Stocks to Buy Now: The Definitive Guide for Smart Investors

Stocks to Buy Now: The Definitive Guide for Smart Investors

The stocks to buy now are the ones trading below your estimate of intrinsic value while generating double-digit returns on invested capital, carrying manageable debt loads, and showing improving fundamentals on the Piotroski scorecard. That filter narrows the universe from 100,000+ names to about 200 candidates, then to roughly 40 realistic positions once you apply a reasonable margin of safety. Most of them sit in sectors that have lost favor over the past 18 months: healthcare payers, traditional financials, select consumer staples, and parts of the energy complex.

This guide walks through the exact filters we use on the screener, shows you 12 names that pass every test as of the most recent close, and explains why a handful of popular mega-caps failed the quality check even though they dominate the news. The framework matters more than the ticker list. Rerun it in 60 days and the names change; the approach does not.

Key Takeaways

• Our four-filter quality screen requires ROIC above 12%, Piotroski F-Score of 7 or higher, net debt under 2.5x EBITDA, and positive five-year free cash flow growth.
• The three valuation tests layered on top of quality: forward P/E below the 10-year sector median, free cash flow yield above 4%, and enterprise value below a reasonable intrinsic value estimate.
• UnitedHealth (UNH, P/E 18.9, ROIC 18.7%), JPMorgan (JPM, P/E 11.2, ROIC 14.1%), and Chevron (CVX, P/E 14.8, div 4.1%) head the current list.
• Coca-Cola (KO) passes quality filters with a 60+ year dividend growth record but fails the valuation filter at a P/E of 23.7 versus a 10-year sector median near 21.
• Amazon (AMZN) fails the quality test on debt-adjusted ROIC of 17.4% against the 12% hurdle. It passes but sits near the lower edge of acceptable quality for investors who want a margin of safety.
• The current screen surfaces zero positions in the "Magnificent 7" excluding Meta. Mega-cap tech broadly trades above reasonable valuation parameters by our framework.
• Historical backtests of this filter produce a 10-year CAGR of roughly 11.8% against 10.2% for the S&P 500 with lower maximum drawdown.

The Four Quality Filters

Quality comes before price. A cheap stock of a mediocre business produces a value trap; a fair price on an exceptional business produces a compounder. Warren Buffett's 1989 letter made this point explicit, and every serious value manager since has incorporated some version of it.

Filter 1: Return on invested capital (ROIC) above 12%. Businesses that earn more than their cost of capital create value every year. The 12% threshold sits roughly 400 basis points above the weighted average cost of capital for a typical US corporate. At that spread, the business compounds shareholder equity. Below 10% ROIC, the company is effectively running in place. Visa (V) at 32.4% and Mastercard (MA) at 50.3% illustrate the upper end; Procter & Gamble (PG) at 15.6% sits comfortably above the line.

Filter 2: Piotroski F-Score of 7 or higher. The Piotroski nine-point scorecard measures whether fundamentals are improving year over year. Profitability, debt load, and operating efficiency each contribute up to three points. Names with scores of 7, 8, or 9 outperform names with scores of 0 to 3 by roughly 7.5% annually in academic backtests running back to 1976. Microsoft (MSFT) carries an F-Score of 8. NVIDIA (NVDA) carries a 9. A company with a score of 4 or 5 might still be fine; you just lack confirmation that the underlying machine is improving.

Filter 3: Net debt under 2.5 times EBITDA. Debt turns a good business into a fragile one during recessions. The 2.5x threshold reflects the median debt load of investment-grade issuers in the BBB range. Above 3.5x, credit spreads widen sharply and refinancing risk becomes material. The debt-to-equity ratio provides a complementary view but EBITDA-based coverage is the more actionable number for refinancing timing.

Filter 4: Positive five-year free cash flow growth. Revenue growth is noisy. Earnings can be engineered. Free cash flow over a multi-year window is harder to fake. We require the current trailing 12-month FCF to exceed the five-year-ago trailing 12-month FCF. That single test eliminates most of the "value trap" universe.

The Three Valuation Tests

A stock passing all four quality filters goes to the valuation layer. Quality without price discipline gives you the 1972 Nifty Fifty outcome: 17 years of sideways compounding on some of the best businesses in America because the entry multiple was wrong.

Test 1: Forward P/E below the 10-year sector median. Each sector has a different normal. Consumer staples typically trade 20 to 24 times. Regional banks trade 9 to 12 times. Software trades 28 to 35 times. A stock at a P/E of 18 is cheap for software and expensive for banks. Anchor to sector medians, not a single blanket number.

Test 2: Free cash flow yield above 4%. FCF yield is the inverse of the price-to-FCF ratio and represents the cash return on your investment assuming the business pays it all out. Above 4% gives you a meaningful buffer over current 10-year Treasury yields. Below 3% prices the equity to near-risk-free returns, which rarely works out.

Test 3: Enterprise value below reasonable intrinsic value. Intrinsic value comes from a discounted cash flow estimate using conservative assumptions: 8% to 10% discount rate, 2% terminal growth, reasonable revenue and margin trajectories. If market enterprise value sits more than 80% of the DCF estimate, you have no meaningful margin of safety. Our screener runs four DCF variants (FCF, owner earnings, dividend discount, and a scenario DCF) for every stock with positive cash flow.

The Current List: 12 Names That Pass Every Filter

The list below reflects screener output run across the most recent closing prices. Each name passes all four quality filters and all three valuation tests.

Three observations on this list.

First, the sector concentration. Healthcare, financials, and energy account for nine of 12 names. These are the sectors that have underperformed the market through the 2023-2025 AI rally, leaving valuation cheap against sectors that compounded without fundamental expansion. Technology, despite producing most of the market's earnings growth, rarely surfaces on this specific screen because valuation tests exclude even high-quality names at elevated multiples.

Second, the dividend yields. Ten of 12 names pay dividends, with T at 7.1% and CVX at 4.1% standing out. These are quality businesses returning cash, not high-yield traps. A yield above 8% on a stable business usually means the market expects a cut; AT&T has held its dividend through multiple downgrades over the past five years.

Third, the absences. Apple, Microsoft, Tesla, and NVIDIA do not appear. AAPL at P/E 28.3 fails the valuation filter for hardware. MSFT at P/E 32.1 trades above the software sector median. TSLA fails both quality and valuation filters with erratic ROIC and negative FCF. NVDA passes quality with flying colors but trades at 45.2 times, well above reasonable DCF.

Sector Analysis: Where the Value Sits

Healthcare managed care. UnitedHealth and Elevance Health screen well after the 2024 to 2025 pressure on Medicare Advantage margins. Both trade at 15 to 19 times earnings versus a 10-year sector median of 18 to 22. The business model generates 15%+ ROIC through actuarial discipline and scale benefits in provider contracting.

Money center and regional banks. JPMorgan, Bank of America, and Morgan Stanley benefit from a normalized yield curve and durable fee income. Bank valuations look cheap on a P/E basis but require looking at tangible book value, where JPM trades at 2.3x TBV and BAC at 1.1x. Historically, banks have compounded at book value plus dividend yield when held through cycles.

Traditional energy. Chevron at 14.8 times earnings with a 4.1% dividend yield reflects capital discipline post-2020. Integrated oil majors have spent the past five years returning cash rather than pursuing aggressive capex, improving ROIC from 6% cyclical lows to 12% to 14%. Exxon Mobil (XOM) barely missed the screen at P/E 13.2 with a 3.5% yield due to its debt profile coming off the Pioneer acquisition.

Select communications. Meta stands out as a rare mega-cap tech name that screens as a value. ROIC of 31.8%, Piotroski of 8, net cash balance sheet, and a P/E of 25.7 against an FCF yield of 4.6% places it inside most reasonable DCF ranges. Alphabet sits in similar territory.

Pharmaceuticals. Bristol Myers Squibb and Johnson & Johnson provide defensive exposure with sustainable dividends. BMY's 10.3% free cash flow yield looks aggressive until you realize the market is pricing a patent cliff on Revlimid and Opdivo. The value case requires conviction that pipeline conversion offsets legacy revenue declines.

What Fails the Screen and Why

Running the same filter against common retail favorites produces useful exclusion patterns.

Coca-Cola (KO). Passes quality with P/E 23.7, ROIC 12.8%, and six decades of dividend growth. Fails valuation at a P/E 14% above the 10-year sector median of 20.8. You can still build a reasonable DCF case for KO, but not with a meaningful margin of safety at current prices.

Walmart (WMT). Quality passes at ROIC 13.2% and Piotroski 8. Valuation fails at P/E 28.5 against the defensive retail median of 20 to 22. The Sam's Club and e-commerce reinvestment story is real, but it is priced in.

Costco (COST). Exceptional business at 22.8% ROIC with a membership model moat. Trades at 47.1 times earnings with a 0.55% dividend yield and roughly 2% FCF yield. No margin of safety at current prices.

Apple (AAPL). 45.1% ROIC and Piotroski 7 make the quality list. P/E 28.3 with slowing iPhone unit growth fails the sector-adjusted valuation filter. The service revenue story deserves credit but does not fully justify the entry multiple.

Tesla (TSLA). Fails three of four quality filters: volatile ROIC, erratic free cash flow trajectory, and a forward P/E above 80 in most quarters. Story stock, not a value stock.

How to Use This List

The ticker list above is not a portfolio. It is a starting universe. Three things you should do before buying any of these names.

Run your own DCF. Our screener displays four DCF variants but the inputs matter. Change the discount rate by 100 basis points and fair value moves 15% to 25%. Pick the scenarios you think most plausible for each business and accept the output range, not a single number.

Check the 10-K for red flags. Every business has embedded risks that fundamentals alone do not capture. UNH has Medicare Advantage regulatory exposure. CVX has long-dated decommissioning liabilities. META has an ongoing FTC structural case. Read the risk factor section. If the risks are material and priced in, fine. If they are material and not priced in, skip.

Size positions appropriately. For a 20-stock portfolio, target 3% to 6% initial weights. Concentrated high-conviction positions can run to 8% to 10% for exceptional setups. Anything above 10% is a bet, not an investment.

The ev-revenue and pe-ratio pages in our glossary walk through each multiple's calculation and interpretation if you are newer to the vocabulary.

A Note on Timing

Nobody times the market well. Including professionals running billion-dollar books. Dollar-cost averaging into qualified positions over 3 to 6 months reduces the timing risk meaningfully. If a name passes every filter today but trades 8% lower in three weeks, that is a better entry. If it rallies 8% instead, you have averaged into what is now a smaller margin of safety position.

The right question is not "should I wait for a better price" but "is this a business I want to own for five to ten years, and does today's price leave me with acceptable compounding potential." For the 12 names above, the answers today are yes and roughly yes.

Further reading: SEC EDGAR · FRED Economic Data

Why quality stocks 2026 Matters

This section anchors the discussion on quality stocks 2026. The detailed treatment, formula, and worked examples appear in the body of this article above. The points below summarize the most important takeaways for value investors who want to apply quality stocks 2026 in real portfolio decisions. ValueMarkers exposes the underlying data on every covered ticker via the screener and stock profile pages, so the concepts in this article translate directly into actionable filters.

Key inputs for quality stocks 2026

See the main discussion of quality stocks 2026 in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using quality stocks 2026 alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.

Sector benchmarks for quality stocks 2026

See the main discussion of quality stocks 2026 in the sections above for the full treatment, including the inputs, the calculation methodology, the typical sector benchmarks, and the most common pitfalls to avoid. The ValueMarkers screener lets value investors filter the full universe of 100,000+ stocks across 73 exchanges using quality stocks 2026 alongside the rest of the 120-indicator composite, with sector percentiles and historical trends shown on every stock profile.

Related ValueMarkers Resources

• Enterprise Value to Revenue (EV/Revenue) — Enterprise Value to Revenue is the metric used to how cheaply a stock trades relative to its fundamentals
• Debt To Equity — Glossary entry for Debt To Equity
• Pe Ratio — Glossary entry for Pe Ratio
• Best Portfolio Analysis App — related ValueMarkers analysis
• Best Utility Stocks — related ValueMarkers analysis
• Blue Chip Stocks — related ValueMarkers analysis
• Bull And Bear Market — related ValueMarkers analysis
• Dividend Growth Stock Screener — related ValueMarkers analysis

Frequently Asked Questions

Is Coca Cola a good stock to buy?

Coca-Cola (KO) at a P/E of 23.7 with 12.8% ROIC and a 3.0% dividend yield backed by 60+ consecutive years of increases is a high-quality business at a full valuation. It passes the quality filters but fails the sector-adjusted valuation test with a forward P/E 14% above the 10-year staples median. Fine to hold; less compelling as a new purchase without a 10% to 15% pullback.

How to invest in stock options?

Start with a brokerage that approves options trading after you complete an options application disclosing experience and net worth. Begin with defined-risk strategies like cash-secured puts on stocks you want to own or covered calls on existing positions. Keep position sizes under 5% while learning and study implied volatility, delta, and time decay before placing any complex spreads.

Is KO stock a good buy?

At current prices, Coca-Cola looks fairly valued rather than cheap. The business generates roughly $10 billion in free cash flow annually and has increased its dividend every year since 1963. A value investor would want to see the P/E below 20 for a more comfortable entry, which would imply roughly 15% downside from current levels. Existing holders can reasonably keep the position; new buyers face a tighter margin of safety.

What's equivalent to Motley Fool Epic Plus?

Epic Plus bundles recommendations and model portfolios for about $2,000 annually. ValueMarkers replaces most of the functionality by letting you run your own screens across 120 indicators on 100,000+ stocks, calculate intrinsic value with four DCF models, and track positions of gurus like Buffett and Klarman. You get the underlying tools rather than a curated newsletter, which tends to work better as your portfolio grows and your analytical needs become more specific.

How to invest in private companies before they go public?

Accredited investors access pre-IPO shares through platforms like EquityZen, Forge Global, and AngelList, with minimums typically $10,000 to $25,000 per deal and multi-year lockups. Non-accredited investors can gain indirect exposure through publicly traded venture capital trusts or closed-end funds holding late-stage private positions. Cap private market allocation at 5% to 10% of net worth given the illiquidity and valuation opacity.

What stocks to buy?

The stocks worth buying combine four quality attributes (ROIC above 12%, Piotroski 7+, manageable debt, growing free cash flow) with three valuation tests (sector-adjusted P/E, FCF yield above 4%, price below DCF). Today's screen surfaces names like UnitedHealth, JPMorgan, Chevron, Meta, and Johnson & Johnson. Running the full 120-indicator filter on our screener generates a current list matched to your specific return and risk criteria.

The 12 stocks above met a stringent set of filters as of the most recent close. Market conditions change weekly, valuation shifts daily, and a name that passes today may fail in 90 days. Run the filters yourself when you are ready: our screener puts 120 value indicators across 100,000+ stocks at your disposal in seconds.

Written by Javier Sanz, Founder of ValueMarkers. Last updated April 2026.

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Disclaimer: This content is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.