I continue to look for stock ideas for my own portfolio. Most of my investments are in Mutual Funds and ETFs, but I continue to look for stocks to augment these assets, and especially long term, dividend-bearing stocks. I continue to be interested in long-term stocks that have good yields and are stable.
Matt Thalman of the Motley Fool looks at four companies that have given great returns over the past ten years. His angle is to look at the overall yields. My goal is to assess whether any of these are ones that I would consider.
He takes the example of four companies and examines the returns had you invested ten years ago.
Company | April 2002 | Recent Share Price | Current Annual Dividend per Share | Yield Based on 2002 Price |
|---|---|---|---|---|
| McDonald's (MCD) | $27.71 | $97.29 | $2.80 | 10.1% |
| Chevron (CVX) | $43.23 | $105.75 | $3.24 | 7.5% |
| Nucor (NUE) | $16.25 | $39.22 | $1.46 | 9% |
| HCP (HCP) | $21.55 | $41.36 | $2.00 | 9.3% |
Source: Yahoo Finance; author's calculations. 2002 prices adjusted for splits.
This is all well and good -- if you invested in Apple two years ago, look at how well you would have done. The real question is whether these companies are worth investing in the longer term. Matt claims that they are
- McDonald's (MCD) is the clear-cut leader in the fast-food business and has good growth in emerging markets
- Chevron (CVX) is behind Exxon in market cap, but Chevron's dividend is higher and has a cheaper valuation than Exxon based on earnings.
- Nucor (NUE) is North America's largest recycler, with modern, efficient "mini-mills" that reduce costs
- HCP (HCP) has over 1,000 health-care facilities, and with an aging U.S. population, future revenue should remain fairly consistent
Matt also adds Apple (AAPL) as a long-term prospect, pointing out that, with its rapid growth, the dividend may also increase rapidly. I already own McDonald's and Chevron. I also own Waste Management (WM), which could be considered a proxy for Nucor, and I have National Health (NHI), which could be considered a proxy for HCP.
I am sure that just about everybody has an opinion on Apple, and I have invested in ZAGG Incorporated (ZAGG) that makes accessories for the iPhone, iPAD and android products and will likely ride on their coat tails. So, I am going to compare: (MCD, CVX, NUE, HCP, AAPL) with (MCD, CVX, WM, NHI, ZAGG) and see how they have performed over the past five years.
Portfolio Performance Comparison
| Portfolio/Fund Name | YTD Return | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|---|
| AAPL | 49% | 74% | 330% | 69% | 288% | 43% | 118% |
| MCD | -4% | 25% | 149% | 26% | 160% | 18% | 76% |
| CVX | 13% | -2% | 128% | 20% | 63% | 9% | 37% |
| HCP | 5% | 14% | 82% | 40% | 13% | 8% | 23% |
| NUE | -5% | 1% | 5% | 11% | 7% | -4% | -13% |
The spectacular performance of Apple has been well-documented, and opinions abound about the future. With the exception of Nucor, the other stocks have performed well, with decent volatility performance. Nucor has not performed that well year to date (neither has McDonald's with their recent lower than forecast results).
Five Year Chart
I haven't looked into the premium on each of these, but McDonald's is high and Apple is stratospheric, so there are going to be swings, depending on results.
Portfolio Performance Comparison
| Portfolio/Fund Name | YTD Return | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|---|
| MCD | -4% | 25% | 149% | 26% | 160% | 18% | 76% |
| NHI | 12% | 10% | 38% | 30% | 84% | 15% | 38% |
| CVX | 13% | -2% | 128% | 20% | 63% | 9% | 37% |
| WM | 6% | -10% | -11% | 13% | 64% | 2% | 12% |
| ZAGG | 47% | 44% | 392% | 58% | 162% |
My proxy list which substituted Waste Management for Nucor, National Health Investors for HCP and Zagg for Apple has performed reasonably well, but with similar properties. I have only recently come across Zagg, and if you want a rocket stock, I think I prefer Zagg, because it backs smartphones in general, and not just the iPhone. I anticipate other suppliers catching up with iPAD over the next couple of years.
Five Year Chart
Green is Waste Management
These are an interesting set, and we will see whether my confidence in them is justified over the coming months and years.
Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
