money jungle

Scott Black’s Screen

Posted in scott-black, value investing by moneyjungle on February 21, 2009

Boston-based Investor Scott Black, founder and President of Delphi Management, is well-known for his excellent performance, membership in the Barron’s roundtable, and savvy art collecting.

In this interview, Black says his process is to identify good businesses trading at cheap prices. He uses six criteria to screen for good businesses, including:

  • The company should earn a minimum 15% after-tax return on equity. For a cyclical business, the corporation must achieve this 15% target on its recovery earnings.
  • I look for companies that grow both revenues and earnings faster than inflation over a 3 to 5 year time horizon
  • For non-financial companies, I perform a free cash flow analysis to determine if a firm can finance its growth from internally-generated operating cash flow.
  • I analyze the areas of capital intensity such as inventory turns, days of receivables, and sales to fixed assets.
  • Companies with low debt/equity ratios

Black offered six picks for the 2009 Barron’s roundtable, including: Oracle, General Dynamics, XTO Energy, Endo Pharm Holdings, Ameron International, and StealthGas