This is the easy way to find stock market bargains

How does one find bargains in the market?

Eddy Elfenbein of Crossing Wall Street suggests that investors start by examining two factors: a stock's dividend yield, and its amount of debt relative to equity.

Performing such a screen will generate stocks that are attractive in terms of their yield — which may hint at low valuations — but may be less risky than other high-dividend stocks, especially in an environment in which the Federal Reserve is raising interest rates.

"Basically, it gives you companies with fiscal health, and also with good valuations," Elfenbein said Thursday on CNBC's "Trading Nation."

Performing this screen now brings up names such as Johnson & Johnson, BlackRock and Chevron.


Stock
Dividend Yield
Long-Term Debt/Equity
Johnson & Johnson 3.09% 0.2
BlackRock 2.86% 0.18
Chevron 5.26% 0.19
Exxon Mobil 3.86% 0.12

While he would stay away from the energy stocks this picks up, because he fears their dividends are not sustainable, Elfenbein does like Johnson & Johnson, which has been a consistent dividend-raiser.

Of course, one downside of using publicly available information to make investment decisions is that it's, well, publicly available.

The prevalence of screeners like this may be one reason that Johnson & Johnson and BlackRock, which don't have a whole lot to do with each other business-wise, trade nearly in lockstep, suggests Evercore ISI technical analyst Rich Ross.


"That just speaks to the proliferation of these screens that use the same type of factors that Eddy is looking for," Ross said Thursday. "So people are trading companies based the stats — not necessarily on the companies themselves."

Still, Ross likes the names relative to the S&P 500, saying the J&J and BlackRock are "two names you can buy in an uncertain world."


Latest Special Reports

  • Take an in-depth look at the world of modern medicine - examining the treatments, companies and people making a difference in the way we treat illness and injuries today, and laying the foundation for the medical treatments of tomorrow.

  • NYSE Trader on the floor

    The buzz on the trading floor

  • Financial Portfolio

    A look at how leading portfolio managers and institutional investors build investment plans to meet clients’ goals.




About Trading Nation

  • Trading Nation will offer enthusiast traders insights from a group of "Trader Coaches," a collection of expert CNBC Contributors who are well-versed in the daily challenges of trading. Each "Trader Coach" will have a different area of expertise, and will share their unique perspective on the markets, allowing new insights to emerge from this collaboration. Trading Nation is not simply about finding that next trade; it's a forum where enthusiast traders can hear and compare investing ideas in order to build confidence in their trading decisions.

On-Air Video

@TradingNation