Goldman believes these quality stocks are cheap

The value vs. growth debate has dominated investor attention this year, but the best route may just be to find quality companies selling at a relative discount, according to Goldman Sachs.

The Wall Street firm said valuations are now in-line with historical averages, signaling investors should be even more selective when looking for opportunities within quality stocks.

“Against this backdrop we look for stocks with quality characteristics that still trade at a discount/attractive multiples,” Deep Mehta, a vice president at Goldman, told clients. “While there are many ways to define quality, we believe a track record of strong asset productivity and financial returns as well as cash generation are important indicators.”

Goldman screened for two different types of quality stocks that are cheap in the current climate. The first list of stocks are equities with a combination of strong productivity and efficacy of spending. The second screen are stocks that center around earnings quality, measured by consistent free cash flow.

Goldman then added a valuation overlay to both these screens. Take a look at the lists of stocks here.