Last week, I told you that I thought the recent
rout had presented some real buying opportunities for the type of
blue-chip "forever" stocks StreetAuthority Co-founder Paul Tracy
preaches about to his
readers. During my research, I found 20 such potential long-term
buys. 10 of them were reviewed n a pair of previous columns, which
you can find
. Here's a look at five more, and I'll round out the list later
I've already gone through the first five, and here is round two...
11. Intel (Nasdaq:
2002 sales: $27 Billion
2011 sales (est.): $54 billion
It was a tale two decades for the world's largest chip maker.
rose from (a split-adjusted $1 at the start of the 1990's to $41 at
the end of the decade. A decade later, shares would be languishing
at half of that December, 2000 price. Even if the stock price has
gone nowhere, this business has steadily moved ahead as Intel has
expanded beyond its microprocessor niche into other specialized
chips that handle graphics and other chores.
For several years in the last decade, it looked like Intel was
running faster just to stay in place. Heavy R&D spending caused
free cash flow
to slump from an average of $8 billion in 2003 through 2005, to
less than $4 billion - on average - from 2006 through 2009. Yet
that metric is back again at peak levels, reaching $8 billion in
2010. Goldman Sachs figures it will reach $9 billion this year and
$10 billion in 2012. That should help Intel to keep boosting its
, which currently yields nearly 4%.
12. Jabil Circuit (NYSE:
Fiscal (August) 2002 sales: $4.8 billion
Fiscal 2011 sales: $16.5 billion
Jabil is the world's third largest contract manufacturer, making a
wide range of electronic components, devices and systems for major
tech companies like
Cisco Systems (Nasdaq:
. Excepting the global economic slowdown of 2008 and 2009, sales
have risen at least 15% in every year of the last decade. Equally
important, Jabil has recently been able to generate very impressive
margins in an industry known for very slim margins.
Fiscal 2011 results, which were just released last week, were
extremely impressive. Sales shot up more than 20% from a year
earlier, thanks to a big push to land new customers in fields such
as medical devices and clean energy technology. Jabil is also
offering more advanced manufacturing services, and these moves are
pushing the company onto a path of higher profit margins, which
helps explain why
rose more than 50% in fiscal 2011 to $2.34 a share.
Could a break-out be at hand? Jabil's stock has been on the
decline, from nearly $40 in early 2006 to a recent $19, which
values the stock at just seven times projected fiscal 2012 EPS of
$2.60. Needham's analysts figure they'll move up to $26, or 10
times that fiscal 2012 outlook.
13. Johnson Controls (NYSE:
2002 sales: $20 billion
2011 sales (est.): $40 billion
With exposure to both the automotive and heating/ventilation/air
conditioning industries, this company surely rides the ups and
downs of the global
. Yet the long-term trend has been steadily upward noted by those
above-cited sales figures, and a stock that from $10 in 2000 to
around $40 this spring. If you missed that upward move, you've just
been given a second chance, as this summer's market rout has pushed
the stock right back to $27, giving up roughly half of the
decade-ling upward surge.
Johnson Controls has typically traded for between seven and 20
. Right now, the forward multiple on projected 2012 profits is
around nine. Assuming shares trade up to the mid-point of that
range, or 13 times projected
, and if the fiscal 2012 EPS forecast of $3.16 is to be believed,
then shares should rise back up to $40. That's +50% above current
14. Kohl's (NYSE:
Fiscal (January) 2003 sales: $9 billion
Fiscal 2011 sales : $18.4 billion
While many investors were fixated on big-box retailers such as
over the past decade, Kohl's quietly emerged as the industry's best
operator. Same-store sales have steadily been on the rise over the
last decade, fueling impressive gains in profit margins and the
. Earnings per share hit a record $3.66 in fiscal 2011, are
expected to reach $4.50 in the current
, and exceed $5 in fiscal 2013, thanks to the retailer's spate of
growth initiatives. That's an impressive trajectory at a time when
consumer spending is in such a funk.
Still, Kohl's shares haven't gotten the love they deserve, having
fallen from $75 in 2007 to a recent $48. Connect the EPS forecast
and the current stock price and you see a mismatch. Analysts at
Citigroup think this stock deserves to trade up to 13 times their
projected fiscal 2012 profit forecast, or $68. That's 40% upside
from current levels.
15. Mylan Labs (NYSE:
2002 sales: $1.1 billion
2011 sales (est.): $6.2 billion
This provider of generic drugs has been one of the key
beneficiaries of the ongoing stream of Big Pharma drugs that lose
patent protection. As more drugs have moved off-patent, Mylan's
opportunities have expanded. And as the company doesn't need to
spend a lot on R&D every year, it has become a veritable
: Mylan has generated a collective $900 million in free cash flow
over the last two years.
The road looks bright, thanks to
another wave of major drugs
soon to go off-patent.
That helps explain why analysts think Mylan will boost EPS roughly
15% in 2012 to around $2.30. Shares trade for less than eight times
that figure. That low multiple comes after a recent 30% pull back
to $18, which is right where this stock traded back in 2003.Mylan's
stock will never garner a high P/E ratio, but there's no reason
this stock can't again garner a forward multiple of 11 or 12 times
earnings, implying a move into the upper $20's, roughly 50% above
the current share price.
Risks to Consider:
As is the case with other stocks profiled in this series, this
could be a "dead money" portfolio until the market finally regains
its footing. Johnson Controls and Jabil Circuit likely have the
, and would see a large reduction in forward earnings estimates if
the global economy fell into a prolonged slump. Mylan likely
carries the least earnings risk.
Action to Take -->
These are part of a group of 20 solid companies that possess solid
long-term track records. There's no reason to suspect that these
companies won't flourish in the decades to come as well. The fact
that these shares are well off from the highs, and in some
instances back at levels seen a number of years ago, creates a
solid entry point.
-- David Sterman
Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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