Three Stocks on Solid Footing
10/05/2010 12:00 pm EST
Kelley Wright, managing editor of Investment Quality Trends, names three blue-chip companies that are well managed and can withstand the weakest of economies.
MoneyShow.com: So, Kelley, what are you doing now for clients?
Kelley Wright: You know, pretty much across the board in every sector, we’ve got a couple of stocks that are doing pretty well for us. If you look at the consumer discretionary area, we’ve done great with McDonald’s (NYSE: MCD), and they show no sign of slowing down.
Q: Even in this economy where people have pulled back discretionary spending? Why?
A: They just produce. They just execute. It’s a well-run company. They’re in about 160 countries around the globe. They alter their menu a little bit so that it’s culturally appealing wherever they are, but the general principle of how they run their business is pretty much the same, and quarter in/quarter out, they just kind of step up to the plate and jack up another 5%, 6%, 7% [increase in same-store] sales, quarter in/quarter out. They raise the divided every year very consistently. You can almost set your clock by them. At [just below $75 Monday,] with a 3% yield, the stock still offers tremendous value.Another one in the consumer discretionary [area] would be Nike (NYSE: NKE), the good old shoe and apparel manufacturer.
Q: And some pricey shoes.
A: And, you know what? They almost print money. It’s amazing. If you look at them fundamentally, they’ve got about $2.75 of cash for every dollar of short-term debt. They’ve got a return on equity way in the 20% [range]. It doesn’t matter what period—one year, three years, five years—I mean, it’s just a company that produces.
If you’ve got kids or nephews and nieces, grandkids, whatever, and they’re wearing tennis shoes, I guarantee you that they’re Nike. If you look at the professional sport teams, they all got a swoosh. They own college athletics. They’re just a very well-managed company. They market well. They know how to handle their cash, and, you know, in an area that’s kind of counterintuitive during the recession, they’re doing really, really, well. (The stock closed just below $80 Tuesday—Editor.)
Altria Group (NYSE: MO), the old Phillip Morris, [closed Monday just below $24 and has a more than 6%] dividend yield. You may not be wild about what the company does, but they almost print money over there. Return on equity in the [80% range]. It’s a cash cow.
Q: It seems like a common theme here is really good management of these companies.
A: Yes. Managerial competence is really starting to show why it’s important now because, I mean, these are not your typical bread-and-butter times, and managers have to know what they’re doing.
Q: Do you own these for yourself or your clients?
A: Yes. The company owns them. Our clients own them. We’ve got them in our fund.
This interview was conducted at The San Francisco MoneyShow by MoneyShow.com video host Karen Gibbs.