— “Ahead of The Street” Column, by Mitchell Clark, B. Comm.
As much as I am enthusiastic about speculative investment opportunities like U.S.-listed Chinese stocks, I’m also a big fan of some well-known large-cap companies that have proven track records of success. When I say a “track record of success,” I’m not only referring to operational success at the corporate level, but also a large-cap company’s ability to deliver steady returns to shareholders. A business can be successful financially, but is not always recognized properly by the investing marketplace.
One such company that stands out as a proven wealth-creator is Colgate-Palmolive Company (NYSE/CL). As you know, this company sells consumer items like toothpaste, dental floss, soap, and dog food. In the last 30 days, eight Wall Street research analysts have raised their earnings expectations for Colgate’s fourth quarter. Some 14 analysts recently increased their 2010 earnings expectations for the company and, last week, the stock hit a new all-time high.
Since the early 1980s, this stock has been a powerhouse wealth-creator. After accounting for stock splits (three 2-for-1 splits since 1991), this stock has appreciated some 840% since its post-split stock price of around $1.00 per share in 1981. And the company paid a dividend to stockholders during this period.
This is an impressive performance for a $40.0-billion large-cap company that sells toothpaste and soap. Sometimes I think investors ignore the opportunities that present themselves in the large-cap sector of the stock market. It may be because some investors simply can’t see the kind of capital appreciation that they might otherwise expect from investing in a nimbler smaller company.
Colgate is one company that’s proven to the marketplace that it can make a lot of money for shareholders over both long and short periods of time. Others include United Technologies Corp. (NYSE/UTX), The Procter & Gamble Company (NYSE/PG), Hewlett-Packard Company (NYSE/HPQ), PepsiCo, Inc. (NYSE/PEP), and McDonald’s Corp. (NYSE/MCD), to name only a few.
Investing in the right large-cap company usually offers investors the ability to collect dividends, along with potential for capital gains. It also offers something that you can’t put a value on — the ability to sleep well at night knowing that your investment is providing slow, but steady returns to your portfolio. As investors, we often take the big, brand-name companies for granted. However, the numbers clearly show that owning the right large-cap company can pay off just as well as the hottest stock in the marketplace.