10 blue chips: Growth, value and yield

by Kelley Wright, editor IQ Trends

Our Timely Ten list is not just another “best of, right now” list. It is our reasoned expectation based on our methodology and experience for what we believe will perform best over the next five years.

Do we believe that all 10 will go up simultaneously or immediately? Of course not. Our four-plus decades of research and experience, however, leads us to believe that these stocks, purchased at current undervalued levels, are well positioned for both growth of capital and income.

Whether you are looking to build a portfolio from scratch, are partially invested and looking to add new positions, or fully invested and in need of some affirmation and hand holding, The Timely Ten represents our top ten recommendations as of each issue.

Our primary purpose is to assist investors in growing their capital and income base from which to derive cash for their current and future needs.

To that end we believe that high-quality stocks purchased at historically low-price-to-high-yield offers the best potential for downside protection and upside appreciation.

The Timely Ten consists of undervalued stocks that generally have a S&P Dividend & Earnings Quality rating of A- or better, exemplary long-term dividend growth, and a P/E ratio of 15 or less.

These stocks also sport a payout ratio of 50% or less (75% for Utilities), debt of 50% or less (75% for Utilities), and technical characteristics on the daily and weekly charts that suggests the potential for imminent capital appreciation.

This issue’s selections are:

CVS Caremark (CVS)
McDonald's (MCD)
Johnson & Johnson (JNJ)
Coca-Cola (KO)
Union Pacific (UNP)
Occidental Petroleum (OXY)
Reliance Steel (RS)
Cardinal Health (CAH)
ConocoPhillips (COP)
Archer-Daniels Midland (ADM)

A true economic recovery will come in stages. A deflationary-disinflationary cycle requires time for debt to be retired and the demand for goods and services to come in line with the capacity for production.

The good news for value investors is that the inevitable ebb and flow of investor psychology will provide several opportunities to acquire excellent companies at good value.

The key is to be patient and not to get caught up in periodic bouts of irrational exuberance. Investing is a business and should be treated as such. Remember you are buying part of a company; not betting on a horse or buying a lottery ticket.

Your return is established on the buy, not the sell. Buy right, when good value is presented, and the returns will come.

Learn more about this financial newsletter at Kelley Wright's IQ Trends.

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