distressed) or extremely expensive (potentially speculative).
   • Rationale:
     • A P/E below ~5 can signal serious problems (cyclical collapse, one‑off gains, or market expecting earnings to fall).
     • A P/E above ~35 often indicates very high growth expectations already priced in, which raises valuation risk for long‑term investors if growth slows.
     • Keeping P/E in a moderate range aims to balance paying a fair price for quality and growth without reaching into deep‑value distress or bubble-like valuations.

Why the Results Match the User’s Goal (Long-Term US Investing)

• The S&P 500 filter keeps you in the realm of large, established U.S. companies suitable as core long‑term holdings.
• The debt limit screens for financially resilient businesses less likely to be crippled by recessions or rate hikes over a long horizon.
• The ROE threshold targets companies that efficiently generate profits from their capital, a hallmark of quality compounders.
• The EPS growth requirement looks for a proven history of growing earnings, which is key for long‑term capital appreciation.
• The P/E range helps avoid the extremes of speculative overvaluation and possible value traps, aiming for a reasonable balance between quality, growth, and price.

Together, these filters are designed to surface financially solid, profitable, growing, and reasonably valued U.S. large-cap companies, which are well aligned with a long‑term investment approach.