Although they fell a little on Friday, US markets are near their yearly highs, and so are a lot of big names. There are plenty of great companies out there that you can add to your portfolio currently, but for a lot of them, you want to wait until their prices become a little more reasonable. Last week, I named five big tech names to buy on their next pullback. This article will focus on five large names, not in the technology sector.
Philip Morris (PM): The cigarette maker hit a new 52-week high this week after its earnings report, which was decent. Although earnings per share only beat by a penny, they beat revenue expectations by $320 million. Guidance for 2012 was very good, and the company stated it will buy back $6 billion worth of its shares this year. That's about 4.3% of its market cap, as of Friday's close. The stock also boasts a nearly 4% dividend yield, and their dividend has been increasing each year.
When the stock dropped below $73 last month, I called it a great buying opportunity. Through conversations with other investors and traders, most agreed that the analyst downgrades were slightly unwarranted and created a great entry point for the stock. If you bought then, you are doing quite well on your purchase. The stock is up about 10% since then. With a near 4% dividend and large buyback, this stock will continue to be an investor favorite, and will definitely go higher from here. You don't want to overpay for the name, so I would start entering a position around $78 and adding more if it goes lower. I'll have more out on the name this week.
Intuitive Surgical (ISRG): The surgical robot maker fell after last quarter's earnings report, creating a tremendous buying opportunity around $430. It has rallied $60 since then, and I believe there is more growth ahead. I recently argued that this name could be a $700 stock by the end of 2013.
Intuitive has virtually no competition in the surgical robot arena, and is receiving approval for new procedures using its machines each year. The company is expected to have revenue and earnings growth in the high teens or low twenties, percentage wise, both this year and next. The company has virtually no debt, an exceptionally clean balance sheet, and is buying back stock. It's a very high margin business and there is still plenty of room for growth.
Mastercard (MA) and Visa (V): Both companies rocketed higher after great earnings reports, and these are names that should be in your portfolio. The credit card industry is doing extremely well, and these names are very profitable. Both names are projected for double digit revenue growth this year, and knowing their propensity for beating estimates, they could do even better.
Both names are near 52-week highs, so you should definitely wait to get them cheaper. Both companies are mostly growth names, but they do offer small dividends, and Mastercard just doubled theirs. I stated in my 2012 predictions that I think these two names could return 25% this year, and they are doing well so far. Be ready to get into these names on any weakness.
McDonald's (MCD): I can't give you too many growth names, so I'll throw in another value play. McDonald's offers a near 3% dividend, is buying back plenty of stock, and is expected to grow revenues by more than 5% this year and next. Analysts like the name and most price targets are a bit higher than current prices.
McDonald's is a couple of bucks off its 52-week high already, which means if you want to start a position here, you can. But don't buy a significant portion of it here. Buy small, and average in as it goes lower. If you could get in around $95, that would be excellent. A good dividend, buyback, and some growth offer decent potential for this blue chip name.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.