The Best of the Beasts

Only in the midst of the most troubled markets do we find the opportunity to choose from a large number of the best companies in the world at discount prices. Investors can find small, undiscovered companies selling at a discount prices in almost any market. But, the world’s largest companies are rarely on sale in healthy markets. While stock markets all over the world are reeling, we can calmly select blue chip companies that can become the core of our portfolios.

But, with so many companies on sale, how should we choose? How can we scan the globe and pick the best of the beasts?

Motley Fool CAPS is a great tool to screen for prospects. Companies rated as 4- or 5-star stocks by the 110,000-plus members in our CAPS community have vastly outperformed the market. Today we’ll try to find the best of the beasts.

We're going to screen the world’s largest companies for the following criteria:

  • A market cap of more than $10 billion (beasts)
  • Within 10% of yearly low (cheap)
  • A dividend yield of at least 3.5% (they pay you to own them)
  • At least a 10% EPS growth rate (growing)
  • A 20% return on equity (sound fundamental business)

This is what we get:

Company

CAPS Rating

Market Cap

(billions)

% above 12-month low

Current Dividend Yield

EPS Growth Rate (last 3 years)

Return on Equity

DuPont (NYSE: DD  )

*****

39.68

8.95%

3.7%

18.44

27.2

PT Telekomunikasi Indonesia (NYSE: TLK  )

*****

15.21

2.81%

5.5%

29.41

35.5

America Movil SAB de CV (NYSE: AMX  )

*****

58.89

7.58%

4.3%

44.07

39.9

Banco Bilbao Vizcaya Argentaria (NYSE: BBV  )

****

71.32

8.92%

4.5%

27.02

22.6

BT (NYSE: BT  )

****

34.52

7.76%

9.8%

14.63

32.1

Reed Elsevier (NYSE: RUK  )

****

14.36

5.64%

4.9%

61.69

39.8

Source: Motley Fool CAPS as of July 22.

This chart would have included many more companies if the 3.5% dividend criteria were not included. But, I think a strong dividend is crucial in this uncertain environment. Markets could continue to sell off. Collecting dividends is a way to earn a decent return on your original investment while you wait for the markets to bounce back and increase total return in the long run.

These are not recommendations, but rather some facts that can invite further research:

DuPont
Similar to its 4-star rated competitor Dow Chemical (NYSE: DOW  ) , DuPont is a giant in the cyclical chemical business that is currently at the low end of a cycle. This company’s strong international presence and agricultural products helped it to beat earnings estimates and raise expectations in its earnings report this week.

PT Telekomunikasi Indonesia
PT Telekom provides information and telecommunications services in Indonesia, one of the fastest-growing and highly populated areas of the world. The stock has 117 all-star outperform ratings and only one underperform rating.

America Movil SAB de CV
This Mexico-based whale provides fixed and wireless communications in Central and South America. They operate in a growing demographic and are experiencing huge subscriber growth. Already they are the largest cell phone operator in the region.

Banco Bilbao Vizcaya Argentaria
Banco Bilbao is an international banking giant based in Spain. They offer a wide variety of banking services throughout the world. The bank hasn’t exposed itself to the eyeballs in subprime debt like most large American banks and they are aggressively expanding in this environment.

BT
This British telecommunications giant is currently investing in a huge infrastructure build out in fiber-based networks to be completed by 2012. They stopped share buybacks and committed to spending billions over the next several years, and the stock has fallen nearly 42% over the past year. Yet, the company still generates a lot of cash.

Reed Elsevier
This company is a publisher and information provider for the medical, legal, education, and business communities in Europe and North America. They run a sound common sense business that has been around for more than a century.

Our moves during crucial junctures of the market can determine our overall investment success. Shopping wisely in this environment can have a material effect on your long-term wealth accumulation. During a worldwide market sell off in the midst of an unprecedented worldwide economic boom, there is a wider selection of blue chip bargains than perhaps ever before.

For more research on these companies, check out the free CAPS site.

Banco Bilbao Vizcaya Argentaria, PT Telekomunikasi Indonesia, and Dow Chemical are Motley Fool Income Investor recommendations. PT Telekomunikasi Indonesia is a Motley Fool Global Gains pick.

Fool contributor Tom Hutchinson holds shares in Dupont. The Motley Fool has a disclosure policy.


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