No one buys and holds stock to frame that engraved stock certificate on their wall to be admired to the end of time. Today's investor cannot depend on their employer to fund retirement. Consider these four stocks to kick-start your IRA in the new year. Of course, use this analysis as a starting point for your own research.
Green Mountain Coffee Roasters (NASDAQ:GMCR)
This coffee company is trading well off its 52-week high of $115.98, and boasts an glowing year-over-year quarterly revenue growth of 90.8%, yet it recently saw Keurig roaster sales up 50%, year-over-year for last quarter. With a .57 price-to-earnings growth ratio, It bests it competitors Peet's Coffee and Tea (PEET) and juggernaut Starbuck's (SBUX), with PEGs of 2.07 and 1.48 respectively. While SBUX and unprofitable competitor Farmer Brother's (FARM) both offer a dividend, GMCR seems to using much of its cash to aim for higher growth.
GMCR does sell for 35 times earnings, as compared to SBUX P/E of 29 and PEET's 41, which is not a significant premium to pay for its encouraging revenue growth and PEG. There is great anticipation surrounding GMCR's January 30 earnings announcement, which presents some short-term anxiety over the price of the stock. However, raising retail prices at competitor SBUX, coupled with new-found thrift in U.S. society, may encourage some regular coffee drinkers to stay home and sip some of GMCR's home brewed goodness. This is a great candidate for speculative investors looking for growth.
Cisco Systems, Inc. (CSCO)
The networking giant CSCO trades at 16 times earnings, and offers a token dividend yield of 1.3%. It shares a PEG ratio with competitor Juniper Networks, Inc (JNPR) at 1.31, however, smaller JNPR, which has about one-tenth the capitalization of CSCO is trading closer to the low end of its 52-week range. Furthermore, JNPR has a healthier 9.2 quarterly revenue growth as compared to CSCO's 4.7%. While CSCO continues to enjoy large market share, JNPR's nearly double-digit revenue growth cannot be brushed aside.
CSCO's other competitors Alcatel Lucent (ALU) and Hewlett-Packard Company (HPQ) offer negative quarterly revenue growth, which probably explains why ALU is selling at nearly 6 times earnings and HPQ about 8 times earnings. While ALU price-to-earnings growth ratio is a favorable .58, as well as other positive price metrics seen by some as encouraging, falling revenues obviously obstructs long-term profitability. Cisco is a great candidate for further diligence into competition-based risks.
Selling at 15 times earnings, and offering a generous 4% dividend yield, PFE is a tempting choice, especially for income investors and one that I identified as good for retirees. However, PFE's competitor Novartis (NYSE:NVS) is preferable by most every metric. NVS sells for 13 times earnings and is a better long term value with a PEG of 2 versus PFE's 3. NVS offers a comparable dividend yield at 3.6%, which continues to make this an attractive alternative to PFE to most income investors. If this is not encouragement enough, consider that NVS boasts a 17.3% year-over-year quarterly revenue growth as compared to PFE's 7.5%.
PFE's competitor Merck (NYSE:MRK) offers a superior 4.4% dividend, at more favorable PEG of 2.35. However, selling at 28 times earnings, it appears to be overpriced, still making NVS a better choice. Bayer (OTCPK:BAYRY) disappoints with a anemic 1% quarter revenue growth, and for this indignity, it sells at an expensive 22 times earnings. On a relative value basis, Pfizer is a great candidate for additional research.
One can only speculate what kind of performance AAPL would have had if Steve Jobs had not passed, but it appears that the stock continues to be a good value. With an encouraging PEG .65, it edges out competitor Google (NASDAQ:GOOG) only slightly, which came in at .91. However, AAPL is selling at only 15 times earnings compared to GOOG's 21, with both companies seeing quarterly revenue growth in the 30's (33.4 for GOOG versus 39 for AAPL). If money is no factor, one might flip a coin to pick between the two companies; if leverage is a concern, one might be able to afford a few more share of AAPL trading in the low $400's vis-a-vis GOOG trading in the $600s.
Competitor HPQ continues to struggle with having stable leadership, which apparently stems from a hard-to-satisfy board of directors. Without such leadership, HPQ will struggle turning the revenue picture around into positive territory. Research in Motion (RIMM) disappointed at the Consumer Electronics Show, with its sluggish development of its next-generation tablet. The concern compounds considering negative year-over-year quarterly revenue growth.
With quarterly revenue growth well in the negative, a low P/E of 8 is no inducement to get involved in this stock, at least until there is stable management at the hardware manufacturer. HPQ offers an unappealing 1.8% dividend, that one would hope they would consider ceasing to plow back into the company to turnaround its negative revenue growth. While HPQ is trading near the low end of its 52-week range, it will take more than this price metric to consider this issue.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.