The Timely Ten: Trust Value, Not the Market

02/10/2011 2:17 pm EST

Focus: MARKETS

Geraldine Weiss

Publisher,

Buying the best stocks on the cheap is more important to long-term success than timing the indexes’ zigs and zags, writes Geraldine Weiss in Investment Quality Trends.

Although I retired in 2002 after 37 years as editor and publisher of I.Q. Trends, I continue to follow the stock market every day. It’s a difficult habit to break. And of course the market is always changing and always interesting.

When my friends ask me what I think of the market, I generally side-step the question. I don’t want to be responsible for anyone losing their investment capital. I do however have some very specific opinions about investing in the stock market that have nothing to do with what the market is “doing” at any particular time.

No one can predict the short-term direction of the stock market; NO ONE. Of course, there are educated guesses. But, that’s exactly what they are ... guesses. Some will be right and some will be wrong. No one should risk his or her hard-earned money on a guess. Still, there is a way of investing in the stock market that will yield positive returns and provide a patient investor with long-term capital growth and a continuous stream of dividend income that will yield security and comfort in his or her retirement years.

Buy Smart, Buy Cheap

The key to success in the stock market is the recognition of value. When you can buy shares of a historically undervalued blue chip stock that has a history of paying and raising its dividend year after year, it makes little difference what the market is “doing.” You are investing for future growth of capital and income.

For undervalued stocks, the downside risk is small. The upside potential is large and dividend growth is likely.

We believe that high-quality stocks purchased at historically low prices and high yields offer the best potential for downside protection and upside appreciation.

The Timely Ten, therefore, is not just another “best of, right now” list. It is our reasoned expectation based on our methodology and experience for what we believe will perform best over the next five years. Do we believe that all 10 will go up simultaneously or immediately? Of course not. Our four decades of research and experience, however, leads us to believe that these stocks, purchased at current undervalued levels, are well positioned for both growth of capital and income.

The Timely Ten consists of undervalued stocks that generally have a S&P Dividend & Earnings Quality rating of A- or better, a “G” designation for exemplary long-term dividend growth, a price/earnings ratio of 15 or less, a payout ratio of 50% or less (75% for utilities), debt of 50% or less (75% for utilities), and technical characteristics on the daily and weekly charts that suggest the potential for imminent capital appreciation. This issue’s selections are:

The Timely Ten
Rank Prev. Rank Stock Name Ticker Payout Ratio S & P Rank Yield
1 4 Coca-Cola KO 54% A+ 2.8%
2 2 Procter & Gamble PG 52% A+ 3.0%
3 1 Johnson & Johnson JNJ 44% A+ 3.6%
4 3 PepsiCo PEP 48% A+ 3.0%
5 6 United Technologies UTX 36% A+ 2.1%
6 - McDonald's MCD 53% A 3.3%
7 7 Altria Group MO 81% A 6.4%
8 - Philip Morris Int'l. PM 68% NR 4.5%
9 8 AT&T T 53% B+ 6.3%
10 5 Abbott Labs ABT 59% A 3.9%

[Josh Peters recommended one of the names on the list above last month, and another one back in December—Editor.]

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