General Electric’s collapse should have served as a reminder that buying a company based solel...
US Stocks That Make Tempting Targets
12/20/2010 5:08 pm EST
Rob Carrick, columnist for The Globe and Mail, says a depreciating Canadian dollar means US stocks look attractive.
A Band-Aid for your portfolio? Hardly. Johnson & Johnson (NYSE: JNJ), maker of the famed adhesive bandage, is a blue-chip, dividend-spewing health-care company that has no peer in a Canadian market dominated by bank and commodity stocks. If you’ve ever thought of buying this stock, now’s an ideal time.
For most of the past decade, a rising Canadian dollar has been a strong disincentive to buy US stocks. As our dollar rises, returns from US stocks are eroded. But with the dollar near parity, there’s an opportunity to buy the likes of Johnson & Johnson and benefit from the likelihood that Canada’s dollar will be worth less than the US buck over the long term (over the short term, be prepared for anything).
In last week’s Portfolio Strategy column, we look at exchange-traded funds listed on US markets. This week, we look at individual stocks.
The Standard & Poor's Five Star Portfolio
Standard & Poor's (S&P) is best known for rating bonds, but it also produces research on stocks. S&P is independent in that it does not provide investment banking or advisory services for the companies it rates.
Comments: There are 84 companies in the five-star portfolio, which is made up of stocks that are expected to outperform over a six- to 12-month period. The five-star stocks listed here have all have made less than 6% in the past year, which means they present less risk of being over valued. If you're curious about the best performers on the five-star list, they include Parker-Hannafin Corp. (NYSE: PH), Xerox (NYSE: XRX), and Fastenal Co. (Nasdaq: FAST). S&P says a five-star rating for a stock indicates an expectation that it will outperform the relevant benchmark by a wide margin. Five stars are the equivalent of “strong buy.”
Value Line's Dow Safety Stocks
Founded in 1931, Value Line is an independent provider of stock research.
Comments: As part of its analysis, Value Line assigns a safety ranking that compares the risk in a stock with a coverage universe of 1,700 companies. Safety is ranked on a scale of one to five, with one being the lowest risk. What we have here is a subset of the 30 stocks in the Dow Jones industrial average that have a Value Line safety ranking of one. Note the lack of financial stocks on this list. Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), and Travelers Cos. (NYSE: TRV) are all part of the Dow, but they didn't make the cut because of their risk profile. Value Line is a subscription service, but it makes its research on the Dow stocks available at no cost on its Web site at www.valueline.com.
ScotiaMcLeod's US Core Portfolio
ScotiaMcLeod is the retail investment dealer arm of Bank of Nova Scotia
Comments: Scotia describes this portfolio as being aimed at growth-oriented investors seeking consistent long-term returns from quality US companies. An attempt has been made to diversify across four sectors—interest rate sensitive, consumer, industrial, and commodity. With the exception of Cisco (Nasdaq: CSCO), each company on the list pays a dividend. Investors looking for US stocks in sectors that are under-represented in the Canadian market, your attention is drawn to tech stalwarts Cisco, Intel (Nasdaq: INTC), and Oracle (Nasdaq: ORCL), as well as pharmaceutical distributor McKesson (NYSE: MCK), drug giant Pfizer (NYSE: PFE) and Nike (NYSE: NKE).
The Morningstar Tortoise Portfolio
Chicago-based Morningstar is an independent provider of investment research
Comments: The Tortoise Portfolio has been designed to both outperform the S&P 500 index and to generate positive investment returns no matter what the broader market is doing. Companies in the portfolio are large, have a risk rating of moderate to low and are slow growing. Morningstar says it also looks for companies “with an economic moat, preferably wide.” Note the inclusion here of a Canadian company, TransCanada (NYSE: TRP), and a British firm, Diageo (NYSE: DEO), that are listed on the NYSE.
The Dividend Growth Investor Blog's Top US Dividend Stocks For Retirees
Dividend Growth Investor is a blog devoted to stocks that regularly increase the flow of dividends they pay.
Comments: These companies were chosen on the basis of their competitive business advantages, the sustainability of their dividends, their exposure to a variety of sectors, and their valuations. These stocks also have an impressive record of dividend growth. Medtronic (NYSE: MDT) has raised dividends for 33 years in a row, according to the Dividend Growth Investor. Johnson & Johnson has raised its payout 48 years in a row, McDonald's (NYSE: MCD) has done it 34 years in a row, P&G (NYSE: PG) has done it 54 years in a row, and Coca-Cola (NYSE: KO) for 48 years. You can keep up with the Dividend Growth Investor at www.dividendgrowthinvestor.com.
The Broad Dividend Achievers Index
Developed by a company called Mergent, this index is made up of US companies that have increased their dividends for at least each of the past ten consecutive fiscal years.
Comments: Listed here are the ten heaviest weighted companies in this index, which has been licensed for use in an exchange traded fund called the PowerShares Dividend Achievers Portfolio (NYSEArca: PFM)
Starting to notice some overlap in the names on these lists? The favorable consensus on these stocks suggests they're a good place to begin your research. Want to keep your eye on some US stocks before buying? Then give the new watchlists on Globeinvestor.com a try. You'll find them here: http://tgam.ca/BFbB.
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