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Three starter stocks for the long term-Part II



June 05, 2012 – Comments (0) | RELATED TICKERS: MMM , CVX , MCD


This is the second of three articles designed to give beginners a solid long term portfolio.  In the last article I gave my selections for the Health/Pharma industry (JNJ), the telecommunications sector (T), and the consumer non-cyclical sector (KMB).  In this article I plan to cover capital goods, oil/gas, and cyclical (restaurants).

For the capital goods sector it was a tough call between Caterpillar and 3M.  I decided that the diversity of 3M's six different business segments provided more safety than that of Caterpillar, therefore, 3M will be my capital goods selection.  MMM has grown consistently over the prior decades and paid a healthy dividend during that same time.  It is currently trading at $82.53 with a yield of 2.86%.  MMM's future prospects for the long term look very strong in my opinion.

The Oil/Gas sector is filled with winners.  But Chevron stands above all others in my opinion.  Its current valuation has a lot to do with CVX being my current selection.  It's a bargain at $96.33 with a P/E of 7.07 and a yield of 3.74.  It's fully diversified in its operations and has great management.

Last but not least is our restaurant selection, McDonald's.  MCD is an outstanding company that has great management and is focused on increasing shareholder value.  As a vegetarian I feel a bit conflicted about recommending this company but this isn't about my personal biases, it's about getting the beginners a solid portfolio, and MCD is solid in every way.  It's current pullback to $86.90 provides a fantastic entry point and the yield of 3.22% is very attractive.  Though in the cyclical sector, it has proven to be fairly stable during hard economic times.


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