Question: I'm looking for a different way to locate really good companies, other than those in the Dow or those with low debt. (I read both your articles about those.) Do you have any out-of-the-box ideas for finding good companies to invest in?

Shawn Murphy

Answer:

Dear Shawn,

A provocative question for which it took a bit of thinking to develop a suitable answer! We are so accustomed to thinking about companies with low debt, as you noted. Or those with increased profits. Or solid management. Or recession-proof products and services. Or amply covered dividends. Or great research and development.

Please do not overlook those "ingredients" once you begin your search. They are essential for a successful stock selection process.

But here's a new idea and one I think you'll enjoy pursuing.

The Top Lists

Look at companies that continually make the highly regarded "TOP" company lists. For example, every year Fortune Magazine publishes a list of the 100 Best Companies To Work For. Of course, not all of the companies on the Fortune list are publicly traded, but a great many are.

Then check out the American Association For Retired Persons (AARP) list of Best Companies For Workers Over 50.

Next on your "List of Lists" is Forbes Magazine's The 200 Best Small Companies.

Four other lists you should print out are The 100 Best Companies For Working Mothers (put together by Working Mother Magazine), The 100 Fastest Growing Companies (from Fortune), 50 Best Companies For Latinos To Work For In The U.S. (from Latina Style) and America's Most Admired Companies (also from Fortune Magazine.)

For the "Most Admired" list, Fortune asks the opinions of outside executives, directors and security analysts, making for a solid roster of companies.

Finally, take a look at the Ten Companies That Treat Customers Well assembled by Zogby International and msn.com.

I suggest making a list of publicly traded companies that (1) appear on more than one list and (2) that have appeared on their respective list or lists for at least two successive years. If a company survives several years of close scrutiny you may be able to assume that it is (1) well run and (2) making a profit. However, you must confirm those two facts.

When you have narrowed down your list to a manageable number, check each company's P/E, debt ratio, earnings record, dividend coverage and other "same-old" statistics in Value Line Investment Survey (www.valueline.com) or in the company's annual and quarterly reports.

Cutting Short Your Google Search

Although you can go to each list creator's individual website, Job Star provides a nice shortcut, with links to all the lists with the exception of the Ten Companies That Treat You Right. That is available at www.msn.com.

For all others, go to: http://jobstar.org/hidden/bestcos.php.

Good luck!