5 Stocks That Can Thrive Even In A Bad Economy

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 |  Includes: CAT, KO, MCD, MPC, WBA
by: Investment Underground

2012 promises to bring the stock market into new territory as the United States and global economies generally have morphed into something that many investors are struggling to understand. In the United States, the government has imposed new regulations, tinkered with the money supply and bailed out banks, all while ballooning the national debt to historic levels. In Europe, several nations teeter on the brink of default, threatening the euro and the European Union itself. As a result, many question the capability of equities investment.

Based on my analysis, this is a great time to be in equities. In this article I will discuss 5 stocks that represent companies I strongly believe you can invest in with a high degree of confidence in the face of economic adversity, and I'll explain why.

Caterpillar, Inc. (NYSE:CAT)

This 86 year veteran of the industrial goods sector has a market cap of $72.60 billion and is trading around $112 at the time of writing. The price/earnings ratio is an attractive 17.16 coupled with an equally appealing 0.64 price/earnings growth ratio. Price to book stands at 4.98. Caterpillar's return on equity is a robust 35.21%. Both year-over-year quarterly revenue and earnings growth top 41%. Net income per employee is $35,799. The current ratio is a textbook 1.46%. Caterpillar's beta is higher than ideal at 2.11 but not inconsistent with the industry. The stock offers a dividend yield of 1.7% supported by a dividend payout ratio of 27%.

Buying Caterpillar now, while it is trading at 167% of its 52 week low makes perfect sense. Don't try to catch a falling knife. This company is a global enterprise and as a result, has opportunities for growth beyond the troubled domestic and European economies. This stock has solid potential for appreciation and the safety net of a dividend to keep your investment on an upward growth path. The dividend looks dependable, given the 27% payout ratio and, the balance sheet is strong, demonstrating ample ability to service short term debt in relation to its current ratio. With strong fundamentals, global presence and an effective management team, I believe Caterpillar can weather any economic environment, and its shares are right on track to perform well in 2012.

The Coca-Cola Company (NYSE:KO)

This 125 year old cultural icon in the consumer goods sector has a market cap of $155.35 billion and is trading around $68 at the time of writing. The price/earnings ratio is an alluring 12.58 coupled with an unremarkable 2.90 price/earnings growth ratio. Price to book stands at 4.68. Coca Cola's return on equity is an exceptional 41.31%. Year-over-year quarterly revenue growth tops 45% with year-over-year quarterly earnings nudging just above 8.00%. Net income per employee is $90,903. The current ratio is a textbook 1.10%. Coca-Cola's beta is fine at 0.49. The stock offers a dividend yield of 2.80% supported by a dividend payout ratio of 34.00%.

Coca-Cola is another stock you should consider buying now. The stock is trading at 112% of its 52 week low implying plenty of opportunity for appreciation. Coca-Cola, like Caterpillar, participates in the global market, once again lowering your dependence on domestic and European sales. You've got to love that 2.80% dividend yield. Although the 34% payout ratio is pushing my comfort level, I see nothing in the numbers to suggest it will rise or fall anytime soon. The current ratio reflects ample ability to handle short term obligations. I expect its shares to remain on an upward trend in the coming quarters.

McDonald's Corp. (NYSE:MCD)

This restaurant giant in the services sector has a market cap of $101.40 billion and is trading around $99 at the time of writing. The price/earnings ratio is slightly high at 19.44coupled with an acceptable 1.76 price/earnings growth ratio. Price to book stands at 7.61. McDonald's return on equity is a hefty 39.80%. Year-over-year quarterly revenue growth is 13.70% with year-over-year quarterly earnings at 8.60%. Net income per employee is $13,425. The current ratio is just okay at 0.87%. McDonald's beta is ideal at 0.36. The stock offers a dividend yield of 2.60% supported by a dividend payout ratio of 48.00%.

McDonald's is another company you should already be holding. Its worldwide footprint guarantees revenue streams from operations beyond domestic and European boundaries. With a history of stable performance and liberal dividend yields, I believe this stock will perform consistently well throughout 2012.

Walgreen Co. (WAG)

This stalwart in the drug store industry has a market cap of $30.43 billion and is trading at about $35 at the time of writing. The price/earnings ratio makes it cheap at 11.79 and that is coupled with a very good 1.43 price/earnings growth ratio. Price to book stands at 2.07. Walgreen's return on equity is a tolerable 18.51%. Year-over-year quarterly revenue growth is 4.70%. Net income per employee is $15,398. The current ratio is textbook at 1.47%. Walgreen's beta is fine at 1.04. The stock offers a dividend yield of 2.60% amply supported by a dividend payout ratio of 27%. Walgreen's is selling at 116% of its 52 week low and I recommend it as an addition to any investor's portfolio. Although entirely dependent upon domestic sales, it is almost certain that revenues will rise as the 'baby boomers' in the United States continue to age.

Marathon Petroleum Corporation (NYSE:MPC)

This spin off from Marathon Oil Company has a market cap of $13.67 billion and is trading around $38 at the time of writing. The price/earnings ratio is in the basement at 5.09 paired with an astounding 0.19 price/earnings growth ratio. Price to book stands at 1.38. Marathon's return on equity is a robust 29.07%. Year-over-year quarterly revenue growth is 32.60% with year-over-year quarterly earnings at 309.00%. Net income per employee is $103,677. The current ratio is good at 1.36%. Marathon Petroleum's beta has yet to be established. The stock offers a dividend yield of 2.60% supported by a dividend payout ratio of 4.00%.

You may recall, Marathon Oil Company (NYSE:MRO) spun off its refining operations and this company is the result. I have more confidence in Marathon Petroleum Corporation than its parent company which remains in the oil and gas exploration business. Marathon Petroleum Corporation is primarily vested in the domestic economy for revenues. This shouldn't be a challenge as long as we are driving automobiles with internal combustion engines, and full conversion to renewable energy looks to be in the very distant future. All the fundamentals are sound and the dividend is likely to increase as international markets continue to emerge.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.