Fortune 40 Best Stocks for Retirement: Part IV

This is part 4 (final part) of the Fortune 40 Best Stocks to Retire on (Part 1 | Part 2 | Part 3).

We previously looked at the first 30 companies that made up the list in Fortune’s 40 best stocks to retire on. Here we look at the final 10.

Best Stocks to Retire On: No.31-40.

1. Plexus Corp (PLXS)
2. Tessera Technologies Inc (TSRA)
3. BP (BP)
4. Diageo (DEO)
5. Novartis (NVS)
6. Koninklijke Philips Electronics (PHG)
7. Sanofi Aventis (SNY)
8. Total S.A (TOT)
9. Unilever (UL)
10. Vodafone Group (VOD)

This last group consists of companies that are not on the popular buy lists; here are some comments on a few of the companies.

Tessera Technologies

If you go through the numbers for Tessera, you will immediately notice its crazy performance.

For the past 5 years it has averaged:

• increased shareholders equity by 35%
• increased FCF by 52%
• CROIC of 17%
• a FCF/Sales of 27% (this means for every dollar of sales, it has converted 27c into FCF)
• the other return margins are outstanding as well

This is probably all too well reflected in its share price of $16. By my guess, TSRA has to continue growing its cash at 40% for the current price to make sense. A more realistic growth of 13-14% yields a price of $9.40.

A company worth watching and studying.

TSRA Stock Price Estimates

• Stock price as of May 18: $16.07
• Discounted Cash Flow Fair Value: $9.58
• Graham Value: $24.22

BP

BP doesn’t seem to be as popular as Exxon (XOM) or Royal Dutch (RDS.A) but BP is also very consistent and throws off huge free cash flow. Their dividend yield is still at 7% and they had a profitable Q1 to get things back on track.

BP Stock Price Estimates

• Stock price as of May 18: $47.26
• Discounted Cash Flow Fair Value: $69.64
• Graham Value: $100

Sanofi Aventis

Of the 10 companies listed, SNY seems to be the only one that can be considered cheap.

SNY is a pharmaceutical company engaged in the research, development, manufacture and marketing of healthcare products. The company does business in two activities - pharmaceuticals and human vaccines.

From their numbers I see that their FCF growth is rather low but the cash growth has been consistent for the past 4 years, their tangible shareholder’s equity has been rising very nicely and their CROIC numbers are great.

SNY could be an alternative to Pfizer (PFE) for those that understand pharmaceuticals.

SNY Stock Price Estimates

• Stock price as of May 18: $30.51
• Discounted Cash Flow Fair Value: $48.76
• Graham Value: $54.29

Calculate Fair Value with Free Investment Spreadsheets

To calculate the fair value of stocks for yourself, you can download the free DCF investment spreadsheet, or Ben Graham investment spreadsheet.

Fortunes 40 Best Stocks for Retirement - Full List

Fortune 40 Best Stocks to Retire on

Disclosure: No positions in any stocks mentioned at time of writing.

Comments

[Michael D.:]

VOD just increased their dividend, good stable yielder.

May 19 08:29 AM

[abemp:]

Has anybody actually read the spreadsheet? One of the “40” has a comment “Stay Away” and several others say “Outside circle of competence”. How can these be the 40 best? Looks like the person who wrote the article did not read the spreadsheet.

May 19 11:44 AM

[Jae Jun:]

abemp,

If you read all four parts, you would have noticed that the 40 stocks were based on the exact list provided by Fortune. That's the article is titled "Fortune's 40 best stocks to retire on".

What I did was go through each company and take a look at it myself to see whether there was anything valuable.

I have no idea on have to value financials so of course I'm going to write "outside circle of competence".

May 19 12:28 PM

[Jae Jun:]

oh and the person who wrote the article also wrote the spreadsheet :)

May 19 12:29 PM

[Living4Divi...:]

Great post, thanks !!

May 19 12:57 PM

[Larry House:]

Interesting list. One on the 40, GW, has the notation "no longer trades." Most are solid value stocks that should be as safe as any. Entering retirement with a laddered portfolio of investment grade corporate bonds is not a bad idea in this day and time as well.

May 19 02:58 PM

[Missing_Link:]

I have an issue with the concept that there can be good "stocks to retire on."

After what happened to the market between October '07 to March '09, it's clear that "buy and hold" is dead. Especially if you're talking about *retirement* money, you want it in a safe place, and the stock market is NOT the place to put most of that. There is far too much risk even in the best stocks.

I let my investment advisors lose $600K during the 08-09 decline until I finally came to my senses and took matters into my own hands. I believe the market has permanently changed and successful investing from now on will require active management that can profit from both upturns and downturns, limit losses on both the upside and the downside, understand how to diversify with truly non-correlated investments, and distinguish a bear market rally from a real recovery.

Buying stocks and holding them for retirement is a recipe for disaster, no matter how good those stocks may be.

May 19 08:56 PM

[berloe:]

can someone tell me how to print or save the list?
[e-mail]

May 20 10:54 AM

[pansyed:]

berloe - at the top of the page there is a noted place where you can email the article. If you email it to yourself you can do what you want with it.

May 20 08:31 PM

[Jae Jun:]

Berloe,

Click on more and then "save document"

May 21 12:14 PM