Fortune Best Stocks to Retire On: Part 4


This is part 4 (final part) of the Fortune 40 Best Stocks to Retire on.

Part 1 | Part 2 | Part 3 | Part 4

We previously looked at the first 30 companies that made up the list in Fortune’s 40 best stocks to retire on. Here we look at the final 10.

Best Stocks to Retire On: No.31-40.

  1. Plexus Corp (PLXS)
  2. Tessera Technologies Inc (TSRA)
  3. BP (BP)
  4. Diageo (DEO)
  5. Novartis (NVS)
  6. Koninklijke Philips Electronics (PHG)
  7. Sanofi Aventis (SNY)
  8. Total S.A (TOT)
  9. Unilever (UL)
  10. Vodafone Group (VOD)

This last group consists of companies that are not on the popular buy lists but here are some comments on a few of the companies.

Tessera Technologies (TSRA)

If you go through the numbers for Tessera, you will immediately notice its crazy performance.

For the past 5 years it has averaged

  • increased shareholders equity by 35%
  • increased FCF by 52%
  • CROIC of 17%
  • a FCF/Sales of 27% (this means for every dollar of sales, it has converted 27c into FCF.)
  • the other return margins are outstanding as well

This is probably all too well reflected in its share price of $16. By my guess, TSRA has to continue growing its cash at 40% for the current price to make sense. A more realistic growth of 13-14% yields a price of $9.40.

A company worth watching and studying.

TSRA Stock Price Estimates

  • Stock price as of May 18: $16.07
  • Discounted Cash Flow Fair Value: $9.58
  • Graham Value: $24.22

BP (BP)

BP doesn’t seem to be as popular as Exxon (XOM) or Royal Dutch (RDS.A) but BP is also very consistent and throws off huge free cash flow. Their dividend yield is still at 7% and they had a profitable Q1 to get things back on track.

BP Stock Price Estimates

  • Stock price as of May 18: $47.26
  • Discounted Cash Flow Fair Value: $69.64
  • Graham Value: $100

Sanofi Adventis (SNY)

Of the 10 companies listed, SNY seems to be the only one that can be considered cheap.

SNY is a pharmaceutical company engaged in the research, development, manufacture and marketing of healthcare products. The company does business in two activities – pharmaceuticals and human vaccines.

From their numbers I see that their FCF growth is rather low but the cash growth has been consistent for the past 4 years, their tangible shareholder’s equity has been rising very nicely and their CROIC numbers are great.

SNY could be an alternative to PFE for those that understand pharmaceuticals.

SNY Stock Price Estimates

  • Stock price as of May 18: $30.51
  • Discounted Cash Flow Fair Value: $48.76
  • Graham Value: $54.29

Calculate Fair Value with Free Investment Spreadsheets

To calculate the fair value of stocks for yourself, you can download the free DCF investment spreadsheet, Ben Graham investment spreadsheet or get the premium version which includes many more features.

Fortunes 40 Best Stocks for Retirement – Full List

Fortune 40 Best Stocks to Retire on FULL

Disclosure

No positions in any stocks mentioned at time of writing.

  • Seems like TSRA continues to go higher upon winning settlement with Qualcomm.

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