- "This is not a rescue plan. It is the longest ransom note in history: Do what we tell you and you may, in time, get your country back," said Fintan O'Toole, a commentator and author who led a weekend protest by labor-union activists in central Dublin against the imminent bailout. He called the average interest rate being demanded "viciously extortionate."
Despite all the government printing presses running overtime, inflation does not appear to be on the horizon. Wages are going nowhere, rents are stagnant, and pricing power is modest except for the very few. The biggest inflationary pressure has come from oil prices over the past decade, and that is still the most likely commodity to wreak havoc going forward if there is inflationary pressure. Though the clouds over the global economy are thick, there still will be rays of sunshine in the stock market.
The global economy is not going to receive much support from Greece or Ireland, and the list of other nations that have very weak economies and will not be able to contribute anything to growth is increasing. Combined with the pressure to reduce debt in the United States and abroad, where will growth come from? This may be the wrong question. It should not be where will growth come from but who will prosper in the situation as it stands?
The first company to come to mind is International Business Machines (IBM). In the past, when the company was a high end hardware company, a dour economy that caused a slow down in spending would have been painful to the bottom line. Today, IBM is among the largest software and services companies in the world, and cover the world it does. IBM has refocused itself on providing the tools and know-how to business and government to increase efficiencies. This is now 50% of its business and the fastest growing segment.
Looking at the numbers: IBM has a P/E ratio of 12.94, is paying a dividend yield of 1.76%, while the PEG ratio is low at 1.02, with a return-on-equity that I have a hard time believing of 74.25% -- check it out. IBM was last trading around the mid $140 level.
Another company that is engaged in a similar enterprise is Accenture PLC Ireland (ACN), sitting right in the eye of the current storm. What seems like the plight of a nation may actually create a significant backlog of work for Accenture as it helps to sort out the mess.
The metrics here are not as glowing as IBM's but they do reflect some similar attributes: ACM has a P/E ratio of 16.46 and is paying a 1.88% yield, with a higher but still good PEG ratio of 1.31 and like IBM a very high return-on-equity of 69.58. The stock has been changing hands lately in the low $40's
In searching for value and growth in a tough economy the two places to look are consumer staples, and, as I have noted above, those companies that can help in a time of crises.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He currently does not own shares and/or options of ACN or IBM.