3 Ways to Invest in America
09/09/2015 9:00 am EST
Now is the time to ditch any stocks with heavy international exposure as global economic weakness and a strong dollar will hamper their growth, cautions Marshall Hargrave of Investors Alley.
Investors should replace those stocks with these three All-American stocks that will rise with our burgeoning economy.
China has put a dent in the worldwide financial markets and even babies get thrown out with the bathwater. This includes key US stocks, even those that have no international operations.
Here are three safe stocks that get a high percentage of sales from within the US and have less exposure to foreign sales.
The largest US retailer now trades at its cheapest P/E that we’ve seen all year. What’s interesting about the car dealership market, besides the fact that it is heavily US focused, is that it’s a Warren Buffett favorite.
Buffett bought up the largest privately owned dealership operator, Van Tuyl, last year. And Bill Gates’ foundation owns over 15% of AutoNation (AN). So there’s a lot of smart money in dealerships.
Still, CarMax is the 800-pound gorilla in the used car industry, operating around 150 superstores.
It’s also got some of the industry’s best margins given its focus on the higher margin used car market, as opposed to selling new cars.
Union Pacific (UNP)
The largest railroad operator in the US, with over 32,000 route miles, now trades at 14.5 times earnings. This is one of the cheapest opportunities to buy Union Pacific in the last five years.
This is another Buffett-esque play, as Berkshire Hathaway (BRK-B) purchased Burlington Northern Santa Fe, in 2009.
The economics of the business make it tough for any new competition to arise and the nature of shipping still makes rail one of the most economical modes of transportation around.
Lincoln National (LNC)
The stock now trades at 80% of book value. The company is also generating a 9.2% ROE, besting some of the biggest players in the insurance industry.
Not a sexy business, but offering life insurance and employer-sponsored retirement plans is a steady business.
There are certain things that Lincoln National can—and has done—to help boost returns and margins. This starts with the shift toward more higher-margin asset-based fee revenues.
The company also divested its Lincoln Financial Media last month to focus on the core life and retirement insurance businesses.
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