We started this review with 25 stocks of companies noted for their quality of management and how successful they have been at nurturing new leaders as presented in Fortune magazine. After running them through a serious screening process using universally agreed upon key metrics, the list has been reduced to six candidates for potential investment.I will reiterate that there is no imperative to invest in any of them even if they might be among the best opportunities from a select list. While I think all of the original companies listed and stocks screened are well regarded that does not mean now is the right time to invest.
Regardless of the outcome of this process, and since price and timing are critical, it would be smart to create a stock watch-list with the inclusion of all six of these companies.
The following list places a priority on dividend yield. GE and Deere pay a little more than average, but not by enough that I would hesitate to invest in the others. This is not a deal breaker, but it is clear, as it has from most other reference points that GE stands out as a potential investment.
1. General Electric Company (GE) Yield 2.51%
2. Deere & Company (DE) Yield 2.14%
3. American Express Company (AXP) Yield 1.76%
4. International Business Machines Corp. (IBM) Yield 1.75%
5. TNT Post (TNTTY) Yield 0.86
6. FedEx Corporation (FDX) Yield 0.53%
Debt is a problem for many companies these days and access to capital (liquidity) can be a substantial burden. The next list provides a picture of the companies long term debt to equity and orders them accordingly.
1. FedEx (FDX) 13.91
2.TNT Post (TNTTY) 97.18
3. International Business Machines (IBM) 97.28
4. Deere (DE) 360.92
5. General Electric (GE) 304.68
6. American Express (AXP) 379.04
GE and AXP are carrying a heavy debt load, and as I stated in reviewing the P/CF these companies need greater liquidity to service the debt. Financial services companies, the largest segment of both GE and AXP, commonly carry higher debt loads. Although GE and AXP were the lowest ranked of the 6 stocks, they were the top 2 in P/CF among the eighteen in the previous review.
The last element of this review will be to look at long term price history as depicted in the company stock charts TNT Post has not been public very long, with a short history during a dismal time period of the last thirty months. Regardless, given its strength of management, top metrics, and its notoriously straight forward financial reporting it is worthy of investment consideration from my perspective, although I would wait for dip in price.
General Electric was already on my radar screen. It is being considered for my 2010 picks list and the chart below from December 1990 to December 2009 indicates that it is trading near 10 year lows.
The twenty year chart for IBM clearly shows a stock that has not been damaged by the recent world economic meltdown. Big Blue is still a blue chip stock. I think it is a safe bet going forward, however, I will leave it behind because I do not want to speculate on its growth and it does not look like a bargain today.
Federal Express is being considered as pick for 2010. It will likely just come down to price at the end of the month relative to the other contenders on the list.
Deere & Company seems like a value right now. I do not see it returning to its most recent heights but given everything we have seen in our review it is likely to do well in the coming years. Whether that will be 2010 or 2011 I have no idea, but I think it is probably worth the wait.
American Express has been up and down over the last five years so I am not sure this chart is much help. I think it's prospects are probably positive, but I do not find it compelling. For myself I would be interested at $30, not $40 per share where it is now.
Having run these companies though many screens and admittedly my own subjective views I consider GE, FDX, DE, and TNTTY, to present the most interesting stocks to consider for an investment. To find out more about 2010 picks see; Chasing Value: Ten stocks for 2010 -- Part 5.
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: At time of publication I own shares and options in GE.
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