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ubinpokharel
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Individual Investor...... looking for and investing in companies that i can hold....well...forever.... Avid follower of value investing gurus and their investment ideas....
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  • The "Sleep Well" Portfolio 0 comments
    Sep 10, 2011 9:45 AM | about stocks: KO, JNJ, PG, ABT, WMT, MCD, PEP, KMB, INTC, MMM

             Stock Market volatility is back again. Markets and investors  who were artificially euphoric due to fed’s intention of printing money were given rude awakening with the market’s gut wrenching drops of more than 400 points for days last month wiping away billions of dollars in process. Investors, with 2008 still fresh in their minds, yanked billions out of stock market into money markets funds and U.S treasuries, driving down the yields to historic lows. Doom Sayers were back in business, popping all over the place making ridiculous predictions about anything and everything they could talk about. Speculators poured into gold funds causing it to reach record highs. Among all this doom and gloom, investors have lost a lot of confidence in stock markets again and it will take time for them to get back. We can never predict the course of market in the short term, there might be severe volatility ahead, which might cause even more pessimism. But all this “End of the World” prediction should never hide the fact made so famous by Benjamin Graham, “Stock Markets are voting machines in short term and weighing machines in long term”. Investors who are long term should be drooling over this pessimism, as this provides an excellent opportunity to own great businesses with proven track records at discounts. As Warren Buffett regularly points out, “Be Greedy when others are fearful”, this is the time to be greedy about these solid stocks and owning them for a long time. These stocks should form a core of everyone’s “Sleep Well” portfolio, which allows them the proven benefit of investing in stocks for a long term and also helps them ride difficult times like these, when pessimism is the only thing in everyone’s mind.

     

                    In this article “Sleep Well” portfolio, I have decided to outline 10 stocks that should help investors accumulate wealth over time, in times difficult or rosy. These 10 companies are iconic American brands that have stood the test of time, wars, recessions, inflations and oil scares. Not only they provide capital appreciation over time, these companies are also serious dividend payers with track record of constantly increasing dividends over time. These companies are certainly not the darlings of a lot of investors, neither are they glamorous in any regards. These are boring stocks, stocks that seems too “cold” for a lot of people, yet these companies represent significant opportunity of accumulating wealth in the long run. These companies are also an excellent and “safe” way of playing the international/ Emerging Markets story because a significant proportion of sales for all 10 companies comes from international markets. Rather than going hoo...la over some micro cap Chinese or Brazilian stocks, owning these stocks provides a wonderful opportunity to participate in these countries with the “safety” of these iconic stocks.

                   

     

     

    1.      Coca-Cola (KO): 

    Coca -Cola might well be the most famous brand in the world. It is the largest beverage company in the world whose products are marketed in more than 200 countries world wide generating more than 35 Billion in 2010 sales. Key figures for Coke include:

     

    ·         10 Years Sales Growth Rate = 5.5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 11%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 13.30

    ·         Price/ Book Value ( As of 08/09/2011) = 4.4

    ·         Dividend Yield = 2.71%

    ·         Consistent Increase in Dividend Payment for 48 Years

    ·         10 Years Dividend Growth Rate = 9.5%

    ·         Dividend Payout Ratio = 55%

    ·         International Sales = 75% of Total Sales.

     

    2.      Johnson & Johnson (JNJ):

    Johnsons & Johnsons ranks as the world’s largest and most diversified health care company that is composed of three segments: consumer, pharmaceutical & Medical devices. It is among a handful of companies that still command an AAA rating due to its rock solid balance sheet comprising of 61 billion in 2010 sales. Key figures for Johnson & Johnson include:

     

    ·         10 Years Sales Growth Rate = 9.5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 12.5%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 15.60

    ·         Price/ Book Value ( As of 08/09/2011) = 2.9

    ·         Dividend Yield = 3.58%

    ·         Consistent Increase in Dividend Payment for 48 Years

    ·         10 Years Dividend Growth Rate = 14%

    ·         Dividend Payout Ratio = 44%

    ·         International Sales = 53% of Total Sales.

     

    3.       Proctor & Gamble (PG):

    Proctor & Gamble is the world’s largest producer of personal and household products which are used by more than 4 billions people world wide. It has 23 iconic brands that generate more than billion dollars and further 20 brands generating half a billion in sales which totaled 79 billion in 2010. Key figures for Proctor & Gamble include:

     

    ·         10 Years Sales Growth Rate = 6.5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 10%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 16.0

    ·         Price/ Book Value ( As of 08/09/2011) = 2.5

    ·         Dividend Yield = 3.40%

    ·         Consistent Increase in Dividend Payment for 54 Years

    ·         10 Years Dividend Growth Rate = 11%

    ·         Dividend Payout Ratio = 50%

    ·         International Sales = 60% of Total Sales.

     

    4.       Abbott Labs (ABT):

    Abbott Labs, like JNJ, is a diversified health care company comprising of pharmaceutical, nutritional and diagnostic segments. It is the largest company in the nutritional products market and is the second largest company worldwide for diagnostic products accounting for 35 billion in 2010 sales. Key figures for Abbott Labs include:

     

    ·         10 Years Sales Growth Rate = 8%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 11.50%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 15.60

    ·         Price/ Book Value ( As of 08/09/2011) = 3.0

    ·         Dividend Yield = 3.81%

    ·         Consistent Increase in Dividend Payment for 38 Years

    ·         10 Years Dividend Growth Rate = 9%

    ·         Dividend Payout Ratio = 43%

    ·         International Sales = 60% of Total Sales.

     

    5.      Wal-Mart (WMT):

    Wal-Mart is the largest retailer in the world operating around 2800 centers in US and 4100 centers around the world accounting for 420 billion in 2010 sales. Wal-mart accounts for more than 50% of grocery sales in the US and has leading retail position in some of the fastest growing economies of the world. Key figures for Wal-mart include:

     

    ·         10 Years Sales Growth Rate = 11.5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 12%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 11.80

    ·         Price/ Book Value ( As of 08/09/2011) = 2.6

    ·         Dividend Yield = 2.84%

    ·         Consistent Increase in Dividend Payment for 37 Years

    ·         10 Years Dividend Growth Rate = 18.5%

    ·         Dividend Payout Ratio = 28%

    ·         International Sales = 25% of Total Sales.

     

    6.      McDonald’s (MCD): 

    McDonald’s is the largest fast food chain in the world operating more than 32,000 restaurants worldwide in 117 countries. It serves burgers and fries to more than 64 million customers per day. Aggressively expanding in key emerging markets like China & India. Key figures for McDonald’s include:

     

    ·         10 Years Sales Growth Rate = 5.5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 13.8%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 17.90

    ·         Price/ Book Value ( As of 08/09/2011) = 6.1

    ·         Dividend Yield = 2.75%

    ·         Consistent Increase in Dividend Payment for 34 Years

    ·         10 Years Dividend Growth Rate = 25%

    ·         Dividend Payout Ratio = 49%

    ·         International Sales = 66% of Total Sales.

     

    7.      PepsiCo (PEP):

    PepsiCo is a global snacks and beverage powerhouse holding #1 position in savory snacks and #2 position in beverages in more than 200 countries, it operates. 51% of 2010 sales from beverages, rest from the snacks segment. Holds 19 “billion dollar brands”. Aggressively expanding its “good for you/healthy snacks” portfolio.  Key figures for PepsiCo include:

     

    ·         10 Years Sales Growth Rate = 8%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 10%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 15.60

    ·         Price/ Book Value ( As of 08/09/2011) = 4.0

    ·         Dividend Yield = 3.36%

    ·         Consistent Increase in Dividend Payment for 39 Years

    ·         10 Years Dividend Growth Rate = 12.5%

    ·         Dividend Payout Ratio = 52%

    ·         International Sales = 47% of Total Sales.

     

    8.      Kimberly-Clark (KMB):

    Kimberly-Clark is a global “personal hygiene” company that claims to “make products essential for better life”. Its products, mainly paper based, are sold in more than 150 countries where it warrants #1or #2 market share. Aggressively pushing operations and sales in key emerging markets like Russia, China & Latin America. Key figures for Kimberly-Clark include:

     

    ·         10 Years Sales Growth Rate = 3%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 4%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 16.10

    ·         Price/ Book Value ( As of 08/09/2011) = 4.8

    ·         Dividend Yield = 4.11%

    ·         Consistent Increase in Dividend Payment for 39 Years

    ·         10 Years Dividend Growth Rate = 9%

    ·         Dividend Payout Ratio = 56%

    ·         International Sales = 48% of Total Sales.

     

    9.      Intel (INTC):

    Intel is the world’s largest computer chip maker with a virtual monopoly (>80% market share) in this segment. Aggressively pushing its “ATOM” line of processors to gain a foothold in the tablets market. Riding on the strong sales of PC’s in emerging markets and rise of “Cloud Computing”. Key figures for Intel include:

     

    ·         10 Years Sales Growth Rate = 5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 26%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 9.10

    ·         Price/ Book Value ( As of 08/09/2011) = 2.1

    ·         Dividend Yield = 4.22%

    ·         Consistent Increase in Dividend Payment for 8 Years

    ·         8 Years Dividend Growth Rate = 23%

    ·         Dividend Payout Ratio = 30%

    ·         International Sales = 85% of Total Sales.

     

    10.   3M (MMM):

    3M is a diversified scientific conglomerate which has a portfolio of > 55,000 products and operates in > 65 countries. Strong products foothold includes industrial and transport, healthcare, display & graphics & consumer products. Key figures for 3M include:

     

    ·         10 Years Sales Growth Rate = 5%

    ·         10 Years Earnings Per Share (EPS) Growth Rate = 12%

    ·         Price /Earnings Ratio ( As of 08/09/2011) = 13.50

    ·         Price/ Book Value ( As of 08/09/2011) = 3.2

    ·         Dividend Yield = 2.78%

    ·         Consistent Increase in Dividend Payment for 53 Years

    ·         10 Years Dividend Growth Rate = 6%

    ·         Dividend Payout Ratio = 36%

    ·         International Sales = 65% of Total Sales.

     

     

    As mentioned earlier, these iconic American companies’ makes for a sound investments in times “thick & thin” that allows investors to “Sleep well” every night if made a core part of one’s portfolio.  Extreme fear , as evident in the stock market now has hammered the prices of some of these stocks to very attractive valuations, which if held for a long run will reward investors handsomely as well as letting them “ sleep well” when the whole world around them keeps falling over and over.

     

    Disclosure: I am Long ABT, WMT, and INTC

     

     

     

     



     

     

     

     

     

     

     

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