PepsiCo (NYSE: PEP )
This
great company could be a good addition to any portfolio. Of course, it
has the whole battle-for-Olympus thing going on with Coca-Cola (NYSE: KO )
for dominance in the fizzy beverage world, but it also has a giant
snack-food arm that has provided significant growth. However, the
company's quality hasn't escaped many investors, and the stock's current
valuation suggests pretty middle-of-the-road returns ahead. For investors playing defense, that could be just fine, but it's not enough to make PepsiCo my next buy.
Home Depot (NYSE: HD )
It's
easy to be a Home Depot hater. Maybe a little too easy. The economy is
sluggish, the housing market is still pretty much in shambles, and chief
competitor Lowe's (NYSE: LOW )
has made up significant ground on it in recent years. However, the
company's CEO Frank Blake has been at the helm for a little more than
four years now, and I think he's moving the company in a good direction.
And with few investors particularly bullish on a home-improvement
retailer during a prolonged housing slump, the stock also has a pretty
attractive valuation. That said, retailing is a tough business, and I'm
not sure I'm sold on the durability of Home Depot's competitive advantage.
Exelon (NYSE: EXC )
There's a lot to like about Exelon, and high on the list is the stock's 5% dividend yield.
The power company also has a very significant amount of nuclear
generation assets. Though nuclear took a hit on the PR front this year
after the disaster in Japan, most reasonable people still consider it a
very viable solution for lower-emission energy generation. But as I
noted in my write-up, I'm not crazy about the offer that the company
made for Constellation Energy, so that knocked the stock down on my list.
Aflac (NYSE: AFL )
It was very tough for me to not
put Aflac in the top spot. I think there's the potential for very
significant returns from the stock going forward. I like the dividend, I
like the management, I like the business, and even without Gilbert Gottfried
(or maybe especially without Gottfried?), I like the duck. Above all, I
like the future potential. There are some big question marks for the
health care systems in both the U.S. and Japan, which could mean more
business for a supplemental insurance provider like Aflac. So why didn't
it get the top spot? Because I liked another stock just a bit more.
ArcelorMittal (NYSE: MT )
How did ArcelorMittal make it all the way to the top of my list? In four simple words: It's ... so ... darn ... cheap. As I noted last month,
its price-to-earnings ratio based on average 10-year earnings -- a
measure that value investor Ben Graham was a fan of -- was a mere 7.3. A
commenter on one of my articles also pointed out that the stock trades
at just a hair above half of the company's reported book value. But it's not just
a "this is really cheap" thesis. This is also a really great company
and a global leader in the steel business. Better still, it was built,
is run, and is 41% owned by Lakshmi Mittal, a fellow who I think is a
very savvy steel man (not to be confused with Iron Man). Finally, I
should also point out that my personal portfolio is light on materials
companies, so ArcelorMittal also got a boost because it would increase
my portfolio's diversification.
