2009 Top 40 Best Stocks to Retire On: Part 4

Wed, Jul 15, 2009

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This is part 4 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.

Part 1 | Part 2 | Part 3 | Part 4

Small Caps and Foreign Value Stocks

The final 10 companies are comprised of small caps and foreign value stocks which round out the 2009 picks for Fortune’s Best Stocks to Retire on list.

In case you haven’t noticed, I love small caps. I love looking under rocks that people walk by and then turning them over to see what’s underneath without worrying that my hands will get dirty.

There is also the age old comparison that small caps outperform large caps but that’s a boring old observation which I don’t find useful.

Small caps for this stock list were chosen based on the following criteria:

“candidates with positive free cash flow and at least an 8% return on assets, paying special attention to companies with little or no long-term debt.”

Compared to the 2008 best stocks list, the only company that made it through to this year is Tessera Technologies (TSRA).

Also, the consensus is that any long term focused portfolio requires international stocks for diversification.

“With the global economy still struggling but pockets of growth popping up, this year’s foreign portfolio plays both defense and offense. Diageo (DEO), Total (TOT), and Unilever (UL) return and should keep the portfolio stable amid global volatility. Generic-pharmaceuticals maker Teva (TEVA) replaces Big Pharma plays Sanofi and Novartis. Novartis has warned that it faces headwinds in Europe and emerging markets. Sanofi’s blockbuster blood-clot treatment Plavix will soon lose its patent shield, as noted, and at a P/E of 15, Sanofi’s shares are much pricier than those of Bristol-Myers (a P/E of 8), its partner in Plavix.” - Fortune

40 Best Retirement Stocks: No.31-40

Sykes Enterprises (SYKE)
Tessera Technologies (TSRA)
BP (BP)
Diageo (DEO)
Petroleo Brasileiro a.k.a Petrobras (PBR)
Koninklijke Philips (PHG)
Potash (POT)
Teva (TEVA)
TOTAL S.A (TOT)
Unilever (UL)

Tessera Technologies (TSRA)

Tessera Technologies develops and delivers miniaturization solutions that transform wireless, computing and consumer electronic products.

Its micro-electronics solutions enable smaller electronic devices and include semiconductor packaging technologies encompassing interconnect and substrates.

Its imaging and optics solutions provide camera functionality in electronic products and include image sensor packaging, wafer-level optics and wafer-level camera technologies, and image enhancement technologies

Stock price as of July 15: $27.07
Discounted Cash Flow Fair Value: $9.58
Graham Value: $24.22
Comments: In terms of cash flow, it isn’t that great. However, earnings growth has been huge. Not one for the value guys. TSRA went from $16 to $27 from my last post on the company.

Petroleo Brasileiro a.k.a Petrobras (PBR)

Stock price as of July 15: $38.96
Discounted Cash Flow Fair Value: N/A
Graham Value: $80.60
Comments: With cash flow being so irregular it makes it hard to put a figure on. There has also been a huge increase in maintenance capex that needs to be investigated. Could lead to big growth in the near future if the expenditure on capex is smart.

Best 40 Stocks To Retire On Full List

See below for the full list of all 40 stocks, its current price as of July 15 and fair values based on DCF and Benjamin Graham formula.

Want to know how I calculated the fair value estimates? Check out the DCF and Graham valuation spreadsheets.

Fortune 40 Best Stocks to Retire on Full

Disclosure

No positions in any stocks mentioned.

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This post was written by:

Jae Jun - who has written 314 posts on Old School Value.

Value investor following the Old School Graham, Buffett and Fisher school of investing. Follow me on Twitter to receive real time thoughts and updates not available here.

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