Seeking Alpha
Profile| Send Message| ()  

What follows is a list of companies that have 40%+ less volatility than the market and are thus fairly safe from the impact of a double dip. These firms cover a variety of industries: gaming, utilities, food, and mining. Currently, Duke Energy (DUK) is the least preferred with a rating closer to a "sell" than a "buy." Industry consolidation in utilities will inevitably cause margin pressure and thus far Duke has received tough love from regulators over its proposed $26B merger. As for mining: while investors have a strong reason to invest in gold as a hedge against inflation, the Street believes that Kinross Gold (KGC) will be an underperformer amongst peers.

Activision Blizzard (ATVI)

Activision is rated a "strong buy" on the Street and trades at a respective 19.3x and 13x past and forward earnings with a dividend yield of 1.3%. It has a beta of 0.6.

Consensus estimates for Activision's EPS forecast that it will grow by 8.9% to $0.86 in 2011 and then by 11.6% and 12.5% more in the following two years. Modeling a CAGR of 11% for EPS over the next three years and then discounting backwards by a WACC of 9% yields a fair value figure of $13.75, implying 11.4% upside.

Click here for more analysis.

Duke Energy

Duke is rated around a "sell" on the street and trades at a respective 15.4x and 15x past and forward earnings with a dividend yield of 4.7%. It has a beta of 0.4.

Consensus estimates for Duke's EPS forecast that it will be roughly flat at around $1.43 over the next three years. Assuming a multiple of 15x and a conservative 2012 EPS of $1.41, the company is trading roughly at fair value.

Click here for more analysis.

Kraft Foods (KFT)

Kraft is rated a "strong buy" on the Street and trades at a respective 20.9x and 15.2x past and forward earns with a dividend yield of 3%. It has a beta of 0.6.

Consensus estimates for Kraft's EPS forecast that it will grow by 12.9% to $2.28 in 2011 and then by 10.5% and 10.7% more in the following two years. Modeling a CAGR of 11.4% for EPS over the next three years and then discounting backwards by a WACC of 9% yields a fair value figure of $35.49, implying 7.3% downside.

Click here for more analysis.

Kinross Gold

Kinross is rated a "hold" on the Street and trades at a respective 13.9x and 10.6x past and forward earnings with a dividend yield of 1.1%. It has a beta of 0.4.

Consensus estimates for Kinross' EPS forecast that it will grow by 39.7% to $0.81 in 2011 and then by 28.4% and 20.2% more in the following two years. Of the 18 revisions to estimates, 12 have gone down for a net change of -0.6%. Assuming a multiple of 12.5x and a conservative 2012 EPS of $1.01, the rough intrinsic value of the stock is $12.63, implying 11.9% upside.

Source: Defensive Stability: 2 Attractive Prospects, 1 Less So