2009 Top 40 Best Stocks to Retire On: Part 1


Continuing on by popular demand, this is part 1 of a 4 part series looking at each of the companies selected and listed by Fortune in their 2009 Fortune 40: The Best Stocks to Retire On list. View the original list on Fortune.

Part 1 | Part 2 | Part 3 | Part 4

The new 2009 Fortune’s Best Stocks to Retire On is not a complete makeover from last years pick of 40 stocks but there has been quite a number of changes. Enough to keep things interesting.

You can also refer to my commentary on the 2008 best stocks list to catch up.

Excerpts from the Fortune Article

Snippet on how the 2008 list performed.

The Fortune 40 delivered a 20.3% loss for the 12 months ended June 1… The S&P lost 30.1% during the same period… [our]record since inception in 2002: The Fortune 40 has averaged 10% annualized returns, nearly doubling the S&P’s 5.1%.

Best performers from 2008 selected companies.

Our star stocks last year included smokeless-tobacco company UST (acquired by Altria), which returned 25.9%. Then there was National Presto, which manages to sell both ammunition and diapers, among other disparate products. It’s an unlikely combination, to say the least, but one that is apparently impervious to the economy. Investors rewarded National Presto with a 17.6% gain last year.

Worst performers from the stock list.

Our worst decliners were two small-cap recommendations pummeled by the collapse of energy prices. Offshore construction and engineering concern Global Industries plummeted 55%, and natural-gas driller Grey Wolf sank 57% before being bought in December. (Quite a contrast to how my small-cap picks have performed)

Growth and Income Selection

The first 10 companies that make up the list is part of the growth and income section of the portfolio. As the Fortune portfolio is a bag of companies fit for retirement, Fortune has categorized their portfolio positions according to each of the four strategies.

The growth and income companies are blue chip companies based on Jeremy Siegel’s book The Future for Investors.

Siegel’s stock-picking philosophy emphasizes established companies with proven products, consistent returns, healthy long-term earnings growth, and high dividends. Perhaps they aren’t the glitziest names, but “boring” can be another word for “sturdy,” and that’s appealing these days.

CL,USB and ITW were dropped this time around and replaced with MCD, FPL and WMI.

40 Best Retirement Stocks: No.1-10

  1. Abbott Laboratories (ABT)
  2. Coca-Cola Co (KO)
  3. General Mills Inc (GIS)
  4. Johnson & Johnson (JNJ)
  5. Procter & Gamble Co (PG)
  6. Waste Management Inc (WMI)
  7. McDonald’s Corp (MCD)
  8. FPL Group (FPL)
  9. Accenture Ltd (ACN)
  10. Chubb Corp (CB)

Once again, I’ll be passing on Chubb as I don’t have a good understanding of insurance companies and their financials.

This time around, the price discrepencies are quite small but the solid picks are JNJ, PG and the new addition, MCD. With most of the companies, it has been less than 2 months since I put up the 2008 Fortune Best Retirement Stock list and blue chips won’t change within 2 months, so the commentary is the same.

Johnson & Johnson (JNJ)

Johnson & Johnson stock analysis and report

Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics.

  • Current Price: $56.60
  • Discounted Cash Flow Fair Value: $70.16
  • Ben Graham Formula Value: $98.37
  • Comments: increase in debt-equity, good margins, good FCF

Procter & Gamble (PG)

The Procter & Gamble Company is focused on providing branded consumer goods. The Company’s products are sold in over 180 countries around the world primarily through mass merchandisers, grocery stores, membership club stores, drug stores and in high-frequency stores, the neighborhood stores, which serve consumers in developing markets

  • Current Price: $51.75
  • Discounted Cash Flow Fair Value: $68.75
  • Ben Graham Formula Value: $102.49
  • Comments: good FCF, steady margins, super CROIC, decrease debt, outstanding

McDonald’s Corp (MCD)

McDonald’s Corporation franchises and operates McDonald’s restaurants in the food service industry. These restaurants serve a varied, limited, value-priced menu in more than 100 countries globally. The restaurants are operated either by the Company or by franchisees, including franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements.

  • Current Price: $57
  • Discounted Cash Flow Fair Value: $68.75
  • Ben Graham Formula Value: $105.43
  • Comments: Generates cash, earnings with consistent and high returns. Market leader, still growing consistently.

2009 Fortune 40 Best Stocks to Retire on Part1

Disclosure

No positions of any stocks mentioned at time of writing

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