Three Value Stocks

In my article published in December, I took a simplistic approach of predicting a reasonable level for the Dow Jones Industrial Average (DJIA). I looked at the DJIA before the impact of the housing boom, took the DJIA low of 7,286 on October 9th, 2002 as a starting point, and then predicted that a further correction downwards would occur to reflect a negative trend in earnings, especially given the lack of any stimulants this time round to prop up earnings.

So am I please to see that the DJIA is hovering around my predicted level? I would say yes because I now believe that stock prices are approaching reasonable levels. Is there a chance the market will sink lower – sure! But as we all know, no one can predict the market bottom with certainty. What I do know is that if you buy value stocks now, long term returns are most certainly for the taking. So with that, here are some value stocks I would suggest considering:

Walt Disney Company (DIS) – Everything about this name is magical. From the park, to their movies and DVDs, to ESPN, everything is geared towards high-quality entertainment and has become a brand that children seek and parents trust. My belief is that the cable networks will remain profitable in the current environment, but that the theme parks and studio entertainment segments will continue to decline from peak levels in 2008 in the short term. Once the economy recovers, visitors to the parks will be back with a bang.

Cadbury PLC (CBY) – As a leading player in the global confectionery market with product lines spanning the chocolate, candy, and gum segments, and brands that include Halls, Trident, and Dentyne, how can this stock not be a winner at current levels? After divesting itself of the beverage business in 2008, Cadbury can now focus on trimming excess fat from its operating structure and enhancing profitability. And latest results indicate that the company is on track to achieving this. Sure there will be some challenges ahead given the current environment, but I think sweet rewards are in store for those that pick up this stock at current levels.

BB&T Corporation (BBT) – With pretty impressive fourth-quarter results, never mind increasing their quarterly dividend recently (a dividend yield of roughly 11%), this company is just plum for the picking. It managed to increase its deposit base by more than $2 billion in the fourth quarter and reports one of the strongest capital ratios, with a Tier 1 ratio of 12%. After all that has gone wrong with the megabanks such as Citigroup (C) and Bank of America (BAC), I view traditional banks as a safe place to invest. Though the bank’s loan losses will begin to mount, hurting the bottom line in the near term, their conservative underwriting standards and excess capital should keep the company on firm ground.

See you on the upside!

Disclosure: Long positions in the value stocks mentioned.

Comments

[sligoo:]

BBT is a safe way to own bank stocks. It behaves like a good bank should. One other that I think is well managed is JPM. Jamie Dimon is the only banker amoung the "big" boys that seems to have any idea of how to run a bank.

Mar 01 03:41 PM

[helplessobs...:]

BBT also got a good tangible common equity ratio reading from Barron's this week. At over 5% it will easily pass the stress test. WOW increase a 11% yield, shows management sees a strong financial structure.

Mar 01 09:25 PM

[ArtfulDodger:]

GM:

I like people who put their money where their mouth is and invest in companies they recommend.

Thank you for the article, and the best to you on your investing.

Mar 02 10:44 AM

[fcharlie:]

BBT, as much as i like them, did not increase their dividend recently. unless you consider last June recent.

Mar 04 06:16 PM

[goodfigs:]

fcharlie -- this shows they increased their dividend for 2Q 2009

news.prnewswire.com/Di...=

Mar 06 08:27 AM

[fcharlie:]

Goodfigs.

www.bbt.com/bbt/about/...

Mar 06 01:11 PM