"My pal Warren" placed a large bet on PetroChina (PTR), which he has since sold off, but he always makes a big deal about management, so we will give these two the benefit of the doubt. The two also pay the highest yields among the group.
So where do we stand today? We'll stick with all seven and here is why.
Each of these seven stocks will survive what ever the world throws at them, including Greek tragedies, an oil filled Gulf of Mexico, North Korean aggression, and a collapsing Euro. In this group you have the largest oil companies, software company, retail outlet, cellular phone company and consumer products companies.
Each of the seven stocks has its merits but the final order is based on one thing; one final, all-important screen. That is how have they held up against the the market in the last 30 days as all of the current traumas have unfolded. The following 30-day charts compare each to the DJIA, NASDAQ and S&P 500. Four were ahead after one month, one was tied and two underperformed -- the two largest.
From best to worst based on the charts:
- Procter & Gamble (PG) Down 4%
- Walmart (WMT) Down 6%
- Johnson & Johnson (JNJ) Down 6.3%
- China Mobile (CHL) Down 7.4% (followed by the DJIA Down 10%)
- PetroChina (PTR) Down 11% (followed by the NASDAQ Down 11% & S&P Down 12.2%)
- Exxon Mobil (XOM) Down 13%
- Microsoft (MSFT) Down 15.5%
Procter and Gamble is being held up better than the rest by nervous investors. It is paying a 3.08% yield but also had the worst price-to-cash-flow of the group at 13.18. However, since the market average is 10, some premium is probably in order.
Wal-Mart is another safe bet. The largest discount store in the world is very closely attuned to the market and the stock sells at a discount to the market with a 14.45% P/E and 1.19% PEG. It also shines with an ROE over 20%.
It can't be a surprise to any investor to find Johnson and Johnson on this list near the top with a pristine balance sheet and first class management focused on shareholder value distributing dividends with a market beating 3.38% yield. The company is also one of the premier allocators of shareholder capital with a 26.31% ROE and 20.90% ROIC.
China Mobile was the strongest overall stock by the numbers, paying the highest dividend yield at 3.82%, having the lowest P/E in the group of 11.05%, selling at a very low P/CF of 6.47 and still able to use capital wisely with a 24.28% ROE and 22.83% ROIC.
PetroChina did not beat the market but it did track the indices nicely given that oil has been falling for three weeks. It was the best stock value with a P/B of 1.62 and a P/CF of 6.28 -- first in both metrics. It matched JNJ's yield distributing 3.38%. Its downfall was being last in ROE and ROIC. Both were healthy double digit returns but not half of the top stocks.
Exxon Mobile, capitalized at over $300 billion, is the largest company on the US exchanges. It fell in the middle of the pack in most of stock screens with one exception. It has a very very low price-to-earnings-to-growth of 0.65 -- that's cheap!
Microsoft may be last in recent stock performance but I would not say it was least by a long shot. Having extremely high cash-flow, low debt with $25 billion in cash makes it close to bullet proof and worthy of it's triple-A rating. Microsoft bounced around through our screening process. It pays a dividend but it is below average. It's P/B was also bad resting at the bottom of the group at 5.61. On the other hand, it has an out of this world ROE of 44.02% and ROE of 35.71%. These are monster returns. Criticize Steve Balmer all you want -- he is still delivering.
These seven stocks individually and as a group are worthy of investor consideration. They will keep you afloat no matter how rough the seas get (or filled with oil). If you want to stay in the market these are a safe place to hide. If you are cherry picking the group or want better future prospects -- and are a contrarian like me -- you would buy them in reverse order.
For those that would like to review this series from the beginning here are the links:
- Serious Money: Buying the Super Caps
- Serious Money: Buying the Super Caps, Part 2
- Serious Money: Buying the Super Caps, Part 3
- Serious Money: Buying the Super Caps, Part 4 -- the Dividend
- Serious Money: Buying the Super Caps, Part 5 -- ROE, ROIC
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 the time of this post he owned shares of JNJ, PTR, and options in MSFT.