Powell's Picks: Blue Chip Values
08/21/2015 10:00 am EST
Rather than worry about short-term market hitters, Jim Powell focuses on high quality, dividend-paying stocks. Here, the editor of Global Changes & Opportunities looks at some favorite opportunities in the banking, healthcare, defense, and industrial sectors.
Steven Halpern: Joining us today is Jim Powell, International Investing Expert and Editor of the excellent Global Changes & Opportunities Report. How are you doing today, Jim?
Jim Powell: Fine Steve and how are you?
Steven Halpern: Very good; thank you for taking the time. With the market in a sharp downdraft, I thought it would be a particularly timely time to discuss your long-term view, rather than get caught up in the short-term noise of Wall Street. You’ve always focused on quality and value by looking at each individual stock, could you expand on that?
Jim Powell: Yes, Steve, with the market so nervous and the Dow down quite a bit in recent days—over nervousness about the global economy, and the Chinese renminbi being devalued, and a possible rate hike from the Fed, and so on—the stock market is not doing very well and companies are doing better than that.
Whenever you have a situation where the company, individual companies are doing better than their stock prices, you can honestly say that the stock is getting cheaper and it is something that investors with a long-term time horizon should be looking at.
Steven Halpern: Now, as you alluded to, much of the concern among investors lately has been the fears of a Fed rate hike, but you suggest that even a quarter point rise would have little impact on the attractiveness of fixed income investments. In your view, do stocks still remain the most attractive long-term investment opportunity?
Jim Powell: Yes, your blue chip dividend stocks that have a long history of paying their investors on a year-to-year basis and oftentimes increasing their dividends for as many years as 20 and 30.
They’re going to have a far more attractive situation than any fixed income investment can offer now and that’s going to be true even if the Fed raises rates by a quarter of a point later this month.
I’m not sure they’ll do it now in any event, with the sharp devaluation of the renminbi and the slowing economy around the world, the Fed may decide not to raise rates.
Even if it does, adding a quarter point to a 2% bond doesn’t bring it anywhere near close to what a good blue chip stock can offer.
Steven Halpern: Let’s look at some individual stocks and you like the outlook for big banks, particularly Wells Fargo (WFC). What’s the attraction here?
Jim Powell: I like Wells Fargo because the real estate market is doing well and that’s always been one of their fortes. The mortgage market is good and Wells Fargo is cashing in on that.
Wells Fargo is also opening new branches around the country and I just think that the company has a good long-term shot at growth.
Steven Halpern: Now, among your blue chip growth stock holdings, you also point to General Electric (GE), noting that the stock stands out. What do you like in this situation?
Jim Powell: I like General Electric because it’s getting rid of its financial services branches and that has been a real drag on the company, not only from the big financial service meltdown in 2008 and in 2009, but hasn’t done all that well since then either.
So I think that with General Electric going back to its manufacturing base and the services that are associated with that on a worldwide basis, I think that General Electric looks very good.
Steven Halpern: Now you’ve also been a long-term fan of the top tier defense contractors, in fact, you recently said that it would be difficult to find a company with more growth potential than Lockheed Martin (LMT). Could you share your thoughts?
Jim Powell: I think Lockheed Martin is the best of the large defense contractors. They just bought Sikorsky helicopters, which fills a hole in their product lineup in the aerospace area.
They’re also doing some good work in cyber security, which is not being talked about very much, but they’re active in that field, and when you take a look at the problems that we have around the world that are very, very significant, I think it’s very fair to say that America is in something of a wartime economy and that’s likely to persist for a very long time.
Lockheed has done very well. I think it’ll continue to do very well and I think it would be a real good choice for long-term investors.
Steven Halpern: Now finally, particularly for more conservative investors, you highlight Johnson & Johnson (JNJ) as a favorite. Could you tell us a little about this outfit?
Jim Powell: Yes, Johnson & Johnson has a very broad product line, as I’m sure our listeners know. They’re in everything from over-the-counter drugs and health aids, to pharmaceuticals, and just a host of other things.
In fact, there’s so much going on at Johnson & Johnson, that they’re now being subjected to a lot of pressure by shareholders to break up, and there’s quite a lot of information that would indicate that if Johnson & Johnson were to spin-off some of its divisions, that they would be worth a great deal more than they are as part of what really amounts to a healthcare conglomerate.
I tend to agree with that. In the past, when we’ve ever seen a large situation where a breakup is economically advantageous, it usually winds up happening, so I think that Johnson & Johnson is likely to have that over the next, oh, maybe two or three years and I’m happy to be a shareholder.
Steven Halpern: Again, our guest is Jim Powell, Editor of Global Changes & Opportunities Report. Thank you so much for your time today.
Jim Powell: You bet.