5 Companies that Haven’t Lost a Dime in the Past Decade
We’re more than a decade removed from the dot-com crash, and many investors still recall those days with dread, when the market plunged almost daily, seemingly without end. That same mood pervades Wall Street today, and the fear is once again palpable. But between the dot-com crash and the current swoon, major gains were made by many companies.
#-ad_banner-#In fact, a host of companies in the S&P 500 Index never lost a dime during the past decade and saw their share prices rise steadily higher. StreetAuthority Co-founder Paul Tracy likes to call these stocks — the kind that steadily gains over time through any kind of market — “forever” stocks. And many of these stocks certainly fit the bill.
Thankfully, the recent market pullback has knocked these stocks off their perch, and they have given back a big chunk of the gains picked up in the last decade, creating a potential once in a decade opportunity to buy for the long haul.
[If you haven’t already, I encourage you to take some time and watch a presentation Paul recently put together called “The 10 Best Stocks to Hold Forever.”]
During my research, I’ve found no less than 20 stocks that could fall into this “forever” category. Perhaps it’s time to reload your portfolio with these rock-steady assets while they are stuck in the bargain bin. I’ll begin by detailing the first five stocks in this group. (And stay tuned in the coming days for my follow-up on the next five…)
1. 3M (NYSE: MMM)
2002 sales: $16.3 billion
2011 sales (est.): $30.1 billion
Shares of this diversified blue chip steadily rose from $50 in 2001 to nearly $100 this spring, reflecting the fact that sales nearly doubled and earnings per share (EPS) rose roughly 140% (from $2.50 in 2002 to an estimated $6 this year). Yet since peaking this spring, shares have lost a quarter of their value, down to $74. That’s where shares stood in 2004, even though 3M is far larger today. Trading at just 12 times projected 2011 profits, the forward price-to-earnings (P/E) ratio is right near the low end of the 10-year range.
2. Abbott Labs (NYSE: ABT)
2002 sales: $15.3 billion
2011E sales: $39 billion
This provider of medical devices, hospital supplies and pharmaceuticals has been expanding through the ups and downs of the economy. Sales have steadily grown and per share profits are really soaring now, expected to hit a company record $4.64 this year. Analysts think EPS can hit $5 in 2012. But that’s cold comfort for investors. The stock has mostly been stuck in a $40-$60 range for the last decade, and now trades at $50. With the stock spinning its wheels and EPS rising ever-higher, investors now have a chance to pick up this health care blue chip for a decade-low 10 times forward (2012) earnings.
3. Archer-Daniels Midland (NYSE: ADM)
Fiscal (June) 2003 sales: $30.7 billion
Fiscal 2011 sales: $80.7 billion.
This is a tale of two half-decades. From fiscal 2003 to fiscal 2007, per share profits for this large agricultural concern rose from $0.70 to $3.30. But in the past four years, they’ve been stuck in the $3 range, thank to less-profitable hedging strategies in its food processing programs. This may explain why shares have fallen from $48 in early 2008 to a recent $25. Still, at the current price, you can own this stock for less than eight times projected fiscal (June) 2012 profits. Analysts think the stock is quite a bargain, trading for slightly less than book value: “This has historically represented a bottom for the stock and provided investors with an excellent entry point, in which the stock has produced returns ranging from 20%-130% over the next two years,” note analysts at Citigroup.
4. Cisco Systems (Nasdaq: CSCO)
Fiscal (July) 2003 sales: $18.9 billion
Fiscal 2011 sales: $43 billion
What a wild ride this stock has been on. It peaked at $70 in 2001, slumped to $10 in 2003, rebounded back into the $20s for much of the rest of the decade, and has again fallen back to around $15. The downward-sloping stock chart simply doesn’t jive with the upwardly sloping sales figures noted above. To be sure, per share profit growth has been more elusive, stuck in a $0.87-$1.33 range for the last seven years. [Note: if you look up these figures in Yahoo Finance, you’ll notice a discrepancy between the numbers cited here, which are from Reuters and Cisco’s 10-K.]
Yet looked at another way, $1 a share in annual earnings has really added up for Cisco: the networking giant has generated $60 billion on free cash flow during this time frame, pumping up to form the strongest balance sheet in the S&P 500. Cisco now carries a stunning $45 billion in cash, which is fueling massive stock buybacks. But in a cruel twist of fate, shares of Cisco were finally starting to win more converts on Wall Street and the stock began to move up from its multi-year low just as the mid-summer market rout began. Perhaps when the selling abates, shares will again find support and begin moving higher again. [You can read more of my recent analysis on Cisco here.]
5. Dell (Nasdaq: DELL)
Fiscal (Jan.) 2003 sales: $35.4 billion
Fiscal 2011 sales: $61.4 billion
This is a virtual mirror image of Cisco Systems: Strong sales growth has not fueled a commensurate level of profit growth (EPS of $1.35 in fiscal 2011 is slightly below levels seen five years earlier). But Dell has also been able to generate ample free cash flow from those flat profits, and now has more than $15 billion in cash (around $9 billion when you subtract debt, etc.). This works out to be more than 35% of the company’s entire $25 billion market value. Dell was once a $50 stock (in early 2000), then a $40 stock in 2005, then a $30 stock in 2007, and these days can be had for less than $15. Back out the company’s cash (and associated interest income), and this stock trades for just five times projected profits. [See “These Stocks are Producing Mountains of Cash”]
Risks to Consider: If the market stabilizes but fails to rebound in coming weeks and months, these stocks may languish until the investor mood improves. Earnings estimates cited may come down in coming weeks and months if the U.S. economy slips into recession, although the fallback in share prices seems to reflect just such a possibility, implying that further selling won’t accompany downward revisions.
Action to Take –> These are solid companies with great long-term track records. Not a single one has lost money in the past decade — neither on an annual basis or a quarterly basis. The fact that these shares are well off their highs and in some instances are back at levels seen a number of years ago creates a solid entry point for new investors.