In this edition of Watchlist Wednesday, we highlight the top four stocks qualifying for the Defensive Investor screen. This screen was made popular by Benjamin Graham in his book, The Intelligent Investor. According to Graham, a defensive investor buys from a “diversified list of leading common stocks” and ensures that the price paid is “not unduly high as judged by applicable standards.”

The screen finds stocks with “a minimum of quality in the past performance and current financial position of the company, and a minimum of quantity in terms of earnings and assets per dollar of price.” Here is a breakdown of the four stocks with the lowest price to NCAV as found on The Stock Market Blueprint:

• Helmerich & Payne (NYSE:HP) - Helmerich & Payne, Inc. engages in the contract drilling of oil and gas wells. It provides drilling rigs, equipment, personnel, and camps on a contract basis to explore for and develop oil and gas from onshore areas and from fixed platforms, tension-leg platforms, and spars in offshore areas. The company operates through three segments: U.S. Land, Offshore, and International Land. The company also owns, develops, and operates commercial real estate properties; and researches and develops rotary steerable technology. Helmerich & Payne, Inc. was founded in 1920 and is headquartered in Tulsa, Oklahoma.
  • Market Cap: $4.7 Billion
  • Current Ratio (MRQ): 4.1
  • Working Capital - Long-Term Debt = $595,336,000
  • Positive Earnings Streak: 10+ Years
  • Dividends Paid Streak: 10+ Years
  • Net Income % Growth, 5 Year CAGR: 22%
  • Price/Intrinsic Value: 59.7% (closing price on 1/26/16)

• HollyFrontier Corporation (NYSE:HFC) - HollyFrontier Corporation operates as an independent petroleum refiner in the United States. The company operates in two segments, Refining and HEP. It produces high-value refined products, such as gasoline, diesel fuel, jet fuel, specialty lubricant products, liquid petroleum gas, fuel oil, and specialty and modified asphalt. The company offers its products to other refiners, convenience store chains, independent marketers, retailers, truck stop chains, wholesalers, railroads, governmental entities, paving contractors or manufacturers, and commercial and specialty markets, as well as for commercial airline use. HollyFrontier Corporation was founded in 1947 and is headquartered in Dallas, Texas.
  • Market Cap: $6.2 Billion
  • Current Ratio (MRQ): 2.1
  • Working Capital - Long-Term Debt = $122,767,000
  • Positive Earnings Streak: 10+ Years
  • Dividends Paid Streak: 10+ Years
  • Net Income % Growth, 5 Year CAGR: 70.5%
  • Price/Intrinsic Value: 61.3% (closing price on 1/26/16)

• Haliburton Company (NYSE:HAL) - Halliburton Company provides a range of services and products to the upstream oil and natural gas industry worldwide. The company operates through two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment provides production enhancement services, including stimulation services and sand control services; and cementing services that include bonding the well and well casing, and casing equipment. The Drilling and Evaluation segment provides drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services; and drilling systems and services. Halliburton Company was founded in 1919 and is based in Houston, Texas.
  • Market Cap: $25.1 Billion
  • Current Ratio (MRQ): 2.6
  • Working Capital - Long-Term Debt = $1,973,000,000
  • Positive Earnings Streak: 10+ Years
  • Dividends Paid Streak: 10+ Years
  • Net Income % Growth, 5 Year CAGR: 25%
  • Price/Intrinsic Value: 78.6% (closing price on 1/26/16)

• Cummins Inc. (NYSE:CMI) - Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related components. It operates in four segments: Engine, Distribution, Components, and Power Generation. The company sells its products to original equipment manufacturers, distributors, and other customers. As of October 13, 2015, it operated through approximately 600 company-owned and independent distributor locations, and 6,500 dealer locations worldwide. The company was founded in 1919 and is headquartered in Columbus, Indiana.
  • Market Cap: $14.9 Billion
  • Current Ratio (MRQ): 2.2
  • Working Capital - Long-Term Debt = $3,299,000,000
  • Positive Earnings Streak: 10+ Years
  • Dividends Paid Streak: 10+ Years
  • Net Income % Growth, 5 Year CAGR: 31%
  • Price/Intrinsic Value: 86.9% (closing price on 1/26/16)

Benjamin Graham stated that a defensive investor strategy should entail “adequate though not excessive diversification.” He goes on to say this would mean a minimum of 10 stocks and a maximum of 30. This can be accomplished by periodically investing equal amounts in the qualifying stock with the lowest price in relation to intrinsic value.

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