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Summary

  • Citi release last week its latest World Champions list, which is a list of companies with a long track record of strong financial performance.
  • World Champions are nominated by Citi analysts and selected by a committee.
  • 39 of the 50 World Champions trade on a non-OTC American exchange. Read more» Read the article»

Last week Citi released its latest World Champions list, which is a list of companies with high market share, a global reach and a lasting, sustainable business model. The final list is created by a selection committee after Citi analysts submit their personal recommendations. Well-known names on the list include American Express, eBay, Microsoft, Starbucks and more. This article will introduce the complete list of World Champions and offer a glimpse into the companies' comparative valuations listed in Table 1.

The complete list includes the companies listed in Tables 1 and 2 below:

Table 1. The 39 Companies To Be Analyzed

Company

Symbol

Allergan Inc.

(NYSE:AGN)

American Express Company

(NYSE:AXP)

American Tower Corporation

(NYSE:AMT)

Anheuser-Busch InBev SA/NV

(NYSE:BUD)

Apple Inc.

(NASDAQ:AAPL)

ARM Holdings plc

(NASDAQ:ARMH)

Biogen Idec Inc.

(NASDAQ:BIIB)

British American Tobacco plc

(NYSEMKT:BTI)

Cerner Corporation

(NASDAQ:CERN)

Checkpoint Systems Inc.

(NYSE:CKP)

Chemical & Mining Co. of Chile Inc.

(NYSE:SQM)

Colgate-Palmolive Co.

(NYSE:CL)

eBay Inc.

(NASDAQ:EBAY)

Facebook, Inc.

(NASDAQ:FB)

FleetCor Technologies, Inc.

(NYSE:FLT)

FMC Technologies, Inc.

(NYSE:FTI)

Gilead Sciences Inc.

(NASDAQ:GILD)

Google Inc.

(NASDAQ:GOOGL)

Harley-Davidson, Inc.

(NYSE:HOG)

Las Vegas Sands Corp.

(NYSE:LVS)

MasterCard Incorporated

(NYSE:MA)

Mead Johnson Nutrition Company

(NYSE:MJN)

Microsoft Corporation

(NASDAQ:MSFT)

Monsanto Company

(NYSE:MON)

Novo Nordisk A/S

(NYSE:NVO)

Oracle Corporation

(NYSE:ORCL)

Polaris Industries, Inc.

(NYSE:PII)

Praxair Inc.

(NYSE:PX)

QUALCOMM Incorporated

(NASDAQ:QCOM)

ResMed Inc.

(NYSE:RMD)

SAP AG

(NYSE:SAP)

Schlumberger Limited

(NYSE:SLB)

SeaDrill Limited

(NYSE:SDRL)

Starbucks Corporation

(NASDAQ:SBUX)

The Blackstone Group L.P.

(NYSE:BX)

The Boeing Company

(NYSE:BA)

V.F. Corporation

(NYSE:VFC)

Visa Inc.

(NYSE:V)

VMware, Inc.

(NYSE:VMW)

Table 2. The 11 Companies Not Analyzed

Company

Symbol

Axiata

(OTCPK:PTXKY)

Bharti Airtel

N/A

Computershare

(OTCPK:CMSQY)

CSL Ltd.

(OTCPK:CMXHY)

Edenred SA

(OTC:EDNMF)

Great Wall Motor

(OTCPK:GWLLY)

MTN Group Limited

(OTCPK:MTNOY)

Roche Holding AG

(OTCQX:RHHBY)

SEEK Ltd.

(OTC:SKLTF)

Tata Consultancy Services

N/A

TSMC

N/A

Table 1 includes the securities which have current, active data and SEC filings, while Table 2 includes those securities which trade on OTC markets, or not in the United States at all, and do not have readily available data. The companies listed above in Tables 1 and 2 span numerous industries, sectors and international markets. Citi analyst's recommendations needed to fulfill three selection criteria:

  1. market cap of at least $3 billion;
  2. top market share across the majority of their businesses; and
  3. significant revenue coming from outside their home market.

As interesting as a list of the 50 best ideas some of the world's foremost analysts could come up with is, I needed to do a little more analysis before I could identify the handful of companies I would investigate in depth. I decided to compare the companies based on the following four metrics, and includes only those 39 companies found in Table 1:

  1. dividend yield;
  2. price-to-earnings;
  3. price-to-book; and
  4. percent above 52-week low.

For each of the four metrics I choose to compare against, I assigned each company a point who was among the top ten of the respective metric.

Metric 1. Dividend Yield

Many investors seek to purchase companies with a higher, rather than lower, dividend yield. I assigned a point each of the ten highest yielding companies. As of the close of trading on Monday, April 21, 2014 the SPDR S&P 500 (NYSEARCA:SPY), a ETF for the S&P 500, had a dividend yield of 1.7%. Chart 1 and Table 3 provide the top and bottom ten companies as ranked by their dividend yield.

Chart 1. Top and Bottom 10 Companies Ranked By Dividend Yield

Table 3. Top 10 Companies Ranked By Dividend Yield

Company

Dividend Yield (%)

SDRL

12.00%

BTI

5.70%

BX

4.50%

BUD

3.70%

MSFT

2.80%

LVS

2.60%

AAPL

2.30%

BA

2.30%

CL

2.20%

RMD

2.10%

Out of the 39 companies, twenty-nine paid some sort of dividend, meaning ten paid no dividend. The ten companies that did not pay a dividend were considered to be the bottom ten yielding stocks and were not included in Table 3. Each of the ten highest yielding stocks had a current yield greater than the SPY's of 1.7%. A point was assigned to each of the first ten companies listed in Table 3 as they are the ten highest yielding dividend paying stocks from the list.

Metric 2. Price-to-Earnings

Price-to-earnings is a popular metric to quickly evaluate how expensive a stock is trading relative to other securities. Peter Lynch has gone on record stating he relied heavily on the P/E ratio to make his investment decisions. As of the close of trading on Monday, April 21, 2014 the SPY had a P/E ratio of 16.6. Chart 2 and Table 4 present the top and bottom ten companies as ranked by their price-to-earnings ratio.

Chart 2. Top And Bottom Ten Companies Ranked By Price-to-Earnings

Table 4. Top And Bottom Ten Companies Ranked By Price-to-Earnings

Company

P/E

SDRL

6.1

BUD

12.5

AAPL

13.2

MSFT

14.8

BX

15.0

ORCL

16.8

AXP

17.1

BTI

17.5

SQM

18.3

SLB

19.1

  

FLT

33.8

BIIB

38.2

GILD

39.6

AGN

43.6

VMW

44.8

CERN

47.5

AMT

60.2

FB

100.2

ARMH

139.8

SBUX

457.7

Checkpoint Systems Inc. is the only company that had negative earnings per share and was not included in Table 4. As can be seen in Table 4, the top ten companies that had the lowest P/E ratio were either below the market average of 16.6, or not much higher. Comparatively, each of the bottom ten companies had a P/E ratio much higher than the market average of 16.6. Facebook, ARM Holdings plc and Starbucks were the most expensive stocks as ranked by price-to-earnings, each with a P/E ratio above 100. A point was awarded to each of the first ten companies listed in Table 4.

Metric 3. Price-to-Book

For those intrinsic value, Graham/Buffett types, price-to-book value can be a could indicator if a company is worthy of further research. As of the close of trading on Monday, April 21, 2014 the SPY had a P/B ratio of 2.3. Chart 3 and Table 5 show the top and bottom ten companies as ranked by their price-to-book ratio.

Chart 3. Top and Bottom Ten Companies As Ranked By Price-to-Book

Table 5. Top and Bottom Ten Companies As Ranked By Price-to-Book

Company

P/B

CKP

1.49

SDRL

2.04

BX

2.85

EBAY

3.01

SLB

3.25

BUD

3.48

SQM

3.58

AAPL

3.61

QCOM

3.71

MSFT

3.9

  

GILD

9.39

FB

9.66

BTI

10.14

SBUX

10.86

ARMH

11.02

MA

11.83

NVO

15.85

PII

16.59

CL

26.71

MJN

58.44

Of the top ten companies with the lowest P/B ratio, only CKP and SDRL traded with a P/B ratio below the 2.3 P/B ratio of SPY, though the remaining eight were all below a P/B of 4. The bottom ten companies as ranked by P/B became increasingly expensive, with Mead Johnson Nutrition Company rounding out the list with a P/B ratio of approximately 58. A point was awarded to each of the first ten companies listed in Table 5.

Metric 4. Percent Above 52-Week Low

Many people try to time the market and many more advise against trying. Even still, one metric I often use is a security's current trading price as compared to its 52-week low. Because I make an effort to purchase quality securities, I see additional opportunity when I can purchase a quality stock as inexpensively as I possibly can. As of the close of trading on Monday, April 21, 2014 the SPY was trading approximately 20% above its 52-week low. Chart 4 and Table 6 show the top and bottom ten companies as ranked by their current trading price as a percent above their 52-week low price.

Chart 4. Top And Bottom Ten Companies As Ranked By Percent Above 52-Week Low

Table 6. Top And Bottom Ten Companies As Ranked By Percent Above 52-Week Low

Company

% Above 52-Week Low

SDRL

2%

RMD

14%

EBAY

14%

SAP

15%

FTI

16%

CERN

20%

CKP

20%

MON

20%

CL

22%

BTI

22%

  

BA

49%

BIIB

53%

GILD

53%

LVS

58%

VMW

62%

FLT

62%

PII

63%

BX

66%

AGN

75%

FB

170%

The bottom ten companies each currently trade at more than double the percent above 52-week low that the SPY does at 20%. Each of the top ten companies currently trade right around 20% of, or less, their 52-week lows, with SDRL trading within 2% of its 52-week low. A point was awarded to each of the first ten companies listed in Table 6.

Results

Out of the 39 companies analyzed, only 21 companies managed to accumulate at least a single point. A company could accumulate a maximum of one point per each of the four comparison metrics used, for a total maximum of four points. Only one company, SeaDrill Limited, accumulated the maximum four points. The complete point spread breakdown can be seen in Table 7 and is as follows:

  1. 1 company with 4 points;
  2. 5 companies with 3 points;
  3. 6 companies with 2 points;
  4. 9 companies with 1 point; and
  5. 18 companies with no points.

Table 7. Companies With At Least One Point

Company

Company

Points

SeaDrill Limited

SDRL

4

Anheuser-Busch InBev SA/NV

BUD

3

Apple Inc.

AAPL

3

British American Tobacco plc

BTI

3

Microsoft Corporation

MSFT

3

The Blackstone Group L.P.

BX

3

Checkpoint Systems Inc.

CKP

2

Chemical & Mining Co. of Chile Inc.

SQM

2

Colgate-Palmolive Co.

CL

2

eBay Inc.

EBAY

2

ResMed Inc.

RMD

2

Schlumberger Limited

SLB

2

American Express Company

AXP

1

Cerner Corporation

CERN

1

FMC Technologies, Inc.

FTI

1

Las Vegas Sands Corp.

LVS

1

Monsanto Company

MON

1

Oracle Corporation

ORCL

1

QUALCOMM Incorporated

QCOM

1

SAP AG

SAP

1

The Boeing Company

BA

1

Based on the recommendation from Citi analysts and my own brief point scoring, I will be looking more closely at potential investments in the companies with 3 and 4 points:

  1. SeaDrill Limited;
  2. British American Tobacco plc;
  3. The Blackstone Group L.P.;
  4. Anheuser-Busch InBev SA/NV;
  5. Microsoft Corporation; and
  6. Apple Inc.
Source: Citi's 50 World Champions Examined