Some Stock Ideas
Potential "core" holdings:
Dionex (DNEX) just reported their 18th consecutive year of increased profits. As usual there was considerable share repurchasing by the company. This one is not exciting - ever - but it is an excellent holding for taxable accounts (no dividend) and it should be expected to beat the market over time. However it will go through periods of not much happening to the stock, since it is a small cap. IMO it is one very safe company to own, and they do about everything you could ask of a company except grow explosively. A boring 15% grower - perfect for the truly long term (10 year +) hold.
Deere (DE) is very inexpensive right now. All of the agricultural equipment manufacturers are on sale. All but Deere have told of orders being pushed back a bit, but all seem optimistic about volume shipments. The question is if everybody (the companies and those who watch them) is too optimistic - if this is the start of a downturn in the cycle. After all these companies have had fantastic sales growth in recent years. Still DE is one of the 40-odd financially strongest (A++) companies as rated by VL, and it passes every variation of high dividend strategy investing that I know of. Given the dividend and the cyclical nature of the business, this one would seem most suitable for tax-deferred accounts.
Potential speculative holdings:
Credit goes to Porc for alerting me to these possibilities. Both look good from the standpoint of projected free cash flows, but of course that is crystal ball gazing.
Pairgain Technologies (PAIR). VL is estimating (not that it means anything) that PAIR stock will return 41% per year for the next 3-5 years.
Parametric Technology (PMTC). VL is estimating (not that it means anything) that PMTC stock will return 50% per year for the next 3-5 years.
I read a true "story" recently which I though I would share. It appeared in Forbes back in the late 70s, and was reprinted by John Train in his book The Craft of Investing. The story was told in the first person by a man who had been trading actively and not making much, or losing. One day while he was in the brokerage, a sales manager asked him if he would like to meet a man who had never lost money in the stock market. When they guy expressed disbelief, the sales manager said that he had handled the guy's account for 40 years and on balance, he never lost. "Go talk to him now, he's that pig and rice farmer over there in the coveralls. He doesn't stick around long, just comes in every few years to buy or sell and gawks
at the tape."
So the guy goes and talks to this farmer, and surprisingly the farmer was quite enthusiastic about discussing his method. He paid no attention to the stock market or to individual stocks. When he read in the newspaper that the stock market was way down and expected to go lower, he got a current S&P Stock Guide and came up with a list of 30 or so companies which had fallen to below $10 a share, were in boring lines of business (pecan growers, home furnishings were the examples given) and which paid a dividend. He took $50,000 in to the broker and bought a basket of them. A few years later, when the stock market would again be making front page news, this time for new highs, and the sky is the limit, he would sell them all.
The farmer compared his investing to his farming. Like his rice farming, there was a season to plant and a season to harvest. Like his pig farming, the time to buy was when they were cheap (buyer's market) and the time to sell was when they were dear (seller's market). He never got the low price on a buy or the high price on a sell, and was quite content to buy in the low range and sell in the high range.
As the article pointed out, it is quite possible the farmer could have done even better using some other method. But talk about simple!
In the spirit of this story, here are a few companies that would seem to be what the farmer would buy if he were investing today. Boring businesses, all with financial strength of at least "A" as rated by VL, all pay dividends, and all look cheap by free cash flow. I do not follow any of these very closely, so if they interest you do some digging. Also I think these are most suitable for tax-deferred accounts. For the most part they are not what I would consider to be the kinds of companies you would hold "forever" (such as the potential core holdings) nor do they seem to have explosive upside potential (such as the potential speculative holdings) to overcome the drag of taxes.
Cooper Tire and Rubber (CTB). Guess what they make? Actually this was a big winner through the 80s.
Nalco Chemical (NLC). World leader in water treatment chemicals, service a wide range of industries.
Avnet (AVT). Major distributor of electronics components.
Fleetwood Enterprises (FLE). Manufactured homes, RVs.
Adobe Systems (ADBE). I don't know as a software company should really be included in this list, but it does pass the quantitative screens.
Here's a link to make it easy to check the price and news on all the companies named in this post:
quote.yahoo.com
Axel |
