Watchlist: 2 Great Stocks Trading At An Even Better Price
Before I get to the meat of today’s article, I just want to say that I hope all of you are well. Nothing is more important than your health and safety.
We’re all in this together. So listen to your local authorities and health experts, and we’ll all get through this sooner rather than later.
Now, with that said, there are a lot of moving pieces on the board in the market right now. As I write this, it looks like we’ll get a fiscal stimulus package very soon. (The price tag, by the way, is $2 trillion.)
And while that will certainly come as a relief to many Americans, history shows that this may not in fact mark the bottom. Time will tell.
In the meantime, as I’ve said before, right now is the ideal time to make a shopping list for stocks. (My colleague Nathan Slaughter has been stressing this, too.)
As readers of my Top Stock Advisor premium service know, our goal is to buy wonderful companies at reasonable prices. And this unique time in our history is offering plenty of chances for us to do just that.
Remember, I’ve said it before and I’ll say it again: I don’t know when we’ll bottom. But if we follow this simple long-term strategy, that’s okay. We don’t need to know…
So while we’re all sitting at home, spending time with family, cooking, cleaning, and doing whatever else we can to stay busy and take our mind off of this, you might as well make the time to do some homework on quality stocks you want to own coming out of all this.
To help you in this effort, I will briefly address two of the opportunities I see right now…
2 Of My Favorite Long-term Holdings
One of my favorite stocks is CME Group (Nasdaq: CME). As a refresher, CME is the world’s largest derivatives marketplace. It provides a market for buyers and sellers to get together to buy and sell futures contracts. Offerings include interest rates, commodities, energy, metals, currencies, and agricultural products.
CME generates sales by taking a small cut to facilitate these transactions. And it’s extremely profitable. Last year the company pulled in nearly $4.9 billion in sales, a 10.7% increase over the previous year. It had more than $3 billion in operating profit, giving it an operating profit margin of 63%.
More impressively is the fact that it generated more than $2.6 billion in operating cash flow, which gives it a cash operating profit margin of 54.8%. That’s impressive. Remember, anything over 20% is great.
I don’t know about you, but when I find a company that takes nearly 55 cents of every dollar as cash flow, I consider it a wonderful business. Unless trading stops altogether, CME will continue churning out sales and profits. In fact, during times of volatility, trading usually increases, which means CME makes even more money.
In the last two weeks, shares of CME fell over 35%, which provides investors with an opportunity to buy this cash-generating business (or add to a current position).
Another wonderful company that’s now trading at an incredible price is American Express (NYSE: AXP). The credit card powerhouse grew sales 8.6% last year, bringing in more than $47 billion. Cash flow jumped nearly 53% over the previous year to $13.6 billion, giving it a cash operating profit margin of 29%.
Amazingly, shares are only trading for 10.8 times earnings as I write this, which is well below its historical five-year average of 17.1. Its EV/EBITDA multiple sits at just 7.3, which is also below its historical average.
This is a wonderful company. In the chart below, you can see that investors completely threw this iconic company in the garbage bin (from $135 to $70) before rebounding recently. And even though shares have tanked, we are still crushing the S&P 500 since we added the stock to our portfolio in September 2016 (up 40% compared to the broader market’s 16%).
Action To Take
Remember, the market is in a delicate place right now. I am not giving an “all clear” signal, telling you to put everything you have into stocks. Quite the opposite, in fact. This is a time to make a smart plan and make sure you have plenty of dry powder on hand. What looks like a good deal now may not necessarily be a good deal in a couple weeks. But the really good deals will still be there.
Here’s another opportunity you should look into while you’re making that shopping list…
For the past few days, I’ve been telling my readers about a little-known satellite company that just made a game-changing acquisition. And buried in the details of the deal was a stunning revelation that could be worth billions…
To get a full briefing and learn how you can profit, check out my report.