Over the coming weeks, I’d like to highlight a number of companies that I think might make for some attractive core holdings in a long-term equity market portfolio.
With this in mind, there is absolutely no reason to chase this market at all. Some of the best blue-chip, dividend paying stocks are already fully priced, given current expectations for earnings. But there are a number of really good businesses out there that I think are worth putting on a wish list in anticipation of a more attractive entry point. The companies I’m referring to are the long-term, bedrock businesses that equity investors can buy and hold for long periods of time.
To start, I’d like to feature one of my favorite benchmark stocks, Johnson & Johnson (JNJ), which is worthy of serious consideration when it’s down. (See “My Favorite Picks for After the Market Corrects.”)
In an economy where health care and pharmaceuticals are such a large component of economic activity, equity investors really should have some exposure to this sector. What I like about Johnson & Johnson is its diversified businesses model that covers the gamut of healthcare-related needs. The company has a great, long-term track record … Read More
The equity market is looking pretty tired these days and many professional investors seemingly don’t have a sense as to where share prices will go in the near term.
Valuations have been extreme at many fast-growing companies, but this isn’t unusual. The fastest-growing companies are often overbought by institutional investors who can afford to trade on momentum. Closer to quarter-end, much of the action actually is just window dressing.
The vast majority of brand-name stocks are due for a meaningful correction. That would be a healthy development for an equity market that’s up around 25% year-to-date.
I think investors need to be highly cautious and very conservative with their holdings. Dividend-paying blue chips are my favorites going into 2014 because they have the cash, the healthy balance sheets, and the pricing power to keep earnings elevated, even if the U.S. economy experiences its next recession (which is a very plausible development next year).
I recently wrote about The Walt Disney Company (DIS), which has been reporting great earnings results all year. The company just announced a 15% increase to its annual dividend.
Two weeks ago, NIKE, Inc. (NKE), another company that I like, announced a 14% increase in its quarterly … Read More
You don’t often hear a lot about United Technologies Corporation (UTX) these days; it’s an old economy name that doesn’t seem to garner much attention from the media.
Nevertheless, the company that makes elevators, helicopters, airplane engines, and HVAC (heating, ventilation, and air conditioning) and fire/security systems continues to perform excellently. It’s a component of the Dow Jones Industrial Average, and the stock’s had an exceptional year. (See “The One Market Sector That’s Consistently Outperforming the Rest.”)
Approximately $17.0 billion of the company’s total sales in 2012 came from its “UTC Climate, Controls and Security” business. Next was “Pratt & Whitney” aircraft engines at $14.0 billion. “Otis” elevators and escalators brought in $12.0 billion in sales last year, followed by “UTC Aerospace Systems” at $8.3 billion and “Sikorsky” helicopters at $6.8 billion.
As a conglomerate with a strong constituent in aerospace, United Technologies has an excellent track record of increasing its dividends to stockholders.
In 2012, the company increased its common share dividend by a total of 11.5%, representing its 76th consecutive year of paying dividends. According to the company, from fiscal year-end 2002 to year-end 2012, United Technologies delivered a 225% total return to shareholders, which is … Read More
There are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.
Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.
Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.
Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.
Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with … Read More
As evidence of the fervor to which institutional investors are bidding this market, Johnson Controls, Inc. (JCI) jumped five percent on the day the company announced a new $3.65-billion share buyback program and a 16% increase to its dividends.
These are good times for corporations and equity investors. Companies can borrow on the cheap, and they are keeping shareholders happy with rising dividends and share buybacks.
Johnson Controls is based in Milwaukee and sells a great deal of equipment to the automobile and the heating, ventilation, and air conditioning (HVAC) industries.
The company’s dividends have been rising consistently, and for the quarter ended June 30, 2013, earnings per share grew an impressive 32%.
Not surprisingly, the stock’s been doing extremely well. At the beginning of the year, it was trading around $31.00 a share; now, it’s around $50.00.
This kind of capital gain has been very common among countless blue chips. It is a highly unusual and monetary policy-fueled rise. In my view, in the case of Johnson Controls, the company’s share price is overvalued, even with the recent news regarding its dividends.
While there is certainly a lot of liquidity in the stock market now—and there is … Read More
Recently, I revisited J. Anthony Boeckh’s book The Great Reflation, which was written in 2010 and is a thorough, well-written analysis of the long-run cycles experienced by the U.S. economy and the affects of financial crises and monetary policy on the stock market.
Back in June, I presented a summary of Boeckh’s conclusions in this column. Many of his points, based on a non-political historical analysis of business and stock market cycles, have come to fruition. (See “Breakdown: U.S. Economy and Its Cycles in 18 Brief Points.”)
Here are Boeckh’s key top-10 conclusions:
1. The global financial system will always remain flawed and subject to price inflation and bubbles, so long as it is based on fiat paper money. All anchorless fiat money systems are destined to suffer inflation and instability.
2. Stock market investors will be playing a cat-and-mouse game with the Federal Reserve for years to come, a problem caused by excessive private and public debt.
3. Deleveraging of the private sector bodes … Read More
For a company with just one operating division that’s generating meaningful growth, E. I. du Pont de Nemours and Company (DD) seems to have an uncanny ability to appreciate in value on the stock market.
DuPont is a big player in the agriculture sector, and this operating division is somewhat of a proxy on the sell-side industry.
Last quarter, the company reported sales growth of five percent to $7.7 billion. The company’s agricultural division experienced the best gain, with a 15% hike in sales to $1.6 billion.
If institutional investors buy the stock market based on improving balance sheets, DuPont’s fits the bill. The company’s third-quarter cash position soared from $4.3 billion to $7.0 billion.
The stock was trading around $45.00 a share at the beginning of the year, and it is currently trading at approximately $62.00 with a 2.9% dividend yield. For such a mature enterprise, an impressive capital gain like this is indicative of a monetary policy-induced stock market, where even slow-growth enterprises have been bid significantly.
Across the board, Wall Street has been increasing DuPont’s earnings estimates for this year and next. For 2013, total sales are expected to grow approximately three percent, accelerating to 6.3% … Read More
Being a buyer in this stock market is increasingly difficult as the main indices continue to push new highs and a lot of companies are fully priced.
While there are lots of corporations whose outlooks are improving going into 2014, expectations for earnings growth combined with dividends offer little in the way of value. That’s why a major stock market correction would be so healthy and helpful for those who wish to be invested in equities.
The Colgate-Palmolive Company (CL) is a blue chip company that’s proven to be an excellent long-term wealth creator for shareholders. The stock’s trailing price-to-earnings (P/E) ratio is currently around 27 and its forward P/E ratio is approximately 21.
The stock just broke the $65.00-per-share level after trading around $53.00 at the beginning of this year and $45.00 at the beginning of 2012. That’s a 44% gain in less than two years without including dividends.
Then there is NIKE, Inc. (NKE), another strong but mature brand that keeps hitting new record-highs on the stock market.
The company’s latest quarterly sales revealed an eight-percent gain to $6.97 billion, while net earnings grew a whopping 38% to $780 million. The company gave a rosy outlook for the … Read More
Among the many benchmark stocks that I follow, I’ve noticed 2014 Wall Street earnings estimates have been nudging higher.
In a role reversal, Union Pacific Corporation (UNP) has been taking a break, even though the company’s latest quarter was solid and earnings expectations have been boosted for next year.
This is perhaps a subtle indicator that the bull market in equities is moving away from the old economy names that led the run upward over the last couple of years. Most of the other railroad stocks are still pushing new highs. Union Pacific’s share price consolidation has been going on since May.
The company’s price action is definitely worth following now. There is very little value in the stock market today, but Union Pacific’s share price is not expensive; it has the lowest forward price-to-earnings ratio of the railroad group.
If the stock’s consolidation continues or there is a major price retrenchment, Union Pacific could be a buying opportunity for those interested in owning a railroad company.
I’m still inclined to believe that existing stock market winners like Union Pacific are worthy of consideration … Read More
When we last looked at Alaska Air Group, Inc. (ALK), the position had pushed to a new record-high on the stock market, and it’s doing so again.
Many Dow Jones transportation stocks continue to exude price strength and in my mind, this action is one confirming factor that the broader stock market can go higher.
There has also been a spike in countless new initial public offerings (IPOs), which only makes sense with the stock market at an all-time high and the world awash in liquidity.
But it is difficult to consider buying stocks right at their highs. If one came into money and wanted to create a stock market portfolio, there’s not a lot of value for your investable dollar. Even income-seeking investors have to contend with high prices for the best dividend paying stocks.
Big investors have been buying dividend-paying blue chips all year and are likely to continue doing so unless there’s a catalyst to sell.
Automatic Data Processing, Inc. (ADP) just announced a solid 10% increase in its cash dividend to stockholders. The company will pay $0.48 a share, up from the previous $0.435 per share, on January 1, 2014 to shareholders of record … Read More
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