I suppose I should subtitle the article, "Or, Stocks That Will Withstand A Crash", but since I think a zombie apocalypse is an almost certain event, I'm going to stay with that mindset. In other words, these are a set of diversified stocks I want in my perfect portfolio once human flesh becomes the primary component for daily meals.
Having a home I can barricade is a top priority, but the homebuilders are in the toilet. So the next best thing is a hotel. Ashford Hospitality Trust (NYSE:AHT) is a hotel REIT that survived the recession and financial crisis better than all of its peers. The company managed its liquidity with precision and care, used interest rate derivatives to enhance revenue, and paid out all of its Preferred dividends. I'll need a hotel because you can bet the airports will be packed, leaving travelers and airlines as sitting ducks for those flesh eaters.
I want security, so General Dynamics (NYSE:GD) will provide me with business aviation; combat vehicles, weapons systems, and munitions; shipbuilding design and construction; and information systems, technologies, and services worldwide. $2.5 billion in annual free cash flow, and over $2 billion of cash on the balance sheet means they can keep producing the combat vehicles necessary to napalm the advancing undead. I don't want to end up trapped in a zombie minefield or a bad stock, after all!
We must have energy, so I'm sticking with ExxonMobil (NYSE:XOM). They have billions. They make billions. More than ever, the world will need their energy, and you can bet if an oil company sees a chance to make a buck, they'll find a way to survive.
Food is essential. Grocery stores will be overrun and emptied, so we'll need to survive on snack foods and soda. Fortunately, Kraft (KFT) has all the food we'll ever need and it will last a long time. They also generate billions in free cash flow, and their recent reorganization and integration with Cadbury-Schweppes has put them on solid footing. Coca-Cola (NYSE:KO) is another shoe-in. Their products are so ubiquitous that no matter where we are, no matter what zombies may be chasing us, we are guaranteed to stumble across a cache of Coke when we need it most. The company is still growing at a 9% annualized rate going out five years, has $11 billion in cash, generates around $7 billion in FCF annually, and has net margins of almost 30%.
We'll need to communicate with other survivors, so Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) are must-haves. Apple technology is so simple to use, and so much better to figure out than PC's ever have been. I actually think Apple users are more likely to survive than PC users, anyway. Plus it's got a $28 billion cash hoard, no debt, generated billions in FCF, and offers iTunes. I think iTunes and its peers are also going to outlast Netflix (NASDAQ:NFLX). I can stream iTunes, plus Apple has deeper pockets to pay for whatever content isn't raided by the zombies when they overrun the movie studios. As for Google ... it's Google.
Healthcare products and drugs are going to be pretty darn important. Since pharmaceutical companies will be spending all their money on R&D to figure out how to reverse the virus that causes zombification, I'll want access to the best and widest varieties of generic drugs. That means Teva Pharmaceutical (NASDAQ:TEVA), trading near the lowest end of its P/E range in ages, while generating $3.4 billion in FCF last year, growing at a solid 10% annualized clip, yet trading at a P/E of only 8. I'll add Johnson & Johnson (NYSE:JNJ) also, for its incredible variety of products, history of strong management, solid balance sheet, and dividend. 3M (NYSE:MMM) makes all the household products we'll ever need in our Ashford-owned hotel, so we'll stock up with their stuff. 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 (NYSE:HD), you're looking at a company with 13.55% 5-year annualized growth ahead of it, trading at a 13 P/E.
I'm sure I've forgotten a few things here and there, but this list should do for now. These are all buy and holds for long-term investors who are building that underground bunker for the "Night of The Living Dead."
Disclosure: I am long TEVA, AHT, XOM. Also long AHT Preferred D, and short NFLX.