Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...
Top DRIPs: Exxon and PepsiCo
11/26/2013 9:00 am EST
I have heard many investors argue that there just aren't any good values in this market and that stocks have moved too far, too fast. I have several rebuttals to this statement, argues Chuck Carlson, editor of DRIP Investor.
First, judging a stock's future by its past is like driving a car looking out the rearview mirror. Just because a stock is up 50% or 100% this year, doesn't necessarily imply that it has exhausted all future gains. I have seen many instances when stocks that have gone up 50%, proceed to go up another 50% or more.
I would venture to say that you have stocks in your current portfolio that have risen 200% or more since you owned them. The stocks didn't stop going up after the first 50% move. They continued to move higher over time, as the company's profits continued to grow.
The bottom line is that it is a mistake to assess a stock's potential based on what it has done in the past. Your analysis should be about the future, not the past.
Meanwhile, I continue to find stocks that offer good long-term values. Plenty of stocks still offer good entry points for investors who are looking over the next several years.
Exxon has bounced around for much of the year; admittedly, it is not usually a winning investment strategy to buy laggards, but I feel comfortable doing that with Exxon.
The company has a history of moving against the grain when it comes to the market's trend—holding up well during down markets and lagging a bit in up markets.
I'm willing to ride out the slow periods, knowing that I get paid well—the stock yields nearly 3% and regularly boosts the dividend—while waiting for the stock to rebound.
PepsiCo 's third-quarter profits were better than expected, as the bottom line was driven by gains in the company's snack-food business. The company's beverage business continues to struggle for growth.
PepsiCo stock generally does its best work during market periods when investors are looking for lower-volatility stocks. We are not in that sort of market cycle right now, which means investors should expect PepsiCo to lag in the near term.
However, for long-term investors, down periods represent the best time to pick up shares. PepsiCo, yielding nearly 3%, represents a solid long-term buy.
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