The market's recent volatility, and huge sell-off, create the kind of buying opportunities that happen very rarely. Here are three more Dow stocks for your long-term portfolio that you'd be crazy not to buy.
Home Depot (NYSE:HD) is exactly the kind of company I want from a Dow component, and from a stock for my long-term portfolio. It's wedged between a growth stock and what Peter Lynch called a "stalwart." It's economically sensitive and earnings did suffer in 2008, but the company's cash flow is so massive that it would take a prolonged depression to kill off this baby. The company has since come roaring back, cutting expenses by 11% during FY 2009, increasing EBITDA in the same period by 10% and another 25% over 2010. A company this mature is all about free cash flow, and Home Depot still managed to produce over $3.6 billion of it during FY 2008, $4.1 billion the year after, and $4.4 billion last year. The $8.7 billion of debt it carries could be paid off in two years if they wanted, but why bother when it's being carried at an attractive 6% rate? It also pays a very reasonable 3.5% dividend. Analysts project 15% earnings growth this year and next, and 13% annualized over the next five years. When you add all this up, you can understand why it's a compelling buy at $28.50, a full 27% off its 52-week high.
3M (NYSE:MMM) just keeps on chugging. The reason is because the company makes so many household goods that everyone uses on a daily basis that, recession or not, they will still use on a daily basis. The company had net income in the billions during the recession, along with billions in free cash flow and has even more billions in cash on its balance sheet. Its products are ubiquitous and that won't change. Like Home Depot, you're looking at a company with 13.55% 5-year annualized growth ahead of it, trading at a 13 P/E. Add in a 2.4% dividend and it's a must-have at 20% off its 52-week high.
ExxonMobil (NYSE:XOM) is a stock I consider a "forever hold." The world needs oil. It always will need oil. No matter how much the environmental movement screams and shouts, the world will always consume oil, and we will not run out in our lifetime, or the next. That's why I pay no attention to oil prices or the economy when it comes to oil stocks. You buy it, you forget about it. In 2010, ExxonMobil generated a whopping $48 billion in cash flow against a tiny $260 million in interest, and $12 billion in debt. The company pays a 2.7% dividend, and is 22% off its 52-week high.
I stress that these are long-term holds. The market as a whole may fall further from here, taking some of these stocks with them. But it your time horizon is at least ten years, these are classic buys.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.