There are many things that make fathers happy, including a good family, work, entertainment, home and cars. I will discuss four American companies that contribute to fathers' well being and need recognition after the Father's Day weekend. The first two companies, Ford (F) and Harley Davidson (HOG), are symbols of power and mobility. Following them is Home Depot (HD), which symbolizes American dads' obsession with home improvement in their spare time. Finally, I will discuss Disney (DIS), which owns the ESPN channel and Disney parks and is one of the best sources of entertainment for many dads and their families.
Ford owns such brands as the Mustang (in cars), Expedition (in SUVs), and the F-150 (in trucks). Ford symbolizes both power and speed in its vehicles. The father of the company, Henry Ford, is one of the best known men in the world. During his time, he was one of the wealthiest and forward thinking men. More recently, Ford is known as the only American car manufacturer that did not need a bailout from the U.S. government, thus, proving its resilience and ability to navigate well in difficult times. Qualities that many American fathers strive to have.
Ford's stock has a price to earnings ratio of 7, both on a trailing and forward (fiscal 2012 and 2013) basis. This is favorable, compared to the market's (S&P 500) price to earnings ratio of about 13.5. Its price to tangible book value of 2.4 is also significantly less than the market's one of 4.2. In addition, the shares pay a $0.05 per quarter for an annual dividend of about 2%. Given the record low interest rates, this tax-advantaged dividend yield is attractive.
In addition to an attractive valuation, Ford provides exposure to the auto markets in emerging economies such as Latin America (8.9% of 2011 vehicle sales) and Asia Pacific Africa (15.8%). The U.S. market is also recovering, with May 2012 auto sales rising 26%. While Ford is a global company, it recently introduced a Ford One plan. The plan, among other things, aims to develop products that customers want, improve profitability, make global operations more efficient and share know-how and designs globally. I think that all this, together with the company's strong brand, make the shares a good long-term investment.
Harley Davidson is a company associated with liberty and that also helps make fathers across the country happier. In addition, the company's stock offers a good investment opportunity. It has 232 million shares outstanding, a market capitalization of $11.4 billion, and an enterprise value of $15.7 billion. The shares pay a quarterly dividend of $0.155 for an annual yield of about 1.2%. The company had nearly $6 billion of sales in 2008, but following the financial crisis, its sales decreased to $4.8 billion in 2009. Sales are recovering and reached $5.3 billion in 2011. I think the company will continue to improve its sales as the economy and consumer confidence bounce back. Also, baby boomers are reaching their retirement age and most of them will keep an active lifestyle, which includes motorcycle riding.
Harley Davidson's stock trades at an estimated 2012 price to earnings ratio of 17.4 and projected 2013 price to earnings ratio of 13.7. It has been able to beat earnings forecasts in the past four quarters and these estimates are most likely conservative. In addition, the company is implementing a new strategy and expects over 40% of sales to occur outside of the U.S. by 2014 and is also trying to appeal to newer and more diverse demographics.
Home Depot is another company that has the support of the American dad. At the same time the company has committed $30 million for the next 30 years to help military veterans renovate their homes. Home Depot is one of the few stores where fathers feel at home when away from home.
Home Depot sells diverse products, from barbeques and tools to garden supplies and lawnmowers. From an investment standpoint, Home Depot offers growth and also pays a quarterly dividend of $0.29 for an annual yield of 2.2%. Most recently, Home Depot's earnings have benefited from warmer weather and higher builder confidence. The company expects to earn $2.9 per share in 2012 for a price to earnings ratio of 17.9. Analysts estimate that next year Home Depot will earn $3.30 per share for a forward looking price to earnings ratio of 15.6. This is still above the market average price to earnings ratio but the premium is well justified. Home Depot faces less competition from online retailers, it has operations in Mexico, which is growing faster than the domestic market, and will benefit from the anticipated improvements in the economy and consumer confidence. In addition, Home Depot is repurchasing shares (estimated $4 billion in 2012), which should further help performance on per share basis.
The last company I will discuss in this article and that I think American dads and their families appreciate is Disney . While consumers know the company for its animated characters and related movies, theme parks, cruises and other products, when fathers throughout the country are watching sports, they most likely do it on Disney's sports network, ESPN.
Disney has 1.79 billion shares outstanding, a market capitalization of $84.2 billion, and pays an annual dividend of $0.60 for an yield of 1.30%. Disney's stock has returned about 37% in the past 5 years compared to a 10% decline for the S&P 500. There are no reasons to expect this outperformance to stop any time soon. The company has well-diversified businesses across products and regions. Recently, Disney has been focusing on improving its mobile and gaming offerings and the efforts are starting to pay off. Consumers have accepted well one of Disney's games, Where's My Water, and also Macworld reviewed it favorably. This success is especially important for Disney as the main character in the game, Swampy, was created with the fast growing mobile market in mind.
This past weekend, fathers in the United States celebrated fathers day. While they spent time with their families, they likely drove their Ford truck to Home Depot, watched the European soccer championship and baseball on ESPN, or drove their Harley while enjoying the nice weather. The four companies outlined above touch fathers lives in an important way every day of the year and I expect they will continue to do so.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.