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By Scott. A. Mathews

Investment Underground searched for large companies with defensible business strategies and an ability to create a return on invested capital in excess of cost of capital over the long run. You’ll also find that behind these names are three recurrent trends: 1) well managed diversification 2) levered to the emerging market middle classes growth story and 3) a tendency to have their products in your homes. Here is what we found:

Wal-Mart Stores (NYSE:WMT): The king of supply chain efficiency, Wal-Mart maintains positive growth and cyclicality seems to be a word with which they are unfamiliar - at least in the negative sense of the word. Wal-Mart is the classic trading down name, which has strengthened it, feeding its 5.5% free cash yield, over the period of economic depression in the United States. Simultaneously, Wal-Mart is a massive growth story in emerging markets where it represents quality and value in the eyes of the rapidly growing middle classes. As the growth story continues in these markets and consumers the world over seek out bargains and value, Wal-Mart, with its consistent, vicious assault on inefficiencies, looks set to remain strong for a long, long time. Attention Investors: some analysts do currently see the stock as undervalued so it may be time for investors to review it themselves.

Novartis AG (NYSE:NVS): The Swiss pharmaceutical giant operates with a large economic moat, derived from its strong diversification. Despite loss of patent protection at the end of this year on one of its most profitable drugs, it has newly launched products that will help counteract the effect. This past year, these new drugs contributed to 11% top line growth. At Investment Underground we’ve seen fair value estimates for the Swiss company, on its NYSE traded shares, at approximately $10 above where it’s currently trading.

Johnson & Johnson (NYSE:JNJ) Diversification is J&J’s strength. See a trend in this article yet? Despite setbacks on some products and because of modifications in consumer behavior, the diversity of its offering acts to balance its performance. J&J’s cash generation has prudently been used to drive innovation and has resulted in the company sitting prettily upon a healthy product pipeline. Add to that the fact that its current patent protection, relative to its peers, is fairly minimal and it looks set to continue the virtuous cycle of Cash Generation => R&D Investment => Increased Financial Strength and Security.

Colgate-Palmolive (NYSE:CL): How safe do you feel putting something unknown in your mouth? Not very? We thought so, and the seasoned management at Colgate has banked on this fact, building a brand synonymous with quality the world over. The growth of more affluent middle classes in the developing world has helped the company generate impressive returns on invested capital. Currently the stock seems to be trading about $20 under where we’ve seen fair value estimates for this power player that has proven its mettle in a myriad of challenging environments.

International Business Machines (NYSE:IBM): Another name for whom diversification is paying dividends. Diversification and reinvestment in innovation go hand and hand at IBM. It shows in the numbers: Forward P/E of 11.2, PEG ratio of 1.3 and a 5-year EPS projection of nearly 11%. With a global footprint, IBM has balanced its workforce similarly, taking advantage of hiring in lower cost markets.

McDonald's Corporation (NYSE:MCD): Over the last decade McDonald’s deftly faced down the dragon that few thought it could slay: the popularity of healthy food. While that trend has not diminished, McDonald’s expanded its healthy menu options and continued its tradition of savvy marketing. Popularity throughout the world, despite the occasional, symbolic demonstration (any news is good news, right?) have kept its margins expanding. The deftness with which it overcame this last secular blow provides a basis for belief in the company’s ability to continue to grow and chart new waters from Minneapolis to Managua. A fun fact for the next time you’re debating about globalization with a French friend: France is the second largest consumer of McDonald’s in the world.

Procter & Gamble (NYSE:PG): A company whose products and brands are probably on your shelves at home, P&G is another global player benefiting from emerging market exposure. It continues to successfully ride that social-demographic wave, but it does face headwinds. These headwinds are due in part to the growth of the economies in which they operate and are instructive for investors broadly – negative foreign exchange movement and increased commodities. Tuck these last two “reality checks” on the EM growth story in your investor’s cap when evaluating P&G (and similar companies) as they will continue. However, P&G being the deft master of its own game, it is a name that you might want to hold while these realities are navigated by the broader market.

General Mills (NYSE:GIS): Another brand that you may be in touch with every day, especially in the morning, General Mills is another name levered to emerging markets. Of all the names, it seems the most likely to suffer from rising commodities prices as we spoke about here. Investors should weigh the countervailing theses of rising “ag” prices and the strength of a company with such brand omnipresence and product strength.

Source: 8 Safe Blue Chip Stocks for Retirees to Consider