Saturday, October 4, 2008

recession pricing

With the S&P 500 index now re-visiting levels not seen since 2004, it is no surprise that several great companies with long histories of earnings and dividend growth are getting down to some notable lows. This massive sell off is not being felt the same across all sectors. Not surprisingly consumer staples seem to be holding up very well as recession fears loom. Consumer staples are typically products that people will continue to buy in hard times. Major selling is certainly at hand for companies operating in sectors that are directly affected by the broader economy in general and consumers discretionary spending.

Typically during such a steep, quick sell off like this it is wise to avoid 'catching a falling knife' when attempting to buy stocks at good value. Easier said than done, but one should try to wait until a particular stock stops going down and meets some support partnering with large volume before buying. Here are a few examples which I feel are notable and possibly worth taking a look at now or at some point soon. I am keeping a close eye on the following, and I'll likely make a purchase soon based on a list of stocks which includes these 4. Ideally equity investors should have a time horizon of more than 7 years and ensure they are properly diversified.

3M Company (MMM) - The diversified technology company which has paid a mostly rising dividend since 1977 is trading at levels not seen since July of 2003. Yield = 3.1%

Walgreen Company (WAG) - The U.S. drugstore chain with a stellar history of earnings and dividend growth is trading at levels not seen since February of 2003. Yield = 1.6%

Diageo PLC (DEO) - The maker of branded alcohol who has grown their dividend at a compound annual growth rate of 8% over the past 10 years is changing hands at levels last seen during April of 2006. Yield = 4.8%

General Electric (GE) - The diversified conglomerate with an outstanding record of earnings and dividend growth is trading at levels only seen briefly in February of 2003. Yield = 5.8%

Of course there are several more examples in the stock market today. You might call this the start or the end(?) of recession pricing.... Investors out there: What stocks are getting your attention lately?


Dividend Growth Investor said...

STT is trading at yields not seen in decades. NUE also has been beaten down severely. I have many ideas to buy, not enough ideas where to get the cash for it :-(

MG (moneygardener) said...


Anonymous said...

Lots of good deals out there right now.

GE (as you mentioned)