Monday October 01, 2012
by George Putnam, editor The Turnaround Letter
We’ve been hearing for a while that “buy and hold” is dead, but we disagree – at least if you want to make money from your investments.
We went looking for some stocks that could be good long-term holdings. These are solid companies with strong positions in their respective markets. They all pay dividends above 3.0%. And they are generally out of favor with investors, making them look cheap to us.
CA Inc. (CA), formerly CA Technologies, is a major information technology services provider. It survived a maze of legal problems in the early 2000’s, and is now working to stay at the forefront of the IT sector.
CA has a robust product development pipeline, a worldwide presence and strong strategic partnerships. The financials are solid; debt has been reduced by 50% over the last four years and there is an ongoing stock repurchase plan.
General Dynamics (GD) has long been a leading defense contractor supplying a range of products and services ranging from land- and sea-based combat vehicles to information systems and other advanced technologies.
The company is also one of the largest suppliers of corporate jets via its Gulfstream product line. The uncertainty about possible defense department cuts has led to historically low valuations, providing a good entry point for patient investors.
Pfizer (PFE) is the world’s largest drug company. The expiration of patent protection on Lipitor and several other drugs has caused many investors to shy away from the stock.
But Pfizer’s pipeline of potential new drugs is quite robust, with 31 compounds in registration or Phase 3 development.
To sharpen its focus on its core markets, Pfizer is selling several non-core units. Moreover, the company has a strong and growing presence in emerging markets.
Republic Services (RSG) emerged from the 2008 purchase of Allied Waste as one of the largest solid waste disposal/recyclers in North America. It is using smaller acquisitions to enhance its reach, especially in faster growing geographic regions.
The company is transitioning to natural-gas vehicles to reduce future costs. Cascade Investments, Bill Gates’ investment firm, recently upped its holdings to over 21%.
Walgreen (WAG) is the largest U.S. drug retailer and distributor. A contract dispute with prescription manager Express Scripts was resolved in July, but it may take Walgreen a while to regain the customers it lost as a result of the dispute.
The recently announced acquisition of a 45% stake interest in Alliance Boots will greatly expand the Walgreen’s global reach in the long run, but there may be some integration issues in the shorter term. Nonetheless, we view Walgreen as an attractive long-term holding.
Learn more about this financial newsletter at George Putnam's The Turnaround Letter.