Best stocks to buy

Screening Filters

1. Market Capitalization ≥ $30B

   • Purpose: Focus on large, established companies.
   • Rationale:
     • When someone asks for the “best stocks to buy,” they often mean stable, well-known businesses with proven track records, not tiny speculative names.
     • A minimum market cap of $30 billion targets large-cap stocks, which tend to have:
       • More diversified revenue streams
       • Better access to capital
       • More analyst coverage and transparency
     • This reduces the likelihood of extreme volatility and company-specific risk that is more common in small caps.

2. Monthly Average Dollar Volume ≥ $2M

   • Purpose: Ensure the stocks are liquid and easy to trade.
   • Rationale:
     • “Best stocks” should be realistically buyable and sellable without major price impact.
     • A minimum dollar volume of $2M per month helps:
       • Tighten bid-ask spreads (better execution prices)
       • Reduce slippage when entering/exiting positions
       • Make it feasible for both retail and many professional investors to trade
     • Illiquid stocks can be riskier and harder to exit in stressed markets, so this filter increases practicality.

3. Region = United States

   • Purpose: Match the user’s stated focus on the US stock market.
   • Rationale:
     • The user explicitly asked for “the US stock market,” so we restrict the universe to US-listed companies.
     • This ensures:
       • Familiar accounting/reporting standards (US GAAP)
       • US regulatory oversight
       • Alignment with US macro and policy environment (Fed rates, US consumer, etc.).

4. Exchange = XNYS, XNAS, XASE (NYSE, NASDAQ, NYSE American)

   • Purpose: Focus on major, reputable US exchanges.
   • Rationale:
     • These are the primary US exchanges where most high-quality, large, and well-followed companies are listed.
     • Limiting to these:
       • Excludes OTC/pink sheet names that may have lower disclosure standards and higher risks
       • Improves data quality and reliability
       • Aligns with what most investors consider the core “US stock market.”

5. Return on Equity (ROE) ≥ 15%

   • Purpose: Target companies that generate high profitability on shareholders’ capital.
   • Rationale:
     • ROE measures how efficiently a company turns equity capital into profits.
     • A threshold of 15% is relatively strong and tends to indicate:
       • Competitive advantages (brand, technology, cost structure)
       • Strong management and capital allocation
     • For an investor asking for the “best” stocks, we screen for higher-quality businesses, not just any company that happens to be large.

6. 5-Year Revenue CAGR ≥ 10%

   • Purpose: Ensure the companies have demonstrated solid growth over time.
   • Rationale:
     • Best-in-class stocks often combine quality with growth.
     • A 5-year compound annual growth rate (CAGR) in revenue of at least 10% suggests:
       • Healthy, sustained demand for products/services
       • Ability to expand markets or gain share
     • This filter avoids stagnating or shrinking businesses and focuses on companies that are actually expanding, not just cutting costs to look profitable.

7. P/E (TTM) between 12 and 30

   • Purpose: Balance valuation—avoid both extremely cheap (potentially distressed) and extremely expensive (potentially overhyped) stocks.
   • Rationale:
     • A price-to-earnings ratio is a rough gauge of how much investors are willing to pay for each dollar of earnings.
     • Lower bound of 12:
       • Excludes ultra-low P/Es that can sometimes indicate serious underlying problems (e.g., cyclical peaks, structural decline, or market skepticism about earnings quality).
     • Upper bound of 30:
       • Avoids the most aggressively priced, speculative growth names where expectations are very high and downside risk is larger if growth slows.
     • For “best stocks,” we aim for “growth at a reasonable price” rather than pure deep value or speculative momentum.

Why Results Match the User’s Request

• The user asked for the “best stocks to buy in the US stock market.” While “best” is subjective, these filters operationalize that idea by focusing on:
  • Quality: High ROE (≥15%) to capture efficient, profitable businesses.
  • Growth: Strong 5-year revenue growth (≥10%) to find companies that are expanding, not just surviving.
  • Reasonable Valuation: P/E between 12 and 30 to avoid extremes—neither distressed nor wildly speculative pricing.
  • Stability & Scale: Large-cap (≥$30B) US-listed companies on major exchanges for maturity, transparency, and institutional-grade standards.
  • Tradability: Adequate liquidity (≥$2M monthly dollar volume) so positions can be entered and exited without undue friction.

Together, these filters narrow the universe to large, liquid, growing, and profitable US companies trading at moderate valuations—an evidence-based approximation of what many investors might consider among the “better” candidates in the US stock market.