My stock picks of $20M each need to be quick and defensive (going to play some tunes tonight). We all know about defensive stocks, and IMO the best are what I call the eat'em, drink'em, take drugs for'em, smoke'em and insure'em, kind. There are others but who doesn't eat, drink (something), occasionally use drugs (legal kind of course), get insurance and yes, some actually still smoke and chew (and they would spend their last buck here too). I don't have statistics to prove it, but I would bet big that these kinds of classic defensive stocks always perform the best in troubled times.
Why defensive? Well the big market's down 100+ today and our main indicator, the NYSE Bullish % Index, and all its little brothers and sisters are either bear confirmed or on sell signals. In these not so great market times I want defensive oriented stocks that are large and pay a dividend (pay me while I wait). I think they'll get hurt the least if the market continues to slide.
I'll start with an internet search engine and pull-up the top 200 O'Shaughnessy criteria value stocks that come from a) a database of 8,989 stocks; b) exceed the average market capitalization (1,386 million); c) exceed the average shares outstanding (35.78 million); d) exceed the average cash flow p/share (1.159); e) sales are greater than 1.5 times the average (1,336 million); and f) have the highest dividend yield (in this case a minimum of 1.4%).
Next, I'll slap'em in the DWA portfolio and damn! Not many classic defensive stocks with positive Relative Strength. Here's what I get today ---------
1. ABT, Abbot Laboratories is a pharmaceuticals company that also produces nutritional supplements and hospital and laboratory equipment. Its pharmaceuticals unit makes antibiotics, antihypertensives, and other drugs such as Norvir, used in treatment of HIV and AIDS. Nutritional products include the infant formula Similac and the adult nutritional supplement Ensure, each a leading products in its field. Abbott's hospital and lab products include medical diagnostic and drug-delivery systems; Abbott is the world's #2 diagnostics company, behind Roche. The company also makes chemical and agricultural products. More than one-third of sales are to foreign markets.
Zachs has a Strong Buy at 6, Moderate Buy at 5 and Hold at 6. Dividend yield is 1.5%
P&F Info: Drug Sector in Bear Confirmed at 38; RS Buy/+; Current signal is double top buy at 40 on 6/19/98; Bullish Price Objective was achieved.
Comment: Trading well above its Bullish Support Line (BSL). Chart patterns depict lots of classic Bullish Signals (double tops with higher highs and higher lows). Currently at 41 and virtually at the top of its 10-week trading range (as determined using 3 standard deviations). No recent historical resistance at this level. Single support at 35, 29 and 27. Had a high pole top a year ago and didn't bat an eye. Hasn't had a sell signal in years. One tough stock. Would like to see 2 or 3 more points before a three box reversal.
2. AHP, American Home Products, is one of the US's top pharmaceutical companies; it ranks among the top five in prescription drugs. The company makes Premarin, an estrogen-replacement product (and the most frequently prescribed drug in the US), and consumer products (Advil, Preparation H). AHP's subsidiaries include Cyanamid (herbicides and insecticides), Fort Dodge (animal health care products), Whitehall-Robins Healthcare (consumer health products), Wyeth-Ayerst Laboratories (prescription drugs), and Genetics Institute (biotech). It also owns about 54% of another biotech firm, Immunex Corp., and has agreed to buy life sciences company Monsanto. AHP has more than 60 products in clinical trials. About 40% of sales are international.
Zachs has a Strong Buy at 9, Moderate Buy at 9 and Hold at 7. Dividend Yield is 1.7%
P&F Info: Drug Sector in Bear Confirmed at 38; RS Sell/+; Current signal is double top buy 52 on 6/5/98; Bullish Price Objective is 76.
Comment: Trading well above its BSL. Broke tough resistance to 49 with a quad top on 5/15/98. Then after a few pullbacks had a double top to 51 on 6/5/98 and a spread double top to 52 on 6/8/98. Had a 3-box reversal to 50 (its current location) on 6/15/98. Single resistance at 53, double support at 47 and triple support at 44.
3. GE, General Electric operates a wide array of businesses, from TV network NBC to power plant parts manufacturing. The fifth-largest US corporation, it produces aircraft engines, electronic appliances (kitchen and laundry equipment), industrial products and systems (lighting, electrical distribution, and control equipment), and materials (plastics, silicones, laminates, and abrasives). Financial services arm GE Capital Corp. is one of the largest financial services companies in the US. The corporation has almost 150 manufacturing plants throughout the US and Puerto Rico and over 100 plants in 25 other countries.
Zachs has a Strong Buy at 10, Moderate Buy at 6 and Hold at 1. Dividend Yield is 1.4%
P&F Info: Electronics Sector in Bear Confirmed at 26; RS Buy/+; Current Signal is a double top and spread triple top buy at 87 on 6/17/98; Bullish Price Objective is 102 (Incomplete until a reversal).
Comment: Trading miles above its BSL. This is the Arnold S of stocks. Chart is currently basing between 81 and 90. If one wanted to argue that it recently formed a bearish then bullish triangle it would pass the giggle test. Currently at 88 and near the top of its 10 week average. Single resistance at 89. Single support at 82 and triple support at 81. This is the largest market cap firm in the USA at 286.6 billion. If this baby explodes then we're shooting in the streets.
4. HRL, Hormel Foods is best known for its SPAM canned meat, Hormel Foods is actually a diversified food producer that makes a variety of ethnic, convenience, and health-oriented foods. Its processed foods include Jennie-O turkey products, Dinty Moore beef stew, Hormel and Stagg chili, Chi-Chi's Mexican foods, Always Tender pork products, and Hormel fat-free hot dogs and vegetarian chili. Meat products are still the biggest revenue generators at Hormel though, constituting over half its sales. The company operates processing and packaging facilities in 11 states and sells its products in 50 countries around the world.
Zachs has a Strong Buy at 3 and Hold at 4. Dividend Yield is 1.9%
P&F Info: Foods Beverages/Soap Sector in Bull Correction at 52; RS Sell/+; Current signal is double bottom sell at 32 on 4/29/98; Bearish Price Objective is 27.
Comment: Last column of O's dropped down to 32, which was within 2 points of touching the BSL. Trading in the middle of its 10-week range with single resistance at 36 and double resistance at 39. Single support at 32 and 28 (notice how the 28 support was previously a triple resistance). It's given two sell signals in a row with the last being a classic Bearish Signal (double bottom with lower top). Reversed back up to 35 on 6/8/98. I think it's going to continue up. (We'll see.) Eat your SPAM everyone!
5. MHP, McGraw-Hill is a leading information provider. The company publishes "Business Week," and many other consumer and trade magazines. Subsidiary Standard & Poor's is a leading furnisher of corporate credit ratings and also publishes directories of corporate information. The company's acquisition of Times Mirror's educational publishing arm made McGraw-Hill the world's #1 educational publisher. More than a print publisher, McGraw-Hill also serves the business, professional, consumer, government, and education markets through electronic networks, software, and CD-ROMs, as well as via broadcasting (the company owns four TV stations).
Zachs has a Strong Buy at 3, Moderate Buy at 5 and Hold at 1. Dividend Yield is 1.9%
P&F Info: Media Sector in Bear Confirmed at 52; RS Sell/+; Current Signal is a double top buy on 6/12/98; Bullish Price Objective is 85.
Comment: Stock has been trending for sometime well above the BSL. Recent signal was the classic Bullish Signal. 3-box reversal down to 80 on 6/19/98. Trading in the three-quarter area of its 10 week range but doing quite nicely in these troubled times. Single resistance at 83 with single support at 77 and real strong double support at 75 (look at the previous triple resistance at this level). Often time's resistance becomes support and vi se versa.
These nice big blue boy's would help one sleep well, but they probably won't compete with the faster moving more volatile sectors.
NOTE: The above picks are submitted as a learning experience in a not for profit Point and Figure stock picking contest only. The information presented by me is not an offer to buy or sell securities referred to herein. By no means is the company information complete. One should obtain financial statements and a full due diligence package, including chronological news releases, from this company prior to reaching any investment decision. In addition, it is highly advisable that information provided here, should be verified by the respective companies represented. One should not rely upon a single source for financial information, financial data, and corporate information. One should also use the full battery of available technical analysis (including stock charts, moving averages, etc.) and consult a licensed financial advisor for an independent opinion. The information provided is from my own due diligence and my own search criteria developments. I am not responsible for the outcome of anyone's investment decision.
Take care,
Eric
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