5-Star Stocks Worth a Look

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Despite the fierce rally, high-quality companies at great prices can still be found. Watch a few minutes of CNBC. Read a few blogs. Talk to a few opinionated people. There's no doubt about it: Fear still isn't hard to find. And that's great news for those on the hunt for great investments.  

Using our Motley Fool CAPS ranking system's screening tool, I scanned for a few five-star-rated companies -- the highest our CAPS community offers -- that might aid your bargain-hunting ambitions. Have a look:

Company	Recent Price	TTM Return on Equity	Forward P/E Ratio
Abbott Laboratories (NYSE: ABT)	$52.96	27.5%	12.8
3M (NYSE: MMM)	$77.25	22.8%	15.8
Diageo (NYSE: DEO)	$68.27	48.2%	12.9
UnitedHealth (NYSE: UNH)	$28.63	16.9%	9.3
Western Union (NYSE: WU)	$19.28	728.5%	13.7

Data from Motley Fool CAPS and Yahoo! Finance, as of Nov. 19, 2009.

None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.

A closer look at Diageo
Looking for a few reasons to buy alcohol giant Diageo? I've got five.

1. International exposure
No, international exposure is the wrong way to phrase this company's makeup. It's an international company that happens to have American-listed shares, and happens to do a minority amount of business here as well. Here's how fiscal 2009 revenue broke out:

Segment	Percentage of Revenue
North America	31.4%
Europe	34.8%
Other International	22.8%
Asia Pacific	10.3%

Source: Capital IQ, a division of Standard & Poor's.

Why is this important? Two reasons. One, it gives exposure to areas of the world that are still growing at a good clip, like China. Two, it gives a solid weak-dollar hedge by providing sales in a broad range of international currencies. As CAPS member 3dollarhedgefund writes: "[W]hat makes the company so attractive to us at this price is the ability to use US dollars at their current purchasing power to buy future earnings in a variety of world currencies, which increasingly will derive from consumers in emerging markets."

2. Cheers!
Is alcohol recession-proof? Probably not. Nothing, short of government jobs, really is. Even so, you can quickly separate a consumer from their fancy clothes, high-end cars, vacations, and granite countertops with ease. Try to permanently pry someone away from malted goodness, and you'll struggle. Indeed, throughout the largest consumer retrenchment in decades, sales priced in dollars have actually gone up over the past years, increasing some 26% since 2005.

3. Cash flow flows
With a 3.5% dividend, this isn't the highest yield you'll find. But it sure ain't bad, even if it's a bit lower than what other stable large-cap consumer stocks, like Philip Morris International (NYSE: PM) and Kraft (NYSE: KFT), currently yield. Moreover, the 69% free cash flow payout ratio is moderately conservative, meaning the dividend is not only large, but fairly safe.

4. Incredible brands
Most people don't know the name Diageo. They can be forgiven: The mothership's name isn't what's valuable here. It's the individual names of Diageo's lineup that create lasting value. Smirnoff. Johnnie Walker. Guinness. Baileys. Captain Morgan. Tanqueray. People know and love these brands today, and they'll know and love these brands 10 years from now. It fits squarely into Warren Buffett's advice: "Forget about share of market; I'm talking about share of mind."

5. Our CAPS universe loves it
Of the 2,248 investors rating this company, fully 98% tag it as an outperform. That's about as much confidence as you can ask for from our CAPS investors. One of them is detoyerofworlds, who writes, "Everyone should have a few stocks like this in their portfolio. Market leader, rock-solid balance sheet, secure dividend, and future growth. Good defensive play that should yield decent returns with limited downside."

You take it from here
Have your own take on Diageo? More than 140,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

For related Foolishness:

• Everything Buffett Needs to Know, He Learned Right Here
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