J.P. Morgan's 16 Picks in Troubled Times

In the perverse climate of suspicion that keeps dominating the financial system, many investors instinctively have or may want to pull out of the equity markets. Realistically, no one wants to stay in what seems to be endless market deterioration, however, all the necessary ingredients now appear to be in place to stabilize banks and financial markets. More importantly, the decline will eventually subside over time. In our assessment, staying on course can, and will prove to be the best decision.

J.P. Morgan (JPM) has just come out with a list of stock recommendations collectively called “The Franchise 16.” In its 48-page explainer, the firm lists 16 companies that it thinks may outperform the U.S. stock market and global weakness over the next 12-18 months. According to J.P. Morgan, these are companies that possess a profitable business model, substantial financial resources, high-cash flows and low-debt.

In a note titled “Stocks to Own Beyond the Market Turmoil,” analysts recommended the following stocks, all rated “overweight.”

1. 3M Co. (MMM) operates as a worldwide, diversified tech company. It operates in six segments: Industrial and Transportation; Health Care; Display and Graphics; Consumer and Office; Safety, Security, and Protection Services; and Electro and Communications. The company has a $40.2 billion Market cap, 22.50% Operating Margin, mid 14% Profit Margin, $25.60 billion revenue, $2 billion in total cash, $6.1 billion debt as of most recent quarter and a 1.51 Current Ratio.
2. Baxter International Inc (BAX) operates as a worldwide health care company. The company has a $38 billion Market cap, 21.15% Operating Margin, 15.70% Profit Margin, $11.90 billion in revenue, $2.2 billion in total cash, $3.3 billion debt as of most recent quarter and a 2.3 Current Ratio.
3. Colgate-Palmolive Co (CL) engages in the manufacture and marketing of consumer products worldwide. It operates in two segments, Oral, Personal, and Home Care; and Pet Nutrition. The company has a $32 billion Market cap, 20.65% Operating Margin, 12.10% Profit Margin, nearly $15 billion in revenue, $644 million in total cash, $3.8 billion debt as of most recent quarter and a 1.29 Current Ratio.
4. CA Inc. (CA) engages in the design, development, marketing, licensing, and support of IT management software products worldwide. The company has a $8.5 billion Market cap, 24.80% Operating Margin, 13.20% Profit Margin, $4.4 billion in revenue, $2.5 billion in total cash, $2.3 billion debt as of most recent quarter and a 1.15 Current Ratio.
5. Devon Energy Corp. (DVN) and its subsidiaries primarily engage in oil and gas exploration, development, and production; the transportation of oil, gas, and natural gas liquids; and the processing of natural gas. The company has a $33 billion Market cap, 32.09% Operating Margin, 28.32% Profit Margin, $14.48 billion in revenue, $1.85 billion in total cash, $5.45 billion debt as of most recent quarter and a 0.90 Current Ratio.
6. General Mills Inc. (GIS) manufactures and markets branded and packaged consumer foods worldwide. The company has a $22 billion Market cap, 15.75% Operating Margin, 9.10% Profit Margin, $14.1 billion in revenue, $655 million in total cash, $7.4 billion debt as of most recent quarter and a 0.86 Current Ratio.
7. Gilead Sciences Inc. (GILD) a biopharmaceutical company engages in the discovery, development, and commercialization of therapeutics for the treatment of life-threatening infectious diseases. The company has a $40 billion Market cap, 50.3% Operating Margin, 37.8% Profit Margin, $4.7 billion in revenue, $1.35 billion in total cash, $1.33 billion debt as of most recent quarter and a 1.5 Current Ratio.
8. Google Inc. (GOOG) a technology company maintains index of Web sites and other online content for users, advertisers, Google network members, and other content providers. The company has a $119 billion Market cap, 30.2% Operating Margin, 24.7% Profit Margin, $19.7 billion in revenue, $12.8 billion in total cash, $0 debt as of most recent quarter and a solid 6.97 Current Ratio.
9. Hewlett-Packard Co (HPQ) provides various products, technologies, software, solutions, and services worldwide. The company has a $98 billion Market cap, 9.2% Operating Margin, mid 7% Profit Margin, over $113 billion in revenues, $14.9 billion in total cash, $10.3 billion debt as of most recent quarter and a 1.22 Current Ratio.
10. McDonald’s Corp. (MCD) together with its subsidiaries franchises and operates McDonald’s restaurants worldwide. The company has a $61 billion Market cap, 25.80% Operating Margin, 19.20% Profit Margin, $23.35 billion in revenue, $2.35 billion in total cash, $11.1 billion debt as of most recent quarter and a 1.23 Current Ratio.
11. Merck & Co Inc (MRK) provides products for human and animal health in the United States and internationally. The company has a $62 billion Market cap, 25.75% Operating Margin, 20.55% Profit Margin, $24.20 billion in revenue, $10 billion in total cash, $5.11 billion debt as of most recent quarter and a 1.80 Current Ratio.
12. Monsanto Co. (MON) provides agricultural products for farmers principally in the U.S. It operates in two segments, Seeds and Genomics, and Agricultural Productivity. The company has a $45 billion Market cap, 25.40% Operating Margin, 17.80% Profit Margin, $11.38 billion in revenue, $1.6 billion in total cash, $1.82 billion debt as of most recent quarter and a 1.72 Current Ratio.
13. Nucor Corp (NUE) engages in the manufacture and sale of steel and steel products in North America. It operates in two segments, Steel Mills and Steel Products. The company has a $11 billion Market cap, 14.60% Operating Margin, 8.4% Profit Margin, $20.70 billion in revenue, $2.8 billion in total cash, $3.3 billion debt as of most recent quarter and a 2.78 Current Ratio.
14. Philip Morris International (PM) engages in the manufacture and sale of cigarettes and other tobacco products in markets outside the U.S. The company has a $90 billion Market cap, 41.60% Operating Margin, 27.23% Profit Margin, $24.45 billion in revenue, $3.3 billion in total cash, $8.3 billion debt as of most recent quarter and a 1.38 Current Ratio.
15. Union Pacific Corp. (UNP) provides rail transportation services in North America. The company has a $30.9 billion Market cap, 20.85% Operating Margin, 11.60% Profit Margin, $17.24 billion in revenue, $611 million in total cash, $8.3 billion debt as of most recent quarter and a 0.80 Current Ratio.
16. Visa Inc. (V) operates retail electronic payments network worldwide. It facilitates commerce through the transfer of value and information among financial institutions, merchants, consumers, businesses, and government entities in approximately 170 countries and territories. The company has a $41 billion Market cap, 37.50% Operating Margin, negative 4.8% Profit Margin, $7.15 billion in revenue, $6.24 billion in total cash, $110 million debt as of most recent quarter and a 1.78 Current Ratio.

This week, J.P. Morgan, the largest U.S. bank by market value, cut its global growth forecast for fiscal ‘09 to 0.95% from 2.1%.

Disclosure: None

Comments

[Michael Comeau:]

With the strength of the dollar, I'd be a little bit careful with these major multinationals. Hopefully, the impact of a stronger dollar will be offset by lower input costs, but it is a headwind worth noting.

2008 Oct 21 12:33 PM

[pawntan:]

Why can't the fed lets the sick bank fail, and capitalize only the good banks. The bank with good balance sheet will surely lend to businesses.
If the fed let the bad bank fail, the bank will:
1. File chapter 11
2. Stop interest payment to its creditor
3. Liquidate the mortgage asset, and sell it at deep discount. Somebody
will surely buy when the price is very attractive. Heck if nobody will buy, let the poor homeowner keep the house and erase the loans. At least the homeowner gets the benefit, not the banks.

OK the fed is afraid that if the bank is sick, then it wil not lend. So why can't fed find another bank and give them capital to lend to businesses.
A lot of regional banks are healthy.

Why can't fed do this ? WHY DO WE HAVE TO SUBSIDIZE THE BANKER ?

2008 Oct 22 04:58 PM

[steveballmer:]

All good, except Google! :-(

2008 Oct 24 08:05 AM

[User 265729:]

J.P Morgan can afford to pick anything they want...

After all, J.P. Morgan is taking money from every taxpayer, as well as taxpayers that haven't been born yet.

J.P... Ya may have made it through the Great Depression... All bet are off on Great Depression II.

2008 Oct 24 08:45 PM

[User 265729:]

Ron,

Where is your bio and photo?

Are you a J.P. Morgan secret agent or something? Really, with advice like this it would be nice if you put your bio up so we can evaluate your position.

2008 Oct 24 08:48 PM

[voliot:]

J.P. Morgan, they have more cds crap than anyone. 90 trillion i believe. The old man himself is turning in his grave. Get the consumer confident and they will start to spend again. However the savvy ones know we have been royally screwed and it is going to take years to get back to where we are. Hopefully we won't be burdened by the banks bs and some regulation and congress doing their jobs and the senate banking committee keeping their eyes on the crooks.

2008 Oct 29 12:32 AM

[ILL PA.:]

I THINK ==X==ACI==MON==CHK==T=...
ALL 6 OF THESE STOCKS WILL BE GREAT BUYS IN 2009.
SPARKY114

2008 Oct 30 05:25 AM

[ILL PA.:]

MMM IS A GREAT COMPANY AND WILL DO WILL BECAUSE OF THE RATE CUT.
BUT === X / ACI / MON / CHK / T/ FCX/ .
WILL DO GOOD IN 2009.
I WOULD START BUYING THEM ALL NOW INCLUDING MMM.
SPARKY114

2008 Oct 30 05:28 AM

[Jackson Cash:]

I could not agree with the sarca-bitches more! JP Morgan, how does my taxpayer cash taste? I know, the business is dirty but the money is clean.

How about sending me ANYTHING in lieu of zero confidence I'll send right back.

May I please have my 2 minutes back?

2008 Oct 30 11:26 PM