5 Christmas Stocks that Lynch Could Love

To celebrate the holidays, we here at the Fool are devoting extra virtual ink to all things consumer-focused in a special section, "The 12 Days of Christmas." Over the coming week, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish from the holiday cheer.

When preparing a holiday feast for family and friends, it's wise to make a shopping list before you head out for supplies. Those same shopping lists can be a key to consumer-staples companies that can form the bedrock of a Foolish portfolio. Legendary investor Peter Lynch took just such an approach when prospecting for stocks. Search for those great products that you use every day, then see whether they can make great stock picks.

Every Fool's list will be different, but here's how it would work at my house. To cook the Christmas turkey, we need Kingsford charcoal for the smoker, and Bud Light Lime for the turkey cannon. That puts Clorox (NYSE: CLX  ) and Anheuser-Busch InBev (NYSE: BUD  ) on the stock list.

A holiday dinner just isn't complete without green bean casserole. Put some cream of mushroom soup in the shopping basket, and put Campbell Soup (NYSE: CPB  ) in the stock stack. Cinnamon, nutmeg, and vanilla extract are on the list for cookies and other awesome treats my wife bakes. Add McCormick (NYSE: MKC  ) to the stock list.

Coffee with dessert is a must. Folgers is on sale, and that's a J.M. Smucker (NYSE: SJM  ) brand. After dinner, the kids will be doing the dishes -- at least in my dreams -- so dish soap goes on the store list, and Procter & Gamble (NYSE: PG  ) or Colgate-Palmolive (NYSE: CL  ) go on the research list. (Soap is just one of the many products these consumer juggernauts make, of course.)

Just because a company has well-known, popular brands doesn't mean it's a good investment. The table below is a first cut for the stocks from my shopping list.

Company

Forward PE

Earnings Growth Rate (3-yr average)

Dividend Yield

Dividend Growth Rate (3-yr average)

Clorox

16.0

9.8%

3.5%

13.9%

Anheuser-Busch InBev

15.2

24.1%

1.0%

N/A

Campbell

13.3

(0.6%)

3.3%

10.3%

McCormick

17.0

16.1%

2.3%

9.4%

Smucker

13.3

43.0%

2.4%

9.5%

Procter & Gamble

14.8

5.3%

3.0%

11.8%

Colgate-Palmolive

16.0

8.6%

2.6%

12.6%

Sources: Yahoo! Finance and Capital IQ, a division of Standard & Poor's.

It's tough to find great bargains on heavily followed stocks like these, and most of the list is fairly valued, but Smucker is a definite standout. Strong earnings and dividend growth history with a reasonable valuation mean that Mr. Market has put the company on the discount aisle. It's worth digging in to a jam jar of news and numbers to see whether Smucker belongs there, or if it's a bargain. You can start following Smucker by adding it to My Watchlist.

What's on your shopping list? Add a comment below to share your opinion and kick in $0.10 for Foolanthropy.

Fool contributor Russ Krull does not own stock in any company mentioned. Clorox, McCormick, and Procter & Gamble are Motley Fool Income Investor recommendations. The Fool owns shares of and has written covered calls on Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy that belongs on every shopping list.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 22, 2010, at 12:26 PM, rd80 wrote:

    Thanks for stopping in and adding to the shopping list.

    Fool on!

    Russ

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