By Michael Williams
Okay, let's be honest; not every investor is a genius like Warren Buffett or Jeremy Grantham. The good news is that while many don't have these men's gift for predicting the twists and turns that occur on Wall Street, they can still be smart investors. This requires due diligence, patience and an understanding of how the market works.
While there are still some tricky spots in the investment world, savvy traders are finding great opportunities in a variety of places. That said, five stocks that smart investors are considering to buy and hold forever now are AT&T Inc (NYSE:T), Altria Group Inc (NYSE:MO), Home Depot Inc (NYSE:HD), Vodafone Group PLC (NASDAQ:VOD) and Abbott Laboratories (NYSE:ABT).
AT&T, one of the most famous companies in the world, also happens to be a very good investment. The communications giant continues to generate profit and dividends for investors. With an enormous $177.25 billion market cap, the company is able to command the attention of Wall Street, and its investors have been rewarded for their efforts.
Currently trading at $30, the company has a one-year target estimate of $31.71 while paying a dividend of $1.76 and generating a yield of 5.90%. While the dividend is nice, (up from $1.72 last year) investors should be wary as they consider the company's sluggish P/E of 4.00 and a debt/equity ratio of 62.54. Both numbers indicate that AT&T may be on the verge of cash flow problems as it faces a massive debt of $71.23 billion. While the company remains a good investment for its dividends, many investors will want to avoid it due to a limited potential increase in share price.
Atria Group Inc
Manufacturing, selling and distributing cigarettes, smokeless tobacco and wine throughout the world, Altria Group continues to perform well and provide an inflation-proof investment in spite of growing resistance to its key revenue sources. Founded in 1919, the Virginia-based company has been a very good investment, recording a current price $28.81 and a one-year target of $29.13, while paying a dividend of $1.64 for a yield of 5.7% with a 93% payout ratio.
The signs point to the company maintaining its strength as it goes forward. Altria has a forward P/E of 13.16, a worthy follow-up to its trailing P/E of 17.25. MO has been called a great retirement stock, thanks to its strong earnings and rate growth. With a share price that's climbing in unison with its 50-day and 200-day moving averages, Altria Group isn't just a good retirement stock; it's a great holding for nearly any investor.
The Home Depot Inc
One of the United States' biggest home-improvement chains, Home Depot continues to generate dividends and share price increases while helping people work on their houses. At 43.51, the company's stock is trading at the very top of its 52-week high of $43.66, a mark it just recently set. Both the 50-day and 200-day moving averages of HD are trending upward, suggesting that last year's dividend of $1.16 and yield of 2.70% were no illusion.
The company is currently showing a 20.04% return on equity, and it recorded a quarterly earnings growth of 12.00%. A forward P/E of 15.88 suggests continued profitability, but a one-year target estimate of $42.70 suggests that buyers should watch for weakness, although some analysts are ranking HD as a buy, based largely on a 4.2% rise in same-store sales. Home Depot is still a good stock to hold, but investors should analyze the numbers thoroughly before taking additional positions.
Vodafone Group PLC
British telecommunications heavyweight Vodafone Group is another stock that many smart investors are considering. Weathering a volatile year, this large cap has still managed to post a hefty 15% profit margin and a nice 54% payout ratio. The company also holds a 45% stake in Verizon Wireless (NYSE:VZ), one of the largest cell providers in the United States. With a current price of $27.81 and a one-year target of $33.74, Vodafone is truly an intriguing stock to consider.
Not only has the company increased its share price; Vodafone has also been good to investors seeking dividends, as it paid out 0.97 for a nice 3.50% dividend yield. With all of its positive metrics, the only negative is its $-4.27 billion in levered cash flow. The company is very effective at generating operating cash flow; so many analysts are willing to dismiss this as Vodafone being invested extensively in the future. With a long-term vision and steady gains in the present, this is a very good stock to consider for a new position.
It's always nice to find a strong-performing stock in the pharmaceutical industry, and Abbott Laboratories fits the bill. Founded in 1888, this American company specializes in not only medicine, but it also manufactures medical testing supplies, diagnostic equipment and surgical supplies. Currently trading at $55.43, ABT has a one-year target of $59.32, a dividend of $1.92 and a yield of 3.50%.
With a return on equity of 19.71% and a levered free cash flow of $9.06 billion, Abbott looks poised for more success. VOD has a forward P/E of 11.02 and a 5-year PEG of 1.28. The positive news about its current state suggests that Abbott is ready to make another move.
Being a Smart Long-Term Investor
Although it's not easy to achieve the success of Buffett or Grantham, being a smart investor is not as difficult as many people think. Following the business movements and financial stability of a company can offer insight, making it easier to choose a winner. For someone searching for a new addition to his or her portfolio, AT&T, Altria Group, Home Depot, Vodafone or Abbott Laboratories are all solid options to consider for the rest of your days.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.