There's an old stock market adage: "Sell in May and go away, don't come back till Labor Day." Personally, I don't believe in timing the market, especially on the merits of an anonymous maxim, but today's sell-off certainly didn't do much to disprove the saying. That said, there was some actual news today -- global manufacturing is starting to cool down, U.S. companies are hiring more slowly than anticipated -- that substantiated the drop. By day's end, the Dow Jones Industrial Average (DJINDICES: ^DJI ) had lost 138 points, or 0.9%, to close at 14,700http://www.bloomberg.com/news/2013-05-01/asian-stocks-fall-as-yen-gains-amid-growth-concerns-oil-drops.html.
Walt Disney (NYSE: DIS ) was one of just a handful of blue chips to advance today, adding 0.6%. Although the House of Mouse doesn't report quarterly figures until next Tuesday, the stock was buoyed by good results from several other rival entertainment and broadcasting mainstays. Both CBS and Viacom surprised Wall Street today, and with big media beating expectations, investors grew optimistic for Disney's numbers next week.
Top 5 Blue Chip Stocks To Buy For 2014: McDonald's Corporation(MCD)
McDonald?s Corporation, together with its subsidiaries, operates as a worldwide foodservice retailer. It franchises and operates McDonald?s restaurants that offer various food items, soft drinks, coffee, and other beverages. As of December 31, 2009, the company operated 32,478 restaurants in 117 countries, of which 26,216 were operated by franchisees; and 6,262 were operated by the company. McDonald?s Corporation was founded in 1948 and is based in Oak Brook, Illinois.
Advisors' Opinion:- [By Dan Moskowitz]
McDonald�� is one of the strongest brands in the world. For that reason alone, it would be unwise to bet against McDonald��. This doesn�� mean a long position should be initiated. It simply means that shoring the stock would be extremely risky.
- [By Brian Gorban]
Fast food giant and world-renowned company McDonald’s (NYSE: MCD) is undoubtedly a name you’ve heard of, as “the golden arches” are ubiquitous--and with good reason: The company operates over 33,000 restaurants in 119 countries. With over $27 billion in revenue and a market capitalization near $90 billion, McDonald’s is simply a juggernaut and should continue to be a beneficiary of the global growth story happening predominately in the “BRIC” (Brazil, Russia, India, and China) countries in the years and decades to come.
Of course, those countries have not been spared the current economic carnage and that has caused the company to miss the past two quarters’ consensus estimates, but that has created a buying opportunity. With the stock trading not far above its $83.31 52-week low, McDonald’s is now yielding an attractive 3.5% dividend yield, and with a low 54% payout ratio, look for the dividend to not only be safe but be raised in the near future. Add in the fact that the company has a comparatively and historically low 16x forward and trailing P/E, and I think MCD should serve investors well for the long-term while one can wait and happily collect the nice 3.5% dividend.
- [By Victor Mora]
McDonald�� provides highly demanded food items to significant amounts of consumers who enjoy their items around the world. The stock has done very well for investors of the last several years and is now trading at all-time high prices. Earnings and revenue figures have done reasonably well, however, investors have expected a little more from the company. Relative to its strong peers and sector, McDonald’s has been a performance leader, year-to-date. Look for McDonald’s to continue to OUTPERFORM.
Top 5 Blue Chip Stocks To Buy For 2014: Apple Inc.(AAPL)
Apple Inc., together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. The company sells its products worldwide through its online stores, retail stores, direct sales force, third-party wholesalers, resellers, and value-added resellers. In addition, it sells third-party Mac, iPhone, iPad, and iPod compatible products, including application software, printers, storage devices, speakers, headphones, and other accessories and peripherals through its online and retail stores; and digital content and applications through the iTunes Store. The company sells its products to consumer, small and mid-sized business, education, enterprise, government, and creative markets. As of September 25, 2010, it had 317 retail stores, including 233 stores in the United States and 84 stores internationally. The company, formerly known as Apple Computer, Inc., was founded in 1976 and is headquartered in Cupertino, California.
Advisors' Opinion:- [By Geoff Gannon] bott Laboratories (ABT), Autodesk (ADSK), Cisco (CSCO) and Exelon (EXC). Others were ideas collected from places like news, etc.
��The ranking exercise (is) based on growth and fundamental analysis. EXC ranks at the bottom in both analyses��op 4 results are Apple, BHP Billiton (BHP), Mosaic (MOS) and Rio Tinto (RIO). MOS was eliminated as it has one year of negative FCF.
Since AAPL is listed as No. 1, I went back and looked at P/E when I bought it at $333 in April and May 2011. The P/E was 11 - 13 times. It is currently 15 times��I think the iPhone 4s plus Sprint network addition plus iPad plus enterprise adoption of Mac will provide an impressive fabric of earning growth that is sustainable.
The other two on the list are basic materials, they could be��good long-term to my stock portfolio. Assuming scarcity as their global trend (need to learn more here.)
From the fundamental analysis: Rio is cheaper than BHP. But, RIO is qualitatively inferior when compared to BHP (ROIC, ROE, ROA). I have not looked at Vale (VALE), so maybe next weekend I will continue this exercise with VALE.
I am not confident what the next step can be.
Should I do more work or buy AAPL or EXC?
Thank you very much.
Ning
(I should mention here that Ning included some very extensive Excel tables with this email.)
Those are some extensive tables you included there. They are thorough. But I think the next step is not quantitative. It is qualitative. I would first look at the stocks you already own and feel you know best.
This sounds like Apple (AAPL) and Exelon (EXC).
I may be wrong about that. But it sounded to me like you had a lot of basic materials stocks show up for purely quantitative reasons, while you yourself didn�� have a strong feeling whether buying basic materials was a good idea or not. It could be. But you didn�� seem to have any special insight there. Am I right?
Where you did have some special insight ��or at lea! st a very clear opinion ��was on Apple. Now, normally I wouldn�� encourage anyone to start with one of the most talked about, written about, gossiped about companies out there.
Everybody has an opinion on Apple. Everybody knows the company. It is hardly a hidden gem. But it might be a gem in plain sight. And it sounds like you have some ideas about Apple beyond the numbers. So, that�� where you should start.
The other company it sounds like you��e interested in is Exelon. Part of the reason why I�� saying you sounded interested in doing more work on Exelon is that you talked about the stock despite it finishing at the bottom of your purely quantitative comparison.
Is that really a good sign? Am I really saying you should spend more time studying a company that finished at the bottom of a comparison you drew up?
Here�� what I�� saying. You did a wonderful quantitative comparison of some very different stocks. A bunch of the stocks you��e got there are basic materials stocks. This should tip you off that something is ��amiss. When you do a purely quantitative survey of stocks you��e casting a net. When you get back a list of stocks that are all in the same industry, you need to take a good, long pause.
You may not be measuring what you think you��e measuring. Or at least you may not be catching what you wanted in that numerical net you threw.
I think Exelon and Apple are a good place to start.
They are very different companies. That's good. Apple is a very high profile company. While Exelon is not. Both are potentially very interesting companies.
You could argue that either has a wide moat.
I wouldn't disparage the quality of either business relative to its peers. However, I think the next step ��for me at least ��would be to look at the industries they operate in. Are Apple and Exelon predictable? Do they have sustainable competitive advantages ��especially in regards to operating margins and return on equity. ! Look at t! he stocks found in GuruFocus�� Buffett-Munger Screener. Compare the stocks you��e interested in with those companies. Not just quantitatively, but qualitatively as well. Right now, it doesn�� look like either Apple or Exelon score very high in terms of business predictability (as GuruFocus measures it). Again, that�� a purely quantitative judgment ��like your own Excel tables ��but it�� worth keeping in mind.
I��l tell you how I use quantitative measures. I don�� think of them as giving me the whole picture. I like to think of them more like vital signs. They are alerts. They let me know what areas of a stock I need to study more thoroughly. For example, Apple gets a 1-Star business predictability rating. Does that mean it�� a bad, unpredictable company?
Absolutely not. It just means that the trajectory Apple has had these last 10 years hasn�� been predictable. It has been phenomenal.
So you need to focus ��this is always true, but it�� especially true with Apple ��on whether or not the current level of sales, earnings, etc., are sustainable for the long-term. In Apple�� case, this means you need to do qualitative analysis. Probably competitive analysis.
The industry Apple operates in ��consumer electronics ��is not an especially predictable one. It is not one where competitive advantages ����oats����tend to be especially durable. That doesn�� mean that Apple can�� maintain its terrific position. It doesn�� mean Apple lacks a moat. It just means that you need to investigate that issue.
Okay. Another good question to ask is what the risks are. What happens if your assessment of a company is wrong? What if you think Apple has a wide moat and it doesn��? What if you think a barrel of oil will be $150 in 2013 and it ends up being $50? Often, investors focus on the probability of an event. That�� important. But it�� not more important than thinking about what happens if your assessment is wrong. Maybe $150 a barrel oil ! is way mo! re likely than $50 a barrel oil. But ��no matter how sure you felt about the future price of oil ��would you really buy a stock that could go to zero if oil stayed at $50 for any length of time? Probably not. Likewise, however strongly you feel about Apple�� ��oat��as of this moment ��it�� important to be honest about what would happen to the stock (and your portfolio) if Apple�� moat were breached.
I wrote about mean reversion in one of my net-net posts. My point was that when you buy a company that's very cheap relative to its liquid and/or tangible assets any movement toward that company doing "about average" relative to American business generally is a positive for you. Well, these two stocks ��Apple and Exelon ��are far from net-nets. Any movement towards an "about average" business performance for stocks like Apple and Exelon will be very, very bad for you. That is because you are ��in both cases ��paying a high price to liquid and tangible assets (relative to the price you could buy many of their peers at).
That doesn't mean they are bad businesses. An insurer or bank that trades at a premium to tangible book value may be quite a bargain if it is something like Progressive (PGR) or Wells Fargo (WFC).
The important thing is not to confuse a temporarily wonderful competitive position with a competitive position like PGR or WFC that can probably be maintained for many, many years.
You may disagree with me here, but I think in the case of Apple you are really betting on the organization. And in the case of Exelon you are betting on the assets. Basically, you are saying that Apple's brand and people and culture working together are going to achieve things ��like higher returns on investment ��than competitors who seek to do the same thing. In the case of Exelon, I think you are saying that their assets are lower cost (higher margin) generators of power than their competitors. In fact, you are saying they are so much more efficient that it is wort! h paying ! a substantial premium to tangible book value.
I don't disagree with either claim. I think Apple has a superior organization. And Exelon has superior assets.
Exelon's assets are clearly carried at far below their economic value. So the issue with Exelon is how to value those assets.
Have you read Phil Fisher's "Common Stocks and Uncommon Profits?"
It is a good book to read if you are thinking about investing in Apple.
And "There's Always Something to Do" is a good book to read when thinking about Exelon.
After reading the information you sent me, I'd say that the most important thing for you to do now is get some distance from comparative numbers. Think about what it is you are buying in each case. What aspect of the business is providing you with your margin of safety?
It�� not the price.
These are not cheap stocks on an asset value basis if you consider only their tangible book value.
Therefore, either the tangible assets must be worth much more than they are carried for on the books ��or the intangibles must be very valuable for you to buy these stocks.
In your final analysis I think you should focus on one question:
How comfortable would you be if you had to hold this stock forever?
This is an important question because you may have in mind that you have a lot of faith in Apple right now. That faith may be well founded. But if you have little faith in Apple four or five or six years out ��do you really think you will be the first to spot the company's loss of leadership? Think about how quickly companies like Nokia (NOK) and Research In Motion (RIMM) saw their P/E ratios contract when investors realized just how far they were behind the competition. Do you really think you will be fast enough to spot a change in Apple's position? It�� not enough to see the writing on the wall. You have to see it faster than everyone else. You have to sell before they do.
That�� not the Phil Fisher way. The Phil F! isher way! is to be very sure when buying a growth company. Then, yes, you do monitor the situation. But it is not about understanding the situation one or two years out. It is about understanding the qualities already present in the company that will prove durable.
Even if you've read Phil Fisher and Peter Cundill's books, I'd suggest looking at them again as they are good examples of the kind of investing you are trying to do in Apple (Fisher) and Exelon (Cundill).
Also, you might want to read a bit about Marty Whitman's philosophy and Mario Gabelli's philosophy. If you think Exelon is a buy, it is probably because you have reasons similar to the reasons those two investors have when they buy a stock.
Basically, Marty Whitman and Mario Gabelli try to find out the value of a company's assets in a private transaction. They don't try to figure out what public markets will pay for the stock. They try to figure out what private owners would pay for the business and they work back from there to figure out the stock's value.
So my advice is to step back from all the numbers. Zero in on just a couple companies. Don't look at more than one stock in the same day. If you are thinking about Apple today then think only about Apple for today. Exelon can wait until tomorrow. Think about what aspect of the company makes the stock clearly worth more than its current price. Then study that aspect. And don't add a dime to your investment in that stock until you are comfortable with betting on the permanence of that aspect.
Make sure you understand the value in the company. And make sure that value is durable.
Understanding often requires more than just numbers. So, I
Top 10 Oil Stocks To Watch For 2014: Chevron Corporation(CVX)
Chevron Corporation, through its subsidiaries, engages in petroleum, chemicals, mining, power generation, and energy operations worldwide. It operates in two segments, Upstream and Downstream. The Upstream segment involves in the exploration, development, and production of crude oil and natural gas; processing, liquefaction, transportation, and regasification associated with liquefied natural gas; transportation of crude oil through pipelines; and transportation, storage, and marketing of natural gas, as well as holds interest in a gas-to-liquids project. The Downstream segment engages in the refining of crude oil into petroleum products; marketing of crude oil and refined products primarily under the Chevron, Texaco, and Caltex brand names; transportation of crude oil and refined products by pipeline, marine vessel, motor equipment, and rail car; and manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It a lso produces and markets coal and molybdenum; and holds interests in 13 power assets with a total operating capacity of approximately 3,100 megawatts, as well as involves in cash management and debt financing activities, insurance operations, real estate activities, energy services, and alternative fuels and technology business. Chevron Corporation has a joint venture agreement with China National Petroleum Corporation. The company was formerly known as ChevronTexaco Corp. and changed its name to Chevron Corporation in May 2005. Chevron Corporation was founded in 1879 and is based in San Ramon, California.
Advisors' Opinion:- [By Jonas Elmerraji]
Surprisingly, one of the names that's correlating the highest with the S&P 500 right now is oil and gas supermajor Chevron (CVX). Just like the S&P, Chevron is trading in a very well-defined trend channel. The key difference is that the Chevron trade is further along; this stock is bouncing off of trendline support this week. That means it's time to be a buyer.
Commodities and materials stocks are seeing some buoyancy this week, but Chevron's price action is different -- it's been more sustained over the course of 2013. This stock's proximity to trendline support right now makes it the best-in-breed oil name in my view. As geopolitical risks propel oil prices, the real story at CVX is the fact that support is just a few points away. That makes Chevron a great setup from a risk management perspective.
Speaking of risk management, if you decide to jump into shares here, I'd recommend keeping a protective stopprotective stop just above the 200-day moving average.
- [By Hawkinvest]
Chevron Corporation (CVX) is a leading integrated energy company with exposure to oil, natural gas, refining, etc. This could be one of the most undervalued stocks in the market. Chevron pays a dividend that beats many other stock and bond yields, plus it has a below market price to earnings ratio of about 8 times earnings. The average stock in the S&P 500 Index currently trades for over 12 times earnings. If oil prices continue to rise, the already healthy profit estimates for Chevron might be too low. With oil prices showing strength this early in the season, Chevron could be poised to beat earnings in the coming months. However, the stock is trading at the upper end of the recent trading range. Recently, it has been possible to buy this stock at about $102 per share, so waiting for dips could pay off.
Here are some key points for CVX:
Current share price: $104.25
The 52 week range is $85.63 to $110.01
Earnings estimates for 2012: $12.66 per share
Earnings estimates for 2013: $13.20 per share
Annual dividend: $3.42 per share which yields 3.1%
- [By Jonas Elmerraji]
Oil and gas supermajor Chevron (CVX) is another name that's showing investors a bullish technical setup right now. Chevron is forming a textbook ascending triangle pattern, a price setup that we've seen a lot of on the way up in 2013. Here's how to trade it.
Chevron's ascending triangle is formed by horizontal resistance above shares at $127.50 and uptrending support below shares. Basically, as CVX bounces in between those two technical price levels, it's getting squeezed closer and closer to a breakout above $127.50. When that breakout happens, we've got our buy signal.
The energy sector spent the last quarter as a bit of a laggard, but it's been heating back up in the last month and change. With a breakout trade getting close to triggering here, Chevron offers one of the best-in-breed ways to play the trend this summer.
- [By Victor Mora]
Chevron is an oil and gas bellwether that provides essential energy products and services to consumers and companies worldwide. The company recently won a bid to explore�for shale gas in western Lithuania. The stock is currently bouncing off an upward sloping trendline and may continue to do so. Over the last four quarters, earnings and revenues have been mixed, which has produced mixed feelings among investors in the company. Relative to its peers and sector, Chevron has been a year-to-date performance leader. Look for Chevron to OUTPERFORM.
Top 5 Blue Chip Stocks To Buy For 2014: Visa Inc.(V)
Visa Inc., a payments technology company, engages in the operation of retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities. The company owns and operates VisaNet, a global processing platform that provides transaction processing services. It also offers a range of payments platforms, which enable credit, charge, deferred debit, debit, and prepaid payments, as well as cash access for consumers, businesses, and government entities. The company provides its payment platforms under the Visa, Visa Electron, PLUS, and Interlink brand names. In addition, it offers value-added services, including risk management, issuer processing, loyalty, dispute management, value-added information, and CyberSource-branded services. The company is headquartered in San Francisco, California.
Advisors' Opinion:- [By Charles Sizemore]
One of the “big picture” economic themes that I expect to play out over 2011 and beyond is the secular shift to a global cashless society.?Though the process is well on its way in the U.S. and Europe, roughly 40% of all transactions are still made with cash and paper checks according to Barron’s.
This means that even in “boring” developed markets, there is ample room for growth in electronic payments. And there is no better company to benefit from this trend than credit card giant Visa (NYSE: V).
Top 5 Blue Chip Stocks To Buy For 2014: Colgate-Palmolive Company(CL)
Colgate-Palmolive Company, together with its subsidiaries, manufactures and markets consumer products worldwide. It offers oral care products, including toothpaste, toothbrushes, and mouth rinses, as well as dental floss and pharmaceutical products for dentists and other oral health professionals; personal care products, such as liquid hand soap, shower gels, bar soaps, deodorants, antiperspirants, shampoos, and conditioners; and home care products comprising laundry and dishwashing detergents, fabric conditioners, household cleaners, bleaches, dishwashing liquids, and oil soaps. The company offers its oral, personal, and home care products under the Colgate Total, Colgate Max Fresh, Colgate 360 Advisors' Opinion:
- [By ChuckCarlson]
Colgate-Palmolive Company (CL), together with its subsidiaries, manufactures and markets consumer products worldwide. The company has raised distributions for 48 years in a row. The 10 year annual dividend growth rate is 12.40%/year. The last dividend increase was 9.40% to 58 cents/share. Analysts are expecting that Colgate Palmolive will earn $5.52/share in 2012. I expect that the quarterly dividend will be raised to 64 cents/share in 2012. Yield: 2.60%
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