3 Oversold, Must Own Blue Chips!

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Includes: DEO, GWW, SHW
by: Mitchell Harris

Summary

Recession Proof Industries.

Solid Balance Sheets.

Great Upside Potential.

The markets have been smacked around for the past month or so, mostly, in my opinion, due to the precipitous drop in oil. Unless your portfolio is 100% in oil companies, you have made it through with a couple of bumps and bruises. In every sell-off, there are unique opportunities created in a multitude of industries. I have selected 3 "must owns" in this environment. I would dollar cost average your position over the next 4 months, so 1/4 of your intended $ investment per month.

Diageo (NYSE:DEO) pretty much owns every brand of booze you consume. Johnny Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Ciroc, Ketel One, Guinness and Don Julio. I could go on but you get the idea. Though this hasn't been completely beaten down it gets the thumbs up for hanging in there. In 2015 it had 7 upgrades from investment banks. Currently they are a 1.8 out of 5 on the "Buy" scale with a median price of $124 amongst 4 brokerage houses. Their 4% dividend is very attractive. This is a buy it ($106) and forget it, you will be justly rewarded. Remember one thing, when the markets are dropping and panic is spreading what do people do? Drink. When the markets are flying and your 401k is bustling over what do people do? Drink. Once you position yourself in Diageo, a hangover won't feel so bad in the morning.

Sherwin Williams (NYSE:SHW) operates over 4000 specialty paint stores in North and South America. They are a household name, there is most likely a store in your hometown. There are a lot of "do it yourselfers" nowadays, and if you have ever been in one of their stores it has a very "country home" feeling. People are intimidated by Lowes (NYSE:LOW) and Home Depot (NYSE:HD), I have had this discussion with numerous people who fix their own homes up. The stock trades at $255 down around 15% off its 52 week high. Their recent earnings report was very good, and they will see continued growth in 2016 and beyond. There were some currency issues which negatively impacted but those are things none of us can control. Analysts worry about higher interest rates having an impact on home buying and remodeling, but I don't think that is going to affect the company long term. Goldman upgraded the stock last week as well. Currently they are a 2.2 out of 5 on the "Buy" scale with a median price of $291 amongst 16 brokerage houses. I also think a stock split may be coming this year, it has been 16 years since the last one.

W.W Grainger (NYSE:GWW) is a name you have probably heard on the radio at some point during your drive to work. If you haven't heard of them, they are the largest distributor of MRO (Maintenance, Repair and Operations) supplies. They operate stores and distribution centers all over the world, as well as a web driven model which has every single item for any industrial need. The stock trades at $197 down around 25% in the past 52 weeks. I actually know companies that deal with them, and they operate on some pretty sizable margins. Earnings that were reported last week beat the street estimates across the board. 6 different brokerage firms downgraded the stock since June 2015. Perfect, now is when I want to position this stock in your portfolios. They are a 3 out of 5 on the "Buy" scale, with a top end price target of $300 amongst 13 brokerage houses. What I like the most is the 18% short float. Traders will be covering once it hits $200-$205 and that could take the stock back to $225 in the near term if this market gets a little steam. 2.5% dividend is a nice ancillary benefit as well.

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

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.