Search results matching tag 'P&G'

7 top-rated stocks at bargain prices

CAPS Editor — Tue, 15 Sep 2009 20:45:00 GMT

This post comes from The Motley Fool's Morgan Housel.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."

Hard to argue with that seed of wisdom from Warren Buffett, isn't it?

Despite the recent rally, there's still plenty of fear out there. The beauty of it is how much opportunity it's creating for investors patient and diligent enough to reach for the babies thrown out with the bath water.

For help in finding such companies, I turned to the MSN CAPS investment community and the CAPS stock screener tool. I was after a list of companies with the following characteristics:

A five-star rating on CAPS, signifying that it's considered best-of-breed by the community.
Estimates of profitability in the year ahead.
Terrible performance over the past 52 weeks.

Yes, most stocks satisfy this last condition, but what I'm really looking for are stocks with the bullish consensus implied by the stocks' five-star ratings and still cheap despite the market's run-up over the past six months. Among the stocks that came through the screen are seven with values so paltry they demand a closer look. None are formal recommendations, just good starting points for you to dig deeper.

Activision Blizzard (ATVI) is a publisher of video games, including the "Guitar Hero" and "Call of Duty" franchises. It also has more than 11 million subscribers to the "World of Warcraft" multiplayer online game. Shares in the Santa Monica, Calif., company are down 33% over the past 52 weeks as consumers have cut discretionary spending. The stock trades at a forward price-to-earnings ratio of 15.8.

Arch Coal (ACI) is one of the nation's biggest coal miners. Shares in the St. Louis company are down 49% over the past year on slumping electricity demand. The stock trades at a forward price-to-earnings ratio of 16.1.

Berkshire Hathaway (BRK.A) is Warren Buffett's investment vehicle, and even Buffett has suffered in the downturn, sustaining paper losses last year that knocked him out of the top spot among the world's richest people. Shares in the Omaha, Neb., company are down 17% over the past 52 weeks. The stock trades at a price-to-earnings ratio of 52.2.

Schlumberger (SLB) is one of the world's biggest providers of oilfield services. Shares in the Houston company have shed 33% over the past year as its clients slashed capital spending in response to falling energy demand and prices. The stock trades at a forward price-to-earnings ratio of 23.6.

NYSE Euronext (NYX) is one of the world's biggest exchange operators, with exchanges in New York, Paris, Brussels, Lisbon and Amsterdam. Shares in the New York company are down 29% over the past year, as market turmoil has suppressed trading volumes. The stock trades at a forward price-to-earnings ratio of 12.5.

Chesapeake Energy (CHK) is the nation's largest producer of natural gas. Shares in the Oklahoma City company have lost 36% over the past 52 weeks as a glut has sent gas prices to seven-year lows. The stock trades at a forward price-to-earnings ratio of 11.3.

Procter & Gamble (PG) is the nation's biggest supplier of household products, including such billion-dollar brands as Tide, Crest, Pampers and Gillette. Shares declined 24% over the past year as the Cincinnati company lost market share to makers of cheaper goods. The stock trades at a forward price-to-earnings ratio of 13.7.

A closer look at Activision Blizzard
Do recession-proof industries exist? Sure: consumer staples, health care, the government, the Mafia. Maybe a few others.

The video game industry professes confidence that Americans will continue to spend on games even as they cut back elsewhere. And some companies can benefit from recession-led shifts in consumer behavior.

As Activision Blizzard CEO Robert Kotick told The Wall Street Journal last fall: "If you talk to people about the history of the games business during economic downturns, they'll tell you it's a recession-proof industry. I think what's happening is that people go out and spend the $50 or $60 on 'Guitar Hero' and they end up spending so many more hours playing it that they don't have a need to go out to the movies, or as much of a need to watch cable television."

Now, aspects of this notion are challenged by stubborn facts. Video game sales fell 15% in August compared to last year, the sixth consecutive month of year-over-year declines. And profit margins have been harder to come by, as discounters such as Best Buy (BBY) and Wal-Mart (WMT) lower prices for video games. A copy of a game in the Guitar Hero series, for instance, sold for an average of $53 in spring, down from $83 a year earlier.

So maybe we're talking mildly recession-resistant, rather than recession-proof. Fair enough.

Spin it any way you want to, but the negatives are nearly irrelevant to prospective Activision Blizzard investors, considering that a share costs less than $12. Back out the $2.22 in cash per share the company holds on its balance sheet -- which is fair for this debt-free company -- and you get to something around 12 times 2010 earnings.

That doesn't make it the cheapest stock in the market, but it ain't bad for a company with a cult following and a recurring revenue stream. Legions of players are still paying monthly fees to immerse themselves in online fantasies of conquest in "World of Warcraft," a property picked up in 2008 when Vivendi (VIVDY) acquired a 52% stake in Activision and merged the company with its Blizzard Entertainment division.

As CAPS member "riffle10" writes:

"Three words: WORLD OF WARCRACK. They have structured this game in a delightfully similar fashion to a drug-dealer's business plan with the caveat that you pay a premium for the title up front. [T]hen it's $15 a month from there on. The game is addictive and cannot be beaten (read: it doesn't end) and for some is a real means of social interaction. Toss this in with a huge suite of other world-beating titles in a rapidly expanding industry and there's a lot to like about ATVI."

So, do you agree with the bulls' take on Activision Blizzard? Check out what the CAPS community is saying about the company, and offer your own opinion.

Each stock's CAPS page is a good place to start your research; you can find a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made. Turn to member blogs for insight and opinion. Let your voice be heard. It can make a difference.

A stock-picker's market?

John Reese — Fri, 04 Sep 2009 21:24:00 GMT

The investing world is often littered with new theories and new ideas about how best to make money. But over the years, I've found that the best way to produce solid, market-beating returns is to take advantage of the wisdom history's best investors have been kind enough to share. That's why I created my Guru Strategy computer models, and that's why each week I recap what some of the gurus I follow are saying about the market and economy.

This week the theme seemed to be that, while the economic future remains cloudy, it's a good environment for stock-pickers. That's what Mario Gabelli, a Benjamin Graham disciple with an excellent long-term track record, told Bloomberg. While ETFs or sector plays have become all the rage lately, Gabelli says he's focusing on individual stocks that have strong potential for the next three or four years. He gave his thoughts on potential plays in the financial, airline, newspaper, and telecom industries, and also said the food industry is ripe for a round of mergers.

Check out my Top Stocks tracking portfolio at Wall Street Survivor

Another top manager, Donald Yacktman, whose two funds are up about 9% per year over the past decade while the S&P 500 has been in the red, says he's focusing on high-quality stocks. Lower-quality firms have made big gains in the rebound, but the best buys now are plays like Coca-Cola (KO), Pepsi (PEP), and Procter & Gamble (PG), Yacktman, a bottom-up stock-picker, told Bloomberg. He says financials are still dangerous, but that he's found a great play in AmeriCredit (ACF).

Ronald Muhlenkamp, whose fund struggled last year but has regained 25% in 2009 and remains significantly ahead of the S&P 500 for the past 15 years, also sees opportunities. He's high on healthcare stocks, despite all the talk of huge reform in that area. “The best time to buy pharmaceutical or health care stocks has always been in election years, because that’s when everyone beats up on the industry," he told Fortune. "Right now, any positive news about health care would be a surprise. … In my business, you make money on the difference between perception and reality. When everyone expects the bad, that’s when you get the chance to buy Pfizer (PFE), which we own, for cheap.”

Muhlenkamp cautions that things are going to be different in the investment world. “This is not a normal cyclical recession -- this time, people have reset their expectations," he said. "For the market, fair value today is about 15-20% lower than what it was a year ago. We think there will be a 15% drop in return on equity, our favorite metric. Price to earnings ratios should be below what they were.”

Bond guru Bill Gross of PIMCO also sees a "new normal", and his warnings seem more dire than Muhlenkamp's. Gross wrote in his latest market commentary that "children of the bull market" need to "grow up" and adjust their expectations as the economy goes through delevering, deglobalization, and reregulation. "It’s time to recognize that things have changed and that they will continue to change for the next -- yes, the next 10 years and maybe even the next 20 years," Gross writes.

Gross offered several tips for investing in the "new normal" -- though he says it's still unclear exactly what that "normal" will look like. Most likely, he says, "Investors should continue to anticipate and, if necessary, shake hands with government policies, utilizing leverage and/or guarantees to their benefit." He also thinks Asia and Asian-connected economies like Australia and Brazil will dominate future global growth, and that the dollar is vulnerable on a long-term basis.

Finally, in an op-ed for The New York Times, Yale economist Robert Shiller took a different take on the future of the markets and economy, saying that emotions are key to the recovery. Shiller says that supposedly key economic indicators like unemployment or retail sales figures aren’t causes of a recovery, but symptoms of one. “For a fuller explanation, look beyond the traditional economic links and think of the world economy as driven by social epidemics, contagion of ideas and huge feedback loops that gradually change world views,” he wrote. “These social epidemics can travel as swiftly as swine flu: both spread from person to person and can reach every corner of the world in short order.”

With emotions driving the market and economy, Shiller says recent improvements in sentiment could lead to a self-fulfilling prophecy of economic recovery -- though a change in the storyline could push the market back into another downward feedback loop.

Full disclosure: I'm long KO, PEP, PG, ACF, and PFE.

John Reese is founder and CEO of Validea.com, a premium investment research site, and Validea Capital Management, a separate account advisory firm. He is author of the new investing book, "The Guru Investor: How to Beat the Market Using History's Best Investment Strategies".

The recession and the death of brands

Douglas McIntyre — Mon, 22 Jun 2009 11:04:00 GMT

Who needs Advil when it is more expensive than aspirin and probably does no better at reducing pain? Who needs Starbucks (SBUX) when Maxwell House has just as much caffeine?

A new survey of purchasing data from 23,000 stores conducted by the Pointer Media Network shows that many shoppers are simply walking away from their favorite brands because they can’t afford them due to high prices during a recession.

According to Reuters, from 2007 to 2008, of shoppers surveyed “33 percent completely defected to another brand.”

The information probably makes some of the most important “branded” companies in the world likely to have sharp earnings declines. That would certainly include huge consumer products companies Colgate (CL) and P&G (PG) and that may put their stocks under pressure. The same holds true of food and soft drink companies such as Coke (KO), Pepsi (PEP), and General Mills (GIS).

The problem that premium brand companies face may extend will beyond the recession. It is not unlike the challenges faced by General Motors (GMGMQ) and Ford (F). Consumers may be getting used to frugality. While the economy may recover, the recovery may be extremely slow. Many Americans still carry too much debt or are worried about their employment. Those consumers may not return to expensive brands. Hyundai’s sales may rise and people favor cheaper goods. Aspirin sales may have a resurgence.

The era of dominant brands fueled by massive marketing campaigns is going into hibernation and it may be a very long winter.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Legal limbo for chocolate bunnies

Catherine Holahan — Fri, 12 Jun 2009 16:22:00 GMT

Can you trademark a chocolate bunny? Swiss chocolate maker Lindt & Sprüngli thinks so. The confectioner is a bit bitter about rival chocolatiers producing their own chocolate bunnies wrapped in foil. It says that it owns the rights to cocoa bunnies covered in gold foil and is pursuing its case in Europe's highest courts.

Recently, chocolate bunnies have become something of a legal hot potato. Lindt's case revolves around whether companies can trademark a three-dimensional shape and not just a logo. As a result, a ruling in Lindt's favor could have legal ramifications for all manner of businesses. Consumer products companies could trademark the shape of, say, plug-in air-fresheners made to look like flowers. Campbell's could perhaps trademark pasta in the shape of Latin letters. Apple could trademark the shape of its iPod. Wait, Jobs and Co. already did that.

Today, the European Court of Justice in Luxembourg decided it didn't want to determine the fate of the popular Easter treat and sent the case back to the Austrian Supreme Court, according to a Wall Street Journal article.

Gold-wrapped bunny a gold mine for chocolatiers

Rival confectioner Franz Hauswirth is arguing that the trademark that Lindt received for the chocolate bunny back in 2001 was sought in bad faith. After all, chocolatiers have been manufacturing bunnies wrapped in foil for more than 50 years. The chocolate bunny in foil has become a secular symbol of the Easter season.

Still, Lindt argues that it's responsible for that symbol. Thus, it should be the only chocolatier to dress its bunny up in a gold foil wrapper, with or without a ribbon around its neck.

The little gold wrapped bunny is something of a gold mine for confectioners. Lindt sold $44 million worth in Germany alone last year, according to the Journal. In the United States, Easter is the second biggest season for chocolatiers after Christmas. The heart-shaped box of chocolates, apparently, has nothing on the killer-combo of chocolate bunnies and candied Easter eggs.

Where do chocolate bunnies come from?

Another question central to Lindt's case is where chocolate bunnies originated from. If Lindt can prove its company was first to manufacture the shape, it will have a stronger case. But that could be difficult. Some say the chocolate bunny can trace its roots back to medieval Europe, stemming from German legends about magical rabbits that laid colored eggs in the spring for children.

A Pennsylvania company, Bortz Chocolate, began making chocolate rabbits in 1934, according to a 1989 NY Times article. Instead of sitting on their haunches, waiting expectantly to be eaten, their bunnies played accordions and drove cars. Bortz did, however, manufacture a "classic" bunny in foil as well.

Related Reading:

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Hershey's big turnaround

When a $3 candy bar is worth it

Will CEOs fight for their tax havens?

James Dlugosch — Tue, 05 May 2009 17:21:00 GMT

Obama the Destroyer strikes again.

First he goes after excessive bonuses from greedy Wall Street executives. Then he targets corporate jets flown by auto executives.

Yesterday, our fearless leader went after the scheming accountants and their greedy corporate clients and their attempts to avoid taxation. Say good-bye to tax havens and winter trips to the Cayman Islands.

Will there be another tea party?

I doubt it; CEOs take to the golf courses, not to the streets. But plenty of feathers are already being ruffled by news of the administration taking dead aim at offshore tax havens. Is nothing sacred anymore?

At the turn of the millennium, I had the good fortune of spending one-on-one time with Steve Forbes during an investor cruise in Argentina. I was most amazed by his flat-tax ideas. He was clearly ahead of his time.

Not much has changed since that time, but the pendulum may finally be swinging that way.

The tax code is a mess, and attempts to circumvent the code have turned into an industry with billions of dollars at stake. Obama wants his cut in order to pay for recent stimulus spending and future programs including health care.

It should be no surprise that he is taking aim at corporate titans that have been paying less than their fair share. For decades, high-priced accounting paid huge dividends, but those days appear to be ending.

The rules of the game are changing, and the cost could be substantial. As such, investors would be wise to avoid the companies that stand to lose the most.

In my "Top 10 Stocks to Avoid in 2009," I included multinational companies on the firm belief of a strengthening dollar that would weaken the value of across-border sales. Now, we get the added benefit of many of these companies cut off from a few of their favorite tax avoidance schemes.

It should be no surprise that Goldman Sachs (GS) is on the short list of companies negatively impacted from the elimination of tax havens.

But Goldman has enormous power and influence. It will be interesting to see if Obama can stand firm against Goldman Sachs' lobbyists. If he does, GS stock will be worth less as a result.

According to the Government Accountability Office, 83 of the largest 100 companies in this country have subsidiaries in tax haven locales including an estimated 83 subsidiaries of consumer staples giant Procter & Gamble (PG).

Obama's plan also addresses tax loopholes such as tax deferrals on foreign profits. Stopping short of a complete repeal of the law, Obama wants to prohibit deductions on foreign investments until domestic tax is paid on overseas profits.

Top 10 Stocks for 2009 member General Electric (GE) has deferred taxes on $75 billion of foreign profits that will never see these shores according to the company. Those plans may have to change with the tighter grip on loopholes.

The elimination of the tax benefits and loopholes will help the government raise billions of dollars. In my simple mind then that could mean billions of dollars in lost market valuation.

It is no guarantee that this policy will come to fruition, but if it does, stocks of multinationals can be expected to lag the market by a significant margin in the near term. I would avoid these stocks as a result.

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Bras and lingerie: Victoria's secret weapons

Anthony Mirhaydari — Fri, 29 Feb 2008 00:01:00 GMT

Recessionary fears have pummeled stocks across the retail sector -- especially those catering to well-heeled females. The fear is that women, who are more likely then men to shop at trendy boutiques, will be forced scale back discretionary purchases of overpriced clothing during economic downtimes. So when the still-unfolding credit debacle first surfaced late last summer, the likes of Liz Claiborne, Talbots, and Ann Taylor nosedived.

All the panic and fear has created a beautiful opportunity to bottom-feed on Limited Brands, one of the world’s largest makers of women’s lingerie, fragrances, and beauty products under the Victoria’s Secret and Bath & Body Works labels. To fully understand why Limited is a great buy, you first need to appreciate the motives behind the purchase of a $50 bra or a $20 pair of underwear.

Nancy Etcoff, the psychologist and author of "Survival of the Prettiest," probably says it best when she argues that "good looks are a woman's most fungible asset, exchangeable for social position, money, even love. But, dependent on a body that ages, it is an asset that a woman uses or loses."

Before I am cast as chauvinistic, I’d quickly note that much of the same applies for men too. In fact, University of Texas economist Daniel Hamermesh puts the cross-gender income penalty for "plainness" at 5-10% regardless of occupation. Studies by other academics seem to verify these findings.

And of course, looks are a big deal when it comes to reproductive success: Hamermesh finds that "unattractive women marry men with less human capital." Psychologist David Buss, also of the University of Texas, studied the preferences of some 10,000 people from 37 cultures around the world. He found a woman’s physical attractiveness to be at or near the top of the checklist for every man surveyed.

Don’t judge me or get all philosophic about this -- it’s just a fact of life people. Even kids and toddlers are drawn to the attractive among us. And if beauty wasn’t a paramount concern, the global cosmetic industry wouldn’t have generated some $280 billion in revenue last year.

These are the reasons Limited will buck the trend, fight the recession, and outperform its peers. The need to feel desirable and sexy factor much more in the undergarment purchasing decisions of women compared to men -- the latter is less likely to have a problem throwing a pair of Hanes into the cart while shopping for motor oil at Wal-Mart. This is the source of the justification for purchasing a $50 brassiere, even if you’re pinching pennies elsewhere.

After all, feeling beautiful can be just as important as actually being beautiful. Associating your self-image with the models of Victoria’s Secret can be a big confidence boost. You just don’t get the same visceral impact from buying a nice blouse down at Ann Taylor.

The company reported end-of-year results yesterday, and considering the difficult environment, the numbers weren’t too bad. Income fell 12%, but this was made worse by a one-time operational snafu at the company’s new distribution center forced limited distribution of the perennial Victoria’s Secret catalog. Margins are healthy (that $50 bra only requires a handful of silky fabric and lace) and the company is sitting on some $500 million in cash with which to invest in new products and fresh advertising.

But that was enough for Standard & Poor’s to put Limited Brands’ investment-grade rating on credit watch after yesterday’s quarterly results were released. Analyst Diane Shand is worried that "the company will not be able to improve its credit metrics as quickly as…expected, due to the soft U.S. economy, weak mall traffic and declining consumer confidence."

I think Diane is underestimating the psychology here. Plus, as was outlined in today’s Wall Street Journal, efforts are underway to move the Victoria’s Secret brand away from explicit sexuality, and back to its "ultra-feminine" roots with "more-sophisticated, higher-quality products."