The recent issue of Fortune magazine discusses how the best of the best train, guide and nurture top managers to become the leaders that will propel their corporations successfully forward. They list the top 25 companies, which I have used as the basis of a new review to see how they would fair against common metric screens.
In the past few months, many articles have posited that large-cap stocks should excel in the coming year based on their lagging the market behind smaller, more volatile stocks flying out of the March lows. I do not believe this is universally true. Plenty of large-cap stocks did well, such as Anadarko Petroleum (APC), Apple (AAPL) and Google (GOOG), while many small caps went nowhere. Even among the large caps included in Fortune's "Leadership 25," some have doubled.
Here is the list from Fortune:
1. International Business Machines (IBM)
2. Procter & Gamble (PG)
3. General Mills (GIS)
4. McKinsey (private)
5. ICICI Bank (IBN)
6. McDonald's (MCD)
7. General Electric (GE)
8. Titan Cement (TITCF) (OTC -- limited data)
9. China Mobile Limited (CHL)
10. Hindustan Unilever (This might be considered the P&G of India; however, more appropriately, it is the Unilever ADR (UL) of India by a 52% stake in HUL, which was voted the most respected company in India over the past 25 years in a poll conducted by Business World, one of India's leading business magazines. Since Unilever is the majority stakeholder, and on my watch-list, I will use its metrics for this review.)
11. Natura Cosmeticos (NUACF) (OTC -- limited data)
12. Colgate-Palmolive (CL)
13. TNT Post (TNTTY) (OTC -- the Dutch Postal Service made private and competing with other major international messenger services)
14. Deere & Co. (DE)
15. Whirlpool (WHR)
16. 3M (MMM)
17. Cargil (private)
18. Olam (OLMIY) (Singapore, wholesale food distributor, OTC -- limited data)
19. Eli Lilly (LLY)
20 PepsiCo (PEP)
21. American Express (AXP)
22. Lockheed Martin (LMT)
23. Intel (INTC)
24. Infosys (INFY)
25. FedEx (FDX)
Clearly, a list of just 25 companies does not do justice to the hundreds of top-notch companies in the world. I would have thought Exxon Mobil (XOM), Raytheon (RTN) (which was 25th among North American firms) and JPMorgan Chase (JPM) might have made a good showing. No Johnson & Johnson (JNJ), how could that be? What jumps out at you as a surprising omission?
My first screen examines the price-to-book (P/B) (from 11/27/09) to establish value as most bottom-up investors are likely to do. They are ordered accordingly from lowest to highest.
1. ICICI Bank -- 0.81
2. Whirlpool -- 1.44
3. General Electric -- 1.49
4. FedEx -- 1.56
5. Deere & Co. -- 2.4
6. Procter & Gamble -- 2.59
7. China Mobile Limited -- 2.74
8. Intel -- 2.74
9. American Express -- 2.89
10. TNT Post -- 3.37
11. General Mills -- 3.57
12. Eli Lilly -- 3.83
13. 3M -- 4.23
14. McDonald's -- 4.67
15. Unilever ADR -- 4.78
16. Infosys -- 6.46
17. International Business Machines -- 8.54
18. Lockheed Martin -- 9.45
19. Colgate-Palmolive -- 13.64
20. PepsiCo -- 14.52
If the P/B was a singular point of departure for investing, very few of these great companies would receive consideration. However, I will give all of them a pass until tomorrow when we screen further. There are five foreign companies among them: three from India, one from China, and one from the Netherlands. Five companies get cut here because they are private or I was not satisfied with the available data on these pink sheet stocks: Cargill, McKinsey, Natura Cosmeticos, Olam, and Titan Cement.
Tomorrow, the most commonly referred to metric, price-to-earnings, and the more reliable price-to sales will create the hurdles. Perhaps a few of the survivors might make it onto my 2010 stock pick list.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: Among the stocks mentioned at time of publication, I own shares or options in APC, GE and JNJ.
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Reader Comments (Page 1 of 1)
11-30-2009 @ 9:15PM
Beltway Greg said...
I've been looking at ICICI also but can investors trust the numbers coming out of China and India? I read someplace that non-performing loans in India have jumped 50% in one year. Where were the top ten last year?
11-30-2009 @ 9:34PM
Sheldon L said...
Stay tuned BG.
12-01-2009 @ 2:46AM
Maurice Holt said...
FedEx's Inhumane Treatment!
In May 1998, A FedEx Manager, Tim Cecil denied me time off to attend my Father's funeral in New York. I did not receive a sympathy card from Tim, and no flowers were sent to my Father's funeral. I specifically asked for time off to grieve my Father or to attend the funeral. With emotional pain, I had to grieve my Father, John Henry Holt at work. FedEx says, Tim used "poor judgement" to justify their Discriminatory practices at the Elizabethtown, KY station. This was Deliberate! Tim also denied Jose Deleon time off to attend his StepFather's funeral. Because of my pending lawsuit I was fired on Sept. 25, 2009. I remember Manager, Kevin Hart saying, "Johnnie, I am going to make it short and sweet, you are fired!" This was Wrongful Termination and Retaliation! My work record is 25 years of loyal service, 23 years of Safe Driving and 16 years Perfect Attendance. FedEx is a Cruel, Callous and Defiant company.
This is why FedEx needs an Union!!!
2-06-2010 @ 6:25AM
Susana Lemme said...
I cannot believe it, UNILEVER