Serious Money: Whittling away at the Dow - MSFT, PFE, PG, UTX, VZ, & WMT: Part 6

Microsoft (NASDAQ: MSFT) is another great company and great stock but does not offer any value at this time. It has no debt at all, a mountain of cash, $40 billion, and is rock solid in just about every way you consider. It has money to burn and just burned some in buying aQuantive for $6 billion. Microsoft has the most cash of any Dow stock, the highest profit margins, the hardest charging Chairman, Steve Balmer, and prospects galore. It also pays a paltry dividend yield of 1.3%. I think MSFT should double or triple its dividend, given its cash and margins. You may want to put it on your watch list but it's up 35% in the last year and I do not see any way to call this stock a value play.

Procter & Gamble (NYSE: PG) like many of the household names in the Dow, PG needs little introduction. This is one heck of a company and one that I easily could save time on by just pointing you to this: Johnson and Johnson (NYSE: JNJ), and leave it at that. Well-managed, diversified, nice yield 2.2% and its largest shareholder is Warren Buffett's, Berkshire Hathaway (NYSE: BRK.A). I usually do not discuss stocks with price-to-sales ratios over 3.0 as a value but in the case of PG perhaps a closer look is 'Warren-ted' (couldn't resist) and might be the exception. The ROE, ROA, ROIC, profit margins and low debt are very good. That makes its higher than average PE of 21.34 seem like there might be reason to pay up...but is it a value stock? I have not been cutting any of the stocks any slack in my review so I tend not to want to here either but I am tempted. I think I will say this, PG is a close call and investors may want to add this stock to their portfolios for the long haul. It is definitely a safe bet and I do not think there is a Wall Street analyst or hedge fund manager anywhere who would say this is not a great defensive stock with a great risk versus reward situation. It will probably expand faster than the DJIA given the expanding global markets and the strength of its brands.

United Technologies (NYSE: UTX) pays a very generous dividend yield of 4.5%. It is one of the smallest Dow stocks capitalized at $8.6 billion, closing Friday at $54.31 70.78 just shy of it's 52-week high of 71.62.. UTX has been written up several times as a possible turnaround stock in my readings over the past six months, however, insiders don't seem to think so and have been mostly selling. I can't think of a lot of good reasons to be consistent sellers if you thought this stock was worth a ride. So if they're selling I'm not buying. If you want a consistent dividend payer for your Roth IRA UTX may be for you. It has been doing so since 1912. Otherwise there are just too many questions for me.

Verizon Communications (NYSE: VZ) is very tempting indeed. Like AT&T (NYSE: T) it has a nice dividend, currently yielding 3.67%. But it has many better metrics than AT&T. It has a lower P/S of 1.42, a much lower P/CF of 5.04. So what's not to like? The ROE, ROA, and ROIC are all meager and less than the P/E of 21.79 which is higher than the Dow average. Like AT&T, Verizon will be competing for business with cable and media, and like AT&T may lose a battle for every one it wins. I think VZ should be on watch lists because a lower P/E and improving margins created by further industry consolidation could change the value landscape, but given the opportunities elsewhere, I just can't place my bet here.

Wal-Mart Stores (NYSE: WMT) is huge at a capitalization over $200 billion and I'm not sure where it goes from here. The bigger problem: I'm not sure Wal-Mart management knows where it goes from here, either. Readers will find it astonishing and shareholders will find it depressing but WMT's shares hold about the same value they did on the April 20, 1999 closing (over 8 years ago) Friday at 49.47, which was the last time it split. Among the various metrics I could quote only the price-to-sales of 0.57 stands out. Otherwise everything looks average or below average. Municipalities nationwide have hampered WMT's expansion, employees have revolted and some have sued for various reasons. Wal-Mart has already decimated so much of its competition that there might not be anyone's lunch left to eat. In the meantime, foreign competition is relentless and Tesco from the United Kingdom is going to be stepping on Wal-Marts toes in North America. Buy the index, not Wal-mart.

Conclusion: Except for Procter & Gamble, there is nothing that I view as a value among these six stocks and even PG does not make the cut in comparison to the previous stocks I am considering. I do like PG along with PFE, VZ and MSFT for investor watch-lists. The Dow is at an all-time high and it may have room to run some more but some caution is in order at these prices. So the Dow 30 has been whittled away to six stocks. See Part 7 tomorrow for the conclusion. The data I used was from the close on June 1, 2007.

Those of you who are new to BloggingStocks can check out my other stories and read Chasing Value or Serious Money to find more potential opportunities and verify my track record as well.