Ten Stocks for the Next Ten Years

As we enter the era of world inflation courtesy of major central banks de-basing their currencies like no tomorrow (the FED and ECB being the worst of the two, though the latter stands on much stronger economic footing), it is imperative one's portfolio be comprised of those equities which will outpace or at least keep up with inflation. This is most efficiently done in my opinion by being overweight commodity equities as well as international consumer durables, some technology and infrastructure. I am particularly fond of those commodities that serve as inflationary hedges and those with supply-demand disconnects.

1) Silver Wheaton (SLW) - I have talked multiple times about this extremely dynamic business model and the transformational year 2009 has been for the future of this company. Management continues to execute deals and acquire a diversified group of royalty streams at bargain basement prices. Not only will they be the lowest cost producer (under $4.00/oz) but they will also become one of the world's largest producers (peak production of 50m oz per annum assuming 2 development projects come online within the next 5 years or another acquisition which they have made crystal clear in the most recent conference call). This is the best inflationary hedge in my opinion as they pay no income tax (has made arrangements with the Canadian government to either reinvest all excess profits or pay them out as dividends). That being said in one or two more years, these royalty streams will sell for a much bigger premium relative to today. This means a payout ratio of 75-85% will likely be in place by 2015 or so.

2) Suncor (SU) - I think Suncor's brilliant acquisition of Petro-Canada (PCZ) will eventually make it one of the largest oil companies in the world. This has to do with the misunderstood future implications of the oil sands. Suncor will become one of the largest oil sands producers in addition to having both up-stream and down-stream business segments.

3) Philip Morris Int'l (PM) - Far and away an ideal core holding in any portfolio in any economic environment. It has a rare combination of high-single digit/low double digit long term growth, high payout ratio and yield, best of breed management, diversified revenue stream (in terms of currencies around the world) and whose product has addictive properties. They will be able to pay down long term debt in depreciated dollars as their income stream will soon be comprised of much stronger currencies.

4) Potash (POT) - Though most market players are bearish on this very important fertilizer, Potash has a Price vs. Value disconnect and will continue to play an important role as provider of the ideal fertilizer (with several caveats depending on the crop) as well as the many byproducts extracted. No substantial potash mine has been discovered in quite some time (barring Potash one's potential gem) as it mainly grows in Canada and Russia.

5) Coeur d'Alene Mines (CDE) - This turnaround story has impressed me, which transformed them from a financially questionable entity to a free cash flow machine, starting in Q4 (drastically declining cash coast and little capital requirements). They are a diversified silver miner (geographically speaking), have a nice mixture of gold and silver - 200-220k oz of gold in 2011 and 30m oz of silver. They have 3 flagship mines coming online (though one is in Bolivia), which should make this overlooked miner a good investment.

6) Jaguar Mining (JAG) or Yamana (AUY) for the more conservative investor - These are the two best ways to play South America (Brazil, Argentina, Chile) in my opinion. Yamana has put together a very nice group of producing assets, advanced stage and development stage pipeline projects. They were built via a massive wave of acquisitions a few years back and management has shown their understanding of the macro-economic environment as Yamana is at the beginning of their growth spurt from 1m oz to 2m oz per year by 2013-2014. But I tend to favor Jaguar Mining as they boast a much more lucrative valuation, growth profile and have showed their ability to execute their objectives. They have a good track record of steady sequential production growth which will soon be kicked in to high gear as they bring on a new mine online, ramp up existing producing assets and finish their expansion projects. Growth will jump from 165k oz in 2009E to 700k+ by 2014.

7) Pengrowth (PGH) - A great Canadian oil trust play with an undervalued valuation, high long term growth and well as a lucrative dividend. Though they will also lose their tax status in 2011, the long term fundamentals of oil combined with inflation should move black gold near or past its record highs over the next 2-5 years. These trusts (Enerplus (ERP), Baytex, Pennwest (PWE)) aren't going unnoticed by the rest of the world as China has made a bid for harvest energy trust. So along with high leverage to oil, high long term growth, high dividend yield and a potential buyout target, Pengrowth is worth taking a look at.

8) BHP Billiton (BHP) - Though already a mega-cap, BHP has many catalysts in the near and distant future. Near term catalysts include large gold, silver, copper and a vast array of other base metals. They also have a large contract to begin exporting uranium to China, starting in 2010 and likely to extend for many years to come. They have also, like many other (including myself) realized the potential potash holds for the future and have acquired a potash mine in Canada. Being the worldwide supplier of so many commodities entering the next leg of the commodity bull market while the inflation tsunami slowly takes hold makes BHP a great candidate for anyone's portfolio - most notably those who are more risk averse but want some exposure to those commodities mentioned above.

9) The ETN RJA (RJA) (Replication Of Jim Rogers Agriculture Index) is one, if not the best, way to play agriculture in general, excluding futures. The top holdings happen to be my favorite (perhaps I'm a bit biased because of this), which include Wheat, Corn, Soybeans, Cotton and several other. Wheat has a production-consumption gap that has been narrowing for over a decade and will likely be demanded in higher quantities as the standard of living continues to increase in the emerging countries (BRIC) and the ones that will come after that.

10) The tenth should be comprised of a combination of cash (for opportunities that may come along) and hedges (such as put options on an oil index, mining index or call options on the double inverse of the Dow or S&P).

Disclosure: Long SLW, CDE, AUY, JAG, PGH, PWE, RJA, GDX PUTS, DXD CALLS, SDS CALLS.

Comments

[a. palmer jr.:]

I own a small amount of PWE and HTE but I'm getting an uneasy feeling that tells me I'm going to lose money on both. I bought before the crisis hit and I probably would have to own both for several years to bring it up to break-even. I'd suggest you look elsewhere.

Oct 27 09:31 AM

[John Galt:]

I feel like your list is what's "hot".

Picking commodities, oil, and agg seems like picking Tech Stocks about 10 years ago. A lot of these stocks are along the same lines/same theme... My favorite pick on your list is PM, but then again I own rival LO which isn't leveraged and has cash on the balance sheet. I'm less worried about inflation in the short/medium term, but in the longer term it's an absolute certainty.

Oct 27 09:52 AM

[CLH:]

Poor picks as deflation continues.

Oct 27 11:33 AM

[stemcella:]

i would add a high growth pick - KOOL - a micro cap but leading medical device company in regenerative medicine.

A leader in adult stem cell processing and preservation, ample cash , no debt and most likely commencing profitablility this current quarter.

Oct 27 11:44 AM

[Chancer:]

I have a problem with CDE, because their management has a really bad track record of trashing shareholders with huge dilution followed by a reverse split.

I consider it a problem to consider management like that for a long term hold.

Oct 27 01:29 PM

[The Recusant:]

Ahhh...in another era I would agree with most of your picks. However, with the current unsettling economic climate in most countries I would make a new list. There is some developing political strife in South American countries and with the possibility of additional economic pressures, it might boil over into wars, export conflicts, political takeovers, or the nationalization of companies. Strikes in African countries continue to plague miners and China may make a bid for Potash, and if they do they will likely import all the fertilizer they can get from it crippling its ability to sell and improve profit margins. If you want stability, there is only two countries, Canada and Australia (and the possibility of New Zealand), that I'd invest in for miners. As for oil, when inflation hits the price and we're paying twice what we are now paying for imported oil, domestically produced oil will step in. Albeit Greenpeace might impact the tarsands in Canada, but that might not be a bad place to invest also.

Oct 27 02:31 PM

[Peter Mycro...:]

I have analyzed your list to show how those companies are doing on Main Street. My key ratios for analysis are price to free cash flow (PFCF) and Free Cash Flow Return on Invested Capital (FROIC).

When investing I look for PFCF below 15 times and FROIC above 20%+. When you are lucky enough to find a combination of the two you find a perfect balance of growth + value and you get capital appreciation through capital preservation.

For those who don't know;

PFCF =Market Price/ (Cash flow per share-Capital Spending per share)

FROIC = FCF per share/ (long term debt per share + shareholders equity per share)

FROIC basically tells you how much return in free cash flow a company generate for every dollar of Total Capital they employ.

I consider FROIC the primary determining factor in identifying growth companies as you can compare every company (except financials) on an equal basis. The question I ask every company I analyze is = how much return (in percent) in FCF are you going to give me for every dollar of total capital you invest?

As you will see I have analyzed your list from a FROIC point of view below (all using 2010 estimates);

Silver Wheaton (SLW)

FCF PS = $0.65
TCAP PS = $4.12
FROIC = 15.77%
PRICE TO FCF = 19.88

Suncor Energy (SU)

FCF PS = $-1.95
TCAP PS = $17.46
FROIC = -11.16%
PRICE TO FCF = -17.90



Phillip Morris Int'l (PM)

FCF PS = $3.65
TCAP PS = $15.13
FROIC = 24.12%
PRICE TO FCF = 13.14

Potash (POT)

FCF PS = $2.85
TCAP PS = $42.81
FROIC = 6.65%
PRICE TO FCF = 34.10

Coeur d'Alene Mines (CDE)

FCF PS = $0.40
TCAP PS = $32.94
FROIC = 1.2%
PRICE TO FCF = 54.98

Jaguar Mining (JAG)

FCF PS = $-0.15
TCAP PS = $5.10
FROIC = -2.9%
PRICE TO FCF = -58.47

Yamana (AUY)

FCF PS = $0.46
TCAP PS = $9.81
FROIC = 4.69%
PRICE TO FCF = 24.54

Pengrowth (PGH)

FCF PS = $1.25
TCAP PS = $13.02
FROIC = 9.60%
PRICE TO FCF = 7.99

BHP Billiton (BHP)

FCF PS = $1.45
TCAP PS = $20.92
FROIC = 6.93%
PRICE TO FCF = 48.63

FROIC gives me a real return on Main Street and if I can get a 20%+ return on Main Street and at the same time buy a stock that is selling for less than 15 times its FCF then there is a very high probability that it should be very successful investment.

By choosing 20%+ as my minimum FROIC I have built a portfolio of 29 holdings for my clients that has a combined portfolio FROIC of 32% and sells as a group for 12.35 PFCF.

As for PFCF I came up with the 15 or less number as being Ideal after performing a 58 year backtest. To view the backtest just click the link below.

mycroftresearch.com/up...


Disclosure = No Position in any of the stocks on this list

The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of Peter "Mycroft" Psaras, and should not be construed as personalized investment advice.

It should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.

Oct 28 01:47 AM

[gmwright:]

It was a Korean national oil company that agreed to purchase Harvest Energy Trust, not a Chinese company.

Oct 28 06:07 AM

[RiskAverseA...:]

So long as the process of de-leveraging continues threatening the global financial system, most (if not all) equity will remain dead money over the next several years. Processes beyond any given company's ability to control will continue burdening equity valuations until such time as the global financial system is reorganized in bankruptcy and financial claims presently destroying growth prospects are written off. Presently, we are at the precipice of what might prove the worst financial/economic/social nightmare the world has ever experienced. This is no time to be accumulating risk, no matter how attractive it might seem by traditional measures.

Oct 28 09:24 AM

[Innocex:]

Poor advice in my opinion, bordering on terrible.
1. Inflation will be curbed eventually, it would be disastrous for any economy to leave interest rates so low. Australia already started raising them.
2. Gold and silver are at multiyear highs so picking them now is foolish.
3. Potash makes phosphate fertilizers and there is a huge backlash against phosphate in green circles.
4. Oil is too volatile for long term safe plays, it takes someone to daily monitor oil prices to make money this way.

The only hedge that seems decent in the list is the agricultural one.

Oct 28 10:03 AM

[Old Rick:]

Innocex, while I'm not a fan of ALL of the picks herein, I think it's you that has much of this wrong. To wit:

1. There is no political will in the US or the UK to take on inflation a la Volker, Reagan, Thatcher in the early 80s. I don't see the super-Keynesians currently in the WH/Fed/Treasury having the guts to take rates to the double digits level that will be required. Just look at how Volker and Buffett have been marginalized by this group of yahoos (no offense to YHOO). Their responses have largely been to try to reinflate the credit bubble.

2. Gold/Silver are now far lower than their inflation adjusted highs reached in 1980. Gold would have to go over $2000 to beat July 1980. As far as Silver, who over the age of 50 doesn't long for the good old days of the Hunt Brothers! :-)

3. The sooner we marginalize the 2% of people (but 60% of the vocal volume) who constitute the "green circles", the better! We need Nucs, Yucca Mountain, CNG, Bakken oil, Tar Sands, ANWR, and expanded off shore drilling to break the Arab/Chavez/Putin oil cartel. Screw the green machine in favor of (not so) common sense. Wind and Ethanol are 2 of the greatest scams in recent history. CNG and new oil are gonna be the bridge to the urban/suburban electric vehicle. As you might guess, I think AGW is a redistributionist fraud, so keep that coal burning baby!!

4. Can't disagree with you on this one except if my 3 gets done, you could safely short USO, but not my cup of tea.

Other than that Mrs. Lincoln, the play was great!!


On Oct 28 10:03 AM Innocex wrote:

> Poor advice in my opinion, bordering on terrible.
> 1. Inflation will be curbed eventually, it would be disastrous for
> any economy to leave interest rates so low. Australia already started
> raising them.
> 2. Gold and silver are at multiyear highs so picking them now is
> foolish.
> 3. Potash makes phosphate fertilizers and there is a huge backlash
> against phosphate in green circles.
> 4. Oil is too volatile for long term safe plays, it takes someone
> to daily monitor oil prices to make money this way.
>
> The only hedge that seems decent in the list is the agricultural
> one.

Oct 28 12:10 PM

[mbkelly75:]

Thank you for the article - there is some interesting ideas here and in the comments. I am a long-term holder of MO and when they split off KFT and PM - I sold the KFT and kept PM. They (MO and PM) are both great long-term investments with a great (and sustainable) dividend. LO has been good for me also.
I have had HTE and PWE for quite a while and have done pretty well by re-investing the dividends in them as they went down. A South Korean companies bid for HT E made me a nice profit after re-balancing my holding back to the percentage I was keeping it on in my portfolio. If you do not actually need the dividends, re-investing them in the security that paid them has wonderful long-term benefits. Dividend-Paying stocks have historically been the best investment during either deflationary times or inflationary times and I expect that to remain true in the future also.

I also prefer Canada and Australia for mining stocks. They really are the most stable and have the advantage of protecting you from a falling Dollar by paying your dividends in a better currency. The Brazilian Real is a strong currency but I prefer other stocks there instead of Oil or Mining stocks.

Peter’s way of finding good stocks for investment is quite valid and he has a good outlook. My own method is somewhat different but we usually end up liking the same stocks. I value his judgment where ever I find it.
From my own standpoint, let’s see: I prefer PEG to just PE - It gives a clearer picture. However, earnings can be so massaged by a company, I put more weight on P/S. The Quick Ratio gives a very fast and clear picture on company financials. P/FCF and P/C both help to point out undervalued stocks. I use Moving Averages (20 Day, 50 Day and 200 Day) to help determine if now is the time to buy or not. Here is my view of these stocks:

SLW - They have very low debt and a good Quick Ratio at 1.51 but no dividend at this time and no earnings. Their Total Return for the last 3 years has averaged 23.05% which is not bad. The Total Return for the last 12 months is huge (398.84%) but they are trending down now so that may be over at this time. If they recover and start trending up again or finish crashing down to form a Death Cross will be interesting to keep an eye on. They might be a good trade either way and if they move down all the way through the Death Cross and start back up to form a Golden Cross - I would definitely buy at that point to ride it up.

SU - P/S (1.32), PEG (14.25) and P/C (70.9) are all too high, the Quick Ratio is too low (0.71) and the P/FCF is non-existent. The dividend is low for me at 1.05% but is sustainable since the Payout Ratio is only 43% and has a 5 year average of only 8%. The growth rate is the dividend is good with a 5 year average of 12.92% annually. They even paid a special dividend during the last year and have given a Total Return of 109.51% over the last 5 years. They are trending down right now with the 20 Day MA having dropped below the 50 Day and still going down. They have not formed a Death Cross yet but it seems to be on the way. I would wait on this one until they form a Golden Cross and then buy. This would give the benefit of a higher dividend yield at the same time.

I have already given my thoughts on PM so we will go directly to:
POT - Their P/S (4.27), the PEG (3.52), P/C (77.12), and the P/FCF (455.73) are all MUCH too high to make a good investment at this time, but the Quick Ratio is good at 1.11.
The dividend is an itty-bitty one (0.41%) but is sustainable at 5% with a 5 year average of 11%. They have raised the dividend for 2 years now with a 5 year growth rate averaging at 19.45%. This gives it possibilities for the future - just not now. The Total Return over the last 5 years is impressive at 350.07%. Their trend over the last year is up but lately has had some trouble maintaining it with all 3 MA below the long term trend line.. I would watch this one and look for a clear indicator which way they are going to go - up or down.

CDE - They have very little debt and a low P/B at (0.85) but not much else. They no longer pay a dividend (always a danger sign from a dividend investor’s point of view), and P/S (8.08), PEG (15.71), P/C (67.21) are all VERY high and P/FCF does not register at all. Their Quick Ratio is poor (0.60). It would seem that their huge Total Return over the last 12 months (433.74%) has them WAY over-valued. Their terrible 5 year Total Return backs up that view since it is (-55.75%) so even with the last 12 months - you have lost big time over the long-term with them. They are trending down right now but they have been setting higher highs and higher lows so it remains to be seen where they are going now. I do not like this one, even if they continue up, I would not invest in them. There is quite a few better places for your money.

JAG - This is another one that might be worth keeping track of for the future but not a good investment right now. The P/S (5.71) and P/C (8.63) are both WAY too high and the PEG and the P/FCF do not even register. On the good side, they have VERY little debt and a nice Quick Ratio (2.47). They are trending down since September and the 20 Day MA has crossed the 50 Day MA on it’s way to forming a Death Cross. When it does and moves back up into a Golden Cross - this one might be a good trade at that time. They have done well in the last 12 months giving a Total Return of 174.06%, but that seems to be over. Wait for the Golden Cross.

AUY - They have no debt and that is a good thing. Their dividend is small (0.35%) but sustainable with a payout ratio of only 17%. They have been raising it for 2 years so have not really formed a record of how much they are raising it - but they are raising it and have made 6 dividend payments in the last 12 months.
They have a nice Total Return over the last 5 years (309.96%) but most of that is from the last 12 months (203.48%). Their P/S (9.45), PEG (3.76), and P/C (73.24) are all VERY high and their Quick Ratio is low (0.89). Their P/FCF does not even register, but the P/B is only (1.25) and if the stock moves down some more - it might give some indication of being a Value Play by moving below 1. The stock is trending down right now, but has been setting higher highs and higher lows so over the last year - they have been trending up. This might be a trading stock. I would like to see if they continue trending up or crash down. This is one to watch.

PGH - This is one I have been watching. They have a nice dividend that is paid monthly. They are a Canadian Energy Trust and pay out like a REIT does here. They are very near Book Value with a P/B of 1.09 but the P/S (1.41) and P/C (51.27) are both very high. The Quick Ratio is low (0.55) and that is not good either. Their PEG and P/FCF are non-existent. They are trending down in the last few days and I would wait to see where they go from here before investing. If they do form a Death Cross, I would buy when the Golden Cross forms. If they keep trending up (looks doubtful at this point) that monthly dividend is nice and their PE is only 4.99 right now. If the P/B goes below 1.0 - they might even be a good value play.

BHP - I like this one. Their dividend is low for me (2.3%) but they have been raising it for 7 years now. They are paying out 78% right now and that is high. However, their 5 year average payout ratio is a much more reasonable 30% with a 5 year average growth rate for that dividend of 29.41% annually. Their Total Return over the last 5 years is an impressive 258.50% and looks like it will keep up the good work. Their Quick Ratio is a nice 1.49. On the other hand, their P/S (3.91), P/C (16.92 and P/FCF (57.30) are all VERY high. They are trending down as shown by the 20 Day MA but over the last year have trended up nicely with a good record of higher highs and higher lows and the price has not broken that trend yet. The 20 Day MA has dropped below the 50 Day MA so they need to be watched to see where they go from here. They look like a nice trade if they do not break below the previous low but move up again instead. If they do break lower and move down to form a Death Cross - that would raise the dividend up over 3% so I would buy as soon as they form the Golden Cross and start moving up again.

There is a lot to like in this list - and it bears watching to see where they go from here. Even the ones that I would not buy now may very well be a good trade over the next 10 years. Thank you again to the author for his ideas. They are worth watching and may be good stocks later on. PM - I own it and intend to keep right on doing so.

Oct 28 03:59 PM

[Comrade:]

Here

Oct 28 07:12 PM

[Comrade:]

Here's my choices: AIG, BAC,GS,C,JPM, etc.....GUARANTEED BY OUR TAXES NOT TO DISAPPEAR. EVER.

Oct 28 07:15 PM

[Diogenes of...:]

Global Cooling update: This is the first October that did not have at least one day of 70 degrees in Grand Rapids, Michigan, since 1882, when weather data was first collected. In other words, its been the coldest October ever. As was July. Just doesn

Oct 28 08:50 PM

[Hyperinflation:]

I agree with price to free cash flows measure as the best multiple around, except maybe pre-tax return on tangible capital. But this is an emerging industry, so I think as far as the miners go, P/FCF doesn't paint an accurate picture. But I think gold will continue to rise over the years $2000+ and Silver around 35 or 40, thus givin silver Wheaton's business model ( not subject to rising input costs as they purchase every ounce at $4, with a 1% inflation adjustment) and the enormous 5 year cagr , this metric fails to take these into account. As far a PM, this is a great metric to use.
my two cents-


On Oct 28 01:47 AM Peter Mycroft Psaras wrote:

> I have analyzed your list to show how those companies are doing on
> Main Street. My key ratios for analysis are price to free cash flow
> (seekingalpha.com/symbo...) and Free Cash Flow Return on
> Invested Capital (seekingalpha.com/symbo...).
>
> When investing I look for PFCF below 15 times and FROIC above 20%+.
> When you are lucky enough to find a combination of the two you find
> a perfect balance of growth + value and you get capital appreciation
> through capital preservation.
>
> For those who don't know;
>
> PFCF =Market Price/ (Cash flow per share-Capital Spending per share)
>
>
> FROIC = FCF per share/ (long term debt per share + shareholders equity
> per share)
>
> FROIC basically tells you how much return in free cash flow a company
> generate for every dollar of Total Capital they employ.
>
> I consider FROIC the primary determining factor in identifying growth
> companies as you can compare every company (except financials) on
> an equal basis. The question I ask every company I analyze is = how
> much return (in percent) in FCF are you going to give me for every
> dollar of total capital you invest?
>
> As you will see I have analyzed your list from a FROIC point of view
> below (all using 2010 estimates);
>
> Silver Wheaton (seekingalpha.com/symbo...)
>
> FCF PS = $0.65
> TCAP PS = $4.12
> FROIC = 15.77%
> PRICE TO FCF = 19.88
>
> Suncor Energy (seekingalpha.com/symbo...)
>
> FCF PS = $-1.95
> TCAP PS = $17.46
> FROIC = -11.16%
> PRICE TO FCF = -17.90
>
>
>
> Phillip Morris Int'l (seekingalpha.com/symbo...)
>
> FCF PS = $3.65
> TCAP PS = $15.13
> FROIC = 24.12%
> PRICE TO FCF = 13.14
>
> Potash (seekingalpha.com/symbo...)
>
> FCF PS = $2.85
> TCAP PS = $42.81
> FROIC = 6.65%
> PRICE TO FCF = 34.10
>
> Coeur d'Alene Mines (seekingalpha.com/symbo...)
>
> FCF PS = $0.40
> TCAP PS = $32.94
> FROIC = 1.2%
> PRICE TO FCF = 54.98
>
> Jaguar Mining (seekingalpha.com/symbo...)
>
> FCF PS = $-0.15
> TCAP PS = $5.10
> FROIC = -2.9%
> PRICE TO FCF = -58.47
>
> Yamana (seekingalpha.com/symbo...)
>
> FCF PS = $0.46
> TCAP PS = $9.81
> FROIC = 4.69%
> PRICE TO FCF = 24.54
>
> Pengrowth (seekingalpha.com/symbo...)
>
> FCF PS = $1.25
> TCAP PS = $13.02
> FROIC = 9.60%
> PRICE TO FCF = 7.99
>
> BHP Billiton (seekingalpha.com/symbo...)
>
> FCF PS = $1.45
> TCAP PS = $20.92
> FROIC = 6.93%
> PRICE TO FCF = 48.63
>
> FROIC gives me a real return on Main Street and if I can get a 20%+
> return on Main Street and at the same time buy a stock that is selling
> for less than 15 times its FCF then there is a very high probability
> that it should be very successful investment.
>
> By choosing 20%+ as my minimum FROIC I have built a portfolio of
> 29 holdings for my clients that has a combined portfolio FROIC of
> 32% and sells as a group for 12.35 PFCF.
>
> As for PFCF I came up with the 15 or less number as being Ideal after
> performing a 58 year backtest. To view the backtest just click the
> link below.
>
> mycroftresearch.com/up...
>
>
>
> Disclosure = No Position in any of the stocks on this list
>
> The Fine Print: As Registered Investment Advisors, we see it as our
> responsibility to advise the following: We do not know your personal
> financial situation, so the information contained in this communiqué
> represents the opinions of Peter "Mycroft" Psaras, and should not
> be construed as personalized investment advice.
>
> It should not be assumed that investing in any securities we are
> investing in will always be profitable. We take our research seriously,
> we do our best to get it right, and we “eat our own cooking,” but
> we could be wrong, hence our full disclosure as to whether we own
> or are buying the investments we write about.

Oct 29 01:28 AM

[Steven Francis:]

For small investors my suggestion will be to go with Suncor. This is because its stocks are less priced and it is expanding all over the world. So according to me is will be a profitable deal.

Oct 29 02:02 AM

[joliver:]

How about V, thats a pick for next 10 years, you can add INTC to that also.

Oct 29 04:37 PM

[AnonAnon:]

For the next 10 years? PG, JNJ to start. We will still use their products. Mining might be too expensive and Philip and Morris might get sued by the world like in USA

Oct 31 12:21 AM

[Hyperinflation:]

While your "Long Track Record Idea" has merit, you have to look at all the multinational companies ( large money center banks such at Citi ) or General Electric, to name a few. The track record is not nearly as important a question as "Can this company maintain and/or grow their dividend and payout ratios".
I believe I did mention some great dividend stocks such as pengrowth and Phillip Morris Int'l. BHP still sports a 2.5% dividend yield despite the stock price appreciation. BHP, being on of the largest commodity producers ( gold, silver, uranium, base metals, etc ) gives you both great exposure to growth in emerging markets, whose product prices will rise faster than inflation. BHP will ( and has ) resumed its record as being a free cash flow machine. The amount of free cash flow BHP generates will necessarily lead to a higher payout ratio, as operating cash flow can easily cover their capital requirements to continue operations and fund future growth ( such as the potash industry, which they recently decided to enter).

As for some of the others, Silver Wheaton will have to begin paying out their excess profits in order to retain their tax exempt status. They have also discussed their desire to do so, both at the Q2 conference call and the conference call discussing their most recent royalty purchase of Barrick's Pascua-Luma. If you believe Oil is headed higher, Suncor is also a great long term play as they have an enormous reserve base, courtesy of the Petro-Canada acquisition. Suncor has the reserve base ( due to the oil sands), to become one of the largest oil players in the world. Suncor will likely increase their payout ratio dramatically over the course of the next decade.


On Oct 31 11:20 PM bobbybutte wrote:

> Instead of these stocks pick solid dividend stocks with LONG track
> records of large cap multinationals if you want to hedge against
> a falling dollar and inflation

Nov 01 10:01 PM