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Mary953 (38.74)

Investment Stocks and Ideas - Ready for analysis by Caps members please

Recs

21

March 01, 2009 – Comments (30)

I have put together a list of things I am looking for in stock market investments.  I also have a list of stocks that I am starting to look at, although I have not really examined them much yet.  I am putting both lists up here.  If they are good, I invite you to use them.  MUCH More important though, I am hoping that you will look with a critical eye, especially at the stocks.  If you see a problem or a particularly great stock among the group, then please let me know about it.

These are the tests that the stocks have to meet.  There are a lot of good companies that have had stock prices beaten down by an overall bad economic market condition.  I am looking for the bargain rates on good companies that dropped during the panicked reactions of the last months.

The companies need to produce a good product or service and have a proven track record of doing this so well that the company's product or service is in demand now or will be in demand when people have money to spend.

The companies will need to have good solid management with people in the top positions who have an interest in seeing these companies do well.  Owner/managers are best, or others who have been in the lead positions long enough to give some idea of how the companies do under their leaderships.  No big changes in this area should be expected.

Money should not be a problem.  There should be manageable debt (or even better, none), and cash on hand plus lines of credit, where needed, should be enough to see the companies through to economic better times.  An upscale restaurant will need more capital to survive this recession than a small inexpensive spot that is getting a bigger crowd right now.

My guide for consistency is going to be a 3 year chart of stock prices.  This will (I hope) give me a better idea of the strength of the stock over a longer and more stable set of market conditions.

The product or service needs to be something that will be attractive to consumers either now (P&G) or later when the economy starts to recover.  An example of the second might be vacation travel or perhaps computer and other electronic gear that has to be postponed right now to concentrate on food and gasoline purchases.  When there is money to use for "fun stuff," computer hardware, software, upgrades may be on the list for a lot of people, as will cars or TV's.

A few stocks that I am checking for "fire sale prices" include Disney, Microsoft, Intel, Proctor & Gamble, Apple, Coke, Pepsi, Dell, Garmin, WalMart, Lowe's, Home Depot, Logitech, Kraft, Altria (the tobacco side of Phillip Morris), Costco, Marvel, Johnson & Johnson,  and some Vanguard Funds, VTI, VWO, and VEU.  Also I will be looking at USO and USL. 

That's it.  Strategy planned and ready for research.  If you know that one of these stocks is a real winner, let me know.  More important, if you look at this and see me throwing money down a well, please say something!

30 Comments – Post Your Own

#1) On March 01, 2009 at 2:11 PM, CoastalTrader (95.13) wrote:

Be carefull with USO.  It is a short term play best used between the Nymex contract rollover date and USO´s rollover date.  Contango can eat your lunch at other times. You don´t want to be holding when USO rolls over. USL is more stable albeit less liquid.

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#2) On March 01, 2009 at 2:27 PM, maxhoffa (< 20) wrote:

i still like uso.  don't see contago being a long term issue with oil.  O tracked oil very well in the last runup and i expect it to do so again.  the difference in volume between O and L is not small and WILL be a long term factor.  example: on friday O traded volume of 31 Million . .  L traded volume of 200 Thousand.  if you like trading low volume funds, L is the way to go.

 

but give me the liquidity.  i'll suck up the contago for a few more months.   don't get me wrong, contango is a concern, but i don't see it being a lasting one.  we all have our risk levels though.

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#3) On March 01, 2009 at 2:28 PM, awallejr (80.10) wrote:

I kind of viewed USO more as a trading fund.  While you do have the etf, your stocks are short on energy producers.  XOM, BP, PBR are worth a look at, or some income producing nat gas companies like LINE, EVEP. I always preferred PM over Altria mainly because the US is a shrinking market for tobacco, while PM (at a really nice price now) has the whole world to sell to.

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#4) On March 01, 2009 at 2:33 PM, rd80 (99.11) wrote:

I've had green thumbs on LOW and HD for a little while now.  They're both ahead of the S&P, but under water since I picked them.  I see two positives for them in the housing market.  Even though home prices are still falling, home sales numbers appear to have leveled out.  More importantly, sales from foreclosures are up and I believe a typical foreclosed home will need more repair work than a home being sold in an unforced transaction.  If that theory pans out, it would mean increased sales at home improvement centers.  I have not purchased either stock in real life. 

If you're interested in a smaller cap with a similar theme to HD and LOW, take a look at RPM International.  RPM's balance sheet does have quite a bit of debt, but they've maintained good cash flow.  I am concerned about them maintaining the dividend.  However, it's a well managed company that should do great when the economy turns up.

From an earlier post, I think you know I like JNJ.  Net cash positive, nice dividend and products that are relatively insensitive to the economic cycle.

I'd add McDonald's to your list.  Consitently increasing same store sales, still growing overseas, nice dividend.  The only down side I see is most of those positives are well known and in the stock price.  I think it's a steal in the low 50's. 

I've been adding to positions in MCD, JNJ and RPM recently.  I see RPM as far and away the riskier of those three.

I haven't done enough digging on the other stocks from your list to form a stong opinion one way or the other. 

Great topic.  Looking forward to reading more as other Fools chime in.

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#5) On March 01, 2009 at 2:53 PM, maxhoffa (< 20) wrote:

what about commodities?  other than oil, you're a bit short on them.  i'm high on MON, BBL, HAP, GGB, BG, just to name a few. 

 

 

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#6) On March 01, 2009 at 3:38 PM, Mary953 (38.74) wrote:

A major part of this is to invest in what I know or in what I think that I can learn.  Commodities really doesn't fit comfortably into that definition as of yet.  That doesn't mean I won't try learning, just that it takes a LOT of training and study before I am willing to attempt to tackle something if the risk of losiing money is in there.  Maybe if I can make enough of the stuff not to worry about it so much ---  ;-) 

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#7) On March 01, 2009 at 3:47 PM, Ecomike (< 20) wrote:

I seem to recall Disney, and the entertainment industry being one of the first to rebound when we came out of the 1980's recession. But we may be a year, or 2-3 years away from that still. Depends on your investment horizon.

I have been watching DIN recently, and it looks like it will do well in a 1-3 month rally, it is way oversold, and  while people may be too depressed to spend big money on a car or house, they may start returning to resturants first. I have a buy order in for Monday if it drops to or near it's recent low again.

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#8) On March 01, 2009 at 6:36 PM, walt373 (99.85) wrote:

Of that list, the ones I like the most are MSFT and JNJ. Both are looking really cheap right now compared to their risk. MSFT seems like more of the bargain of the two (slightly), although its long-term uncertainty is a lot higher because tech is always rapidly evolving. Healthcare is also constantly changing but JNJ is more diversified and also has consumer staples. This is your classic "safe" play, but the shares have dropped a lot in the past few months. I think it's a buying opportunity and I actually picked up my first shares on Friday.

Your long-term outlook for Microsoft partially depends on your opinion of the emerging computer trends like cloud computing, netbooks, etc. and how well they can adapt. My opinion is that they will stay relevant due to their huge network effect and the switching costs for users. Even when some disruptive new technologies appear, businesses and most consumers will continue to use Microsoft products simply because everyone else still is and it will cost a lot of time and money to learn and switch to competitors' products. And you have to love their balance sheet and the shareholder-friendly management. Oh, and I have been hearing some great things about Windows 7.

One of my favorite stocks that isn't on your list is Activision-Blizzard (ATVI). I know you have picked it as a thumbs-up in the past so you might already know all about it. But in case you don't... I think it is going to be a great long-term growth story starting now, and is pretty "safe" because the demand for cheap entertainment doesn't decrease much in bad times. And if you think the P/E is expensive, it doesn't include Blizzard earnings... with them, it should be more like in the teens. I think that their P/E is putting a lot of people off. Oh and Starcraft 2 is going to be HUGE. Check it out...

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#9) On March 01, 2009 at 6:56 PM, walt373 (99.85) wrote:

A few more comments I forgot. If you are interested in Altria and VWO, you might want to check out Philip Morris International (PM) and WisdomTree Emerging Markets Small Cap Dividend ETF (DGS). They are similar but have more upside in my opinion.

Philip Morris International split off of Altria and is the international half of the business. They both sell Marlboro, etc. There is more room for growth abroad, as the US market is declining, and the valuation is not terribly different between the two. Also, just a guess, but I believe the dollar is overvalued right now and will depreciate in a few years, so companies that sell internationally will get a boost from that trend if it plays out. But in the near-term, the strong dollar will act as a head-wind for these companies.

I think DGS has some advantages over VWO. First of all, the holdings in DGS are cheaper than VWO (average P/B of 1 compared to 1.7, average P/CF of 3.9 compared to 5.4). Also, they are more weighted in local consumer and business services and are less exposed to the global markets, so if they continue to deteriorate, these companies will be more insulated, as they will be doing business in economies that are still growing rather than contracting. These companies also use less leverage on average than any other international equity class. Also, because this ETF is dividend-weighted, it's got a value tilt, which I like. The downside is that the DGS has a higher expense ratio (0.63 compared to 0.20) and is less liquid. But then again, there are only two emerging-market small cap ETFs and the other one is even more expensive/illiquid.

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#10) On March 01, 2009 at 8:02 PM, anchak (99.84) wrote:

 walt373 : VWO is not a small cap fund - it is a Large Cap Blend ( it essentially tries to imitate the emerging market index) - how many broad index funds do you know are Small Cap - zero! Yes they maybe Smaller cap in $ terms - but they are the biggies in their local domain.

Incidentally, I like DGS - never invested though - the Mutual Fund analogue in this space where I put money was T Rowe Price International Discovery. The Vanguard one ( International Explorer) - I think is still closed for new investors.

Small cap funds carry different kind of risk - especially in external markets.

 

Mary....One small thing about P/E ratios ......there's simple notion that

Stock Market P/E ( like the S&P) = GDP Growth + Inflation + Div Yield.

Based on this very simple metric current S&P Expected Forward P/E should be = 3-4% +2-3% + 3-4% = 9-10. Anything else is premium for growth. Use this as a marker to see how much of a premium you are willing to give for any individual US stock.

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#11) On March 01, 2009 at 8:24 PM, bootz27 (80.93) wrote:

Mary I have been reading your blogs for some time and you would seem to be a person with a lot of common sense. I wonder why you are thinking about jumping in front of a speeding train. Most of the stocks you have picked are staring into a bottomless pit. Take it from an old commodity trader with battle scars, the TREND is your friend. The panic selling of november affected all stocks. the orderly selling of feburary affected the weak. There are a lot of solid companies that have rallied in the face of the bear. Grab a freight train heading north. It,s a much better ride.

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#12) On March 01, 2009 at 8:38 PM, JIMRH1 (< 20) wrote:

Logitech has taken a real beating since January.I watch it every day and it's been trending down like almost everything else.If I could go back in time and not buy it I would but, that is hindsight and not much use here..My best stock has been ETP.It has a nice dividend and has been a steady grower. I also like Cameco CJJ.Not telling you to buy these but they are definitely IMO worth a look.I don't think they will tumble like logitech did though.I also have 5 percent of my portfolio in AUY now and may buy some more gold stocks in the future.I think having a bit of gold at this point can't hurt. 

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#13) On March 01, 2009 at 8:40 PM, killeru (< 20) wrote:

CRS  meets your criteria

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#14) On March 01, 2009 at 8:47 PM, walt373 (99.85) wrote:

anchak: Thanks for the comments. I know VWO is a large-cap ETF and that is the reason for one advantage of DGS: the smaller companies in DGS operate more locally. Besides less dependence on more troubled economies, this also results in less correlation with other stocks, so it is nice for diversification.

And I checked out T Rowe Price International Discovery and Vanguard International Explorer. They look like nice funds. FYI, the Vanguard fund re-opened again in October.

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#15) On March 01, 2009 at 9:17 PM, abitare (99.42) wrote:

I would short almost all these garbage equities you listed: Disney, Microsoft, Intel, Proctor & Gamble, Coke, Pepsi, Dell, Garmin, WalMart, Lowe's, Home Depot, Logitech,  Altria (the tobacco side of Phillip Morris), Costco, Marvel, Johnson & Johnson, and some Vanguard

A horrible list, horrible...I would rather have a bank CD then Walmart EQUITY. Horrible, horrible, list of garbage equities. Except maybe Apple, Netflicks, Yahoo or Costco- 

Ultra shorts are good for trades, market should re-test lows this week. 

Only stocks worth considering are commodities, commodity producers and gun makers. The contraction is MASSIVE and far from over. Do you understand equities are last on the food chain of earnings. You should be looking at prefered, if you want to catch a falling knife.

Buffett is buying Prefered and receiving 10% pay outs. He is only down 50%, so far. I expect he is going down like Graham, who lost 70% of his money during the depression.

Why would anyone buy any equity here? Cash is king. The market can easily fall another 20-40%.

Gun makers are working SWHC, OLN, RGR or defense contractors

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#16) On March 02, 2009 at 12:00 AM, Option1307 (30.48) wrote:

Mary953 

I like your overall criteria in terms of what you are looking for. However, I would like to raise a few concerns that you should think about before you dive right in. I'm not trying to discourage you from investing, but just want to raise some important points.

1) Are you investing or trading these markets? Im all for trading the markets right now; however, you should be careful when it comes to long term buy and hold. Especially if you are going to need this money in the near future. Yes we have fallen a lot and stocks are "cheap", but there is no certainty that they can't fall farther. Or at least, there is no guarantee that they will raise up in a V shaped market.

2) High yielding dividends are the way to go if you must buy and hold.

3) I know you have been learning a lot under the direction of Goodvibe, he has been kind enough to share his tremendous knowledge. However, he is largely a swing trader, short term holding periods. Many of the stocks you mentioned above are not very ideal for this type of trading. I assume you are aware of this, but just wanted to double check.

I'm not trying to tell you where or how to invest, just wanted to bring up a few point that seem to get lost in the fray. I recommend to anyone investing right now, to only invest with money that they could live without for 5-10 years. It may take that long, or longer, to get it back. Yes eventually the rewards may be very large, but it may take a long long time. Be aware of that... 

 

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#17) On March 02, 2009 at 12:36 AM, socialconscious wrote:

MARY great  topic! To the point, picks. Im with RD80. I like MCD for now and later. They are are a recession play and they have always sucessfully morphed including there present venture in coffee. I have the green thumb on it for a while on it   I like hd and low for the long term 5+ year. One is gonna be the king when housing rebounds. I thinks its gonna be Lowes.HD sold their contracting business and is not good on the appliance side  All best. In my humble opinion.

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#18) On March 02, 2009 at 12:41 AM, Bays (34.32) wrote:

I wouldn't be so heavily dependant on the American economy.  Most of your companies listed do a majority of their business in the US.  I would look at maybe a BRIC ETF and some Canadian companies to become globally diversified.  

Even better -- I would look to see if you can buy foreign companies in their currency.  This way you will be hedged against the USD.  The USD is said to be at a peak right now by many people -- some who are highly respected here on CAPS.

 I don't like the blue chips that much either... I think there are some better bargains in the small caps and mid caps.

Hope this helps,

 Bays

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#19) On March 02, 2009 at 12:56 AM, socialconscious wrote:

also love that MCD those new salads and watch for some more smart eating initiatives for thses times.

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#20) On March 02, 2009 at 4:24 AM, Mary953 (38.74) wrote:

Friends -

Just to make it clear, I want your opinions. If you think of something I missed, like MCD, SWHC, and others that haven't been named, tell me. If you know of a problem with a company I named, let me know.  The list of companies that I put together was a point to start the discussion.   I had not started to study any of them with the exceptions of Logitech and Garmin (both of which I do like).  I didn't know about the international PM or  DGS.

Bootz - I am interested in learning, which is why I put this information here.  Can you add more to your comment?   This is an area that I could use help in.  Three months ago, I didn't even know about blogging, and I didn't know anything about this entire world of investing.  I am a beginner at all of this and wanting to absorb as much as possible.

Abitare - A Major reason for putting this blog up is to get feedback like yours!  Help me (and everyone else here) to get it right!  While I am working with a very small amount (and small percentage) here, it still represents time and work.  How do you buy Preferred rather than common and if you do want to put money into long term investments, do you have specific ideas?  Also, how do you feel about the whole TA vs FA arguement? Thank you for taking time to be part of this!  I do value your opinion.

Guys - A recurring theme here is sort of a question about what I am after here, so to clarify - This is a long-term, dividend-producing, 'purchase at a lower than normal price' grouping of stocks  It would be intended to make up a small percent of holdings.  The expectation would be that 10 years down the road, these companies would have survived, thrived because of changing conditions, and would be worth much more.  In the mean time, there would be some dividend to most that would help provide some income. 

Examples would be Lowe's profiting from the DIY work of people fixing up their homes or foreclosure 'deals' or Disney or Marvel profiting from their brand merchandise.  My best holding during this last year has been Buffalo Wild Wings.  When the economy goes south, people head for beer and company, it seems.

There is also a need to figure out stocks that would be good for shorter trades, and here I am uncertain on the stocks as well as the amount of time to hold them.  I do not see myself doing day trading.  Holding stocks for a few months would be the closest I would come to swing trading.  If you have a stock that is cyclical in nature and going into an upswing,  sugget it.  Just let me know that it is a short term sort of thing.

I Love the Ideas.  Keep them coming.  Let me know if you are suggesting long term or short term. I want suggestions for both and I am one of many seeking this knowledge. 

Every comment helps and I am glad to get them!!

Mary  :-)

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#21) On March 02, 2009 at 8:20 AM, Mary953 (38.74) wrote:

Sagitarius84 has an excellent blog this morning that fits the topic to a T called "Many Stocks Keep Raising Their Dividends" which can be found at http://caps.fool.com/Blogs/ViewPost.aspx?bpid=154234&t=01002863924178546020   It is very much on target.  I am not going to reproduce part of it here because I want you to go look at it and give it lots of recs (I haven't found anyone who objects to getting recs yet).  Please let me know if any of those stocks mentioned sound like good options to you!

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#22) On March 02, 2009 at 8:24 AM, DaretothREdux (48.12) wrote:

I highly recommend Marvel...but you probably knew that already.

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#23) On March 02, 2009 at 9:36 AM, galtline (31.56) wrote:

Mary,

From your list, my personal favorites would be Intel and Apple. 

Intel - while we're going through a severe contraction, there is no mistake that globalization will continue to happen at a greater pace, and computers are at the heart of that change...and Intel will be there.

Apple - When looking for survivors, you want companies with a strong position, low debt, strong cash flow, and lots of money to throw around....and Apple has this all in spades.  As others will be tightening their belts, these companies will be making acquisitions and doing R&D...and will come out of this stronger.

As for other suggestions -

I strongly encourage a look at ATVI (Activision Blizzard).  It meets all of the criteria that you're looking for.  I would put it as the "Apple" of the video game industry.  Strong company, lots of cash, zero (yes, I said zero) debt.  They are the creators of Call of Duty, Guitar Hero, World of Warcraft, Starcraft, etc.  While their competitors have been missing expectations, losing money, and floundering, ATVI has been steadily performing and beating expectations.  Strong business, solid management.  Expect good things from them.

Other picks that I'm looking at (these may not suite what you're looking for though):

UCO (my oil choice), TIE, PDS, AA, DOW (you'll notice a recurring theme in some of these...companies that are significantly down from their 52 week high with plenty of room to run). 

While I've currently sold my miners (held them since Oct.), I'll be getting back in at the right price: AUY (their costs are down substantially, and gold is up...hard to beat that) and SLW.  They've both been good to me.

 

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#24) On March 02, 2009 at 9:49 AM, EverydayInvestor (< 20) wrote:

abitare - I cannot see how anyone could long SWHC or RGR here. There is a limit to how many guns people will buy. When things start to look a bit better and the new gun control laws pass, sales will drop big-time. Following the gun-makers for a long time that is always what happens: sales go up big right before new gun control laws and they then drop.

Anyway, if your Armageddon scenario comes to pass the equity of even profitable companies would be revalued to be worth less than a 5x P/E.

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#25) On March 02, 2009 at 9:55 AM, oversea (< 20) wrote:

Mary,

I agree with about half of your list (sorry but I didn't like Garmin, Disney and a few others). I see that commodities are missing. I'd suggest RIO, TIE, FCX, EXXON. A nice share is KMR too. In my portfolio I'd add also a little transport NM and UNP. A little health LH, something to spoil your health DEO and finally a little gem, something of wich there is never want in to day's world: garbage! So I've just bought for myself Waste Management Inc.

Cheers

 

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#26) On March 02, 2009 at 10:37 AM, socialconscious wrote:

I agree with oversea (< 20) about Garmin and add cathcy jingle but no moat. 

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#27) On March 06, 2009 at 12:29 AM, gman444 (31.39) wrote:

Mary,

My two cents:  I think you really have to look at the state of the world and where we are heading right now.  Most if not all of the stocks you mention are "old guard" stocks--they have been successful over a long period of time, and are big.  I believe these type of stocks will take the longest to recover, assuming they do, if and when we ever bottom.  I think what used to be safe is now risky, as the world we are in has permanently changed, and will keep doing so.  So my first piece of advice is to consider your world view, research where we are going, and decide what you think is happening in the world.  Do you think we will be going back to business as usual?  Do you think we will be in a Mad Max world?  Or something in between?  I will go with door #3. 

I agree with you that a buy-and-hold approach would be ideal, but unfortunately that does not work in today's climate.  I think it is extraordinarily risky to be long most anything right now.   When we get a bottom, and it could be much lower than where we are now, then buy-and-hold may work again.  But you will want to be doing this with things that are basic to human needs. 

The things I am looking for in long term prospects are little to no debt, good value, dividends, and good positioning in some sort of niche area within a larger industry.  I like small caps, and most of the stocks I am tracking are small or midcaps--many of these would not meet your 3-year criterion, but are good candidates for increasing dividends.  China, Brazil, Taiwan, & US are countries I am particularly looking at.  Areas(most important) I like are Defense, Utilities, Commodities, Vice (Alcohol/tobacco), Energy and Alternative Energy, Agriculture, some Tech, and particularly, Precious Metals.   I'm sure there are more, but I can't think of them right now.

So, for example:  HTGC, a small venture capital co., specializing in tech startups.  Unless you think we are going to a Mad Max world, there will still be a need for this.  The company is solid, but has been hammered because it is lumped in with the other financials.    Other stocks I am tracking seriously: HIMX, APWR, SDTH, NED, DNN, KHD, MOCO, TTM, ZINC, YGE, GU.  Almost any of the energy trusts are interesting in the long run (US or Canadian--the latter have the well known tax-related risks), and most of the midstream oil/gas companies.  My favorite long-term energy play is PSE--a great dividend, and great candidate for increasing dividends given their cash position and zero debt.  If you must have large caps, I like HSY, YUM, ABV, JNJ.

I stress, I am not a serious buyer of any of these at this point---this market is for swing trading, or for being on the sidelines.  If there are areas with which you are unfamiliar, this is a good time to get to know something about them.  Defense and Commodities will play particularly important roles in the years ahead, IMHO.  You have learned a lot since you started--good luck, and keep learning.

 

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#28) On March 06, 2009 at 4:48 AM, Mary953 (38.74) wrote:

gman - Thank you for your input.  It was valuable.  I wish I had the chance more often to tell you that I enjoy your comments when I run across them.  They invariably help me learn.

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#29) On March 06, 2009 at 6:16 AM, Xciteddon (66.91) wrote:

Dear Mary,

  I love your blog! I sit in the very same boat you do it sounds like. I too have kids. Don't let them discourage you too much about Disney. Keep in mind that when times are hard we can't afford to take our kids to the movie! We buy the video. I like Activison/Blizzard too. We buy games to keep our kids busy. The price is also in my range.

I like everyones imput also. I would like some feedback on CSC. It has been a good company and although it is losing now, It hasn't gone yet to where I bought it in November. It will benefit from the healthcare information stimulus that Obama just put in effect and it seems to get a lot of contracts. Let me know what you think. Thanks everyone

Dee

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#30) On March 06, 2009 at 12:45 PM, gman444 (31.39) wrote:

Thank you, Mary...Am glad to be able to add to your learning curve.

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