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Top 10 Stocks for Long-Term Investors

10/06/2011 3:00 pm EST


John Buckingham

Editor, The Prudent Speculator

John Buckingham of The Prudent Speculator shares some of his favorite plays that were hit hard in the downturn, but could pay off nicely on a longer time horizon, in this exclusive interview with

John, do you see anything on the radar for long-term investors that are attractive buys right now?

Well, there are lots of stocks out there that look extremely attractive in my mind. You still want to be selective…there are companies that trade for very low multiples of earnings and have generous dividend yields.

For my money, some of the stocks that have been hit hard because of disappointing second-quarter earnings announcements look attractive. So I’m thinking of names like Cooper Tire (CTB), which is in the replacement tire business, getting close to 4% on its yield, and the stock has really, really been hit hard in the downturn we’ve had.

In this environment, if you miss your earnings expectations, you tend to get destroyed from a stock price perspective. I’m not talking you go down 10%—I’m talking you go down 30% when you announce disappointing earnings. So a Cooper Tire is a name.

Another one is Briggs and Stratton (BGG), which is a maker of lawn mowers and generators and things like that. Another stock that has been hit very hard.

These are small- and mid-cap stocks that offer inexpensive valuations, and in my mind solid, long-term businesses and generous dividend yields for us while we’re waiting for that recovery to come about. Their stock prices have already taken a massive, massive beating.

In addition, there are certainly some blue chip stocks that haven’t had the kind of share price decline, but are attractive. Names like Microsoft (MSFT), names like Intel (INTL), names like Cisco Systems (CSCO). All three of those are big, blue chip tech companies that have generous dividend yields, fantastic balance sheets loaded with cash, and in my mind, inexpensive share prices.

What about the financial sector? It’s been beaten down badly. Do you see anything attractive there or there more room for the downtime?

Well, we are underweight financials in our portfolios, primarily because of all of the mess in Europe, and of course they still have the housing thing to sort out here. But we do see opportunity in some of the names that we consider higher quality.

JPMorgan Chase (JPM) is a stock that we really think very highly of, was obviously able to make acquisitions in the mess in 2008 and 2009. Jamie Dimon is an excellent CEO in our view, and you get close to a 3% dividend yield there.

If you want to be a little more speculative, some of the banks are also attractive. A name like BB&T (BBT), a southeastern regional bank, gets a generous dividend yield. Also able to make acquisitions in the scary times.

Goldman Sachs (GS) would be another name that we think is interesting for long-term investors, especially as it’s been hit very hard here recently.

How about the precious metals? We’ve seen gold soar, but it doesn’t seem like the gold mining stocks have done much.

Well, we do own Yamana Gold (AUY), and Yamana has actually finally had a nice little jump here…you might actually expect them to go up even more. So we’re still holding onto a good chunk of our Yamana.

We also like Freeport McMoRan Copper and Gold (FCX). Again, playing on the global growth story and the emerging markets. Freeport, even though it says copper and gold in its name, the gold part of it is a relatively small component of the total; about 13% of revenues. Copper is the lion share, 75% to 80% of the revenues.

Again, both pay dividends. Freeport’s yield is about close to 5% when you throw in the special dividends that they also pay. So definitely Freeport would be probably my No. 1 pick in the commodity area. We do still like Yamana as well.

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