Money Magazine had an interesting feature recently where they identified five blue chip stocks to buy today. Unfortunately, Money does not say what they based there decision on, other than he best way to boost your long-term returns is to buy stocks when prices are cheap. How is that for research?
Anyway, the five stocks they identified are:
3M
Ticker: MMM
Share price: $ 79.59
P/E ratio: 14.24
Its products are diverse, and 3M gets almost two-thirds of its sales internationally. Earnings are projected to grow 10% in 2008 and to average 11% annually over the next five years. And dividends have been rock-solid for half a century (current yield: 2.6%).
DuPont
Ticker: DD
Share price: $ 49.04
P/E ratio: 15.27
Rising earnings forecasts, a hefty 62% of sales from overseas, and a relatively skinny P/E ratio make this stock look like a winner. Sales of agricultural chemicals in developing countries are a particularly bright spot. And the stock’s 3.6% yield means that you get paid handsomely to wait for the market to recover.
General Electric
Ticker: GE
Share price: $ 36.44
P/E ratio: 16.85
Yes, GE has some exposure to banking through its finance division, but the company still boasts a triple-A rating. Most of its businesses are industrial, and jet engines, locomotives and water-treatment plants are all booming. It trades at a discount to the overall market and yields an ample 3.3%.
Hewlett-Packard
Ticker: HPQ
Share price: $ 46.09
P/E ratio: 15.77
The world’s leading maker of personal computers is gaining market share against rivals such as Dell. While tech stocks can be risky in volatile markets like this one, HP’s knockout growth should more than compensate: Earnings are projected to rise 14% annually over the next five years.
Burlington Northern Santa Fe
Ticker: BNI
Share price: $ 93.03
P/E ratio: 18.23
Rising oil prices and greenhouse gases are a bummer for most of us, but not for the nation’s largest railroad. That’s because when it comes to lugging serious freight, rails use much less fuel than trucks do. Earnings are projected to grow 14% annually over the next five years.
I have some issues with this list. First, we are headed into a recession so I don’t think that buying a technology stocks, especially a hardware company, is a smart move. Cutting back on new computers is one of the first moves a company does when it wants to converse cash.
Second is that Money is playing the rising gas prices by focusing a gas alternative mode of transport – railroads. This is ok, but oil prices show no sign of retreating so wouldn’t a more powerful move be to buy an oil company or refiner?
Third, we are`in the middle of a credit crunch, so I don’t understand why GE is on the list as its financial unit is a big driver of its profits.
Overall I thought the Money list was weak. What do you think?
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