"I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."
-- Warren Buffett
History seems to show that good investing doesn't necessarily mean picking out complex situations and basing your investment thesis on Nobel-level math. In fact, as the recent financial crisis has shown us -- not to mention Long Term Capital Management and many other examples -- too much complexity can often end in calamity.
In an effort to track down companies that may fall into that "fish in a barrel" category, I've turned to The Motley Fool's CAPS community. Using CAPS' stock screener, I looked for companies that have a price-to-earnings ratio below 15, a long-term debt-to-equity ratio below 50%, a return on equity above 10%, and a high rating from the CAPS community.
|
Company |
CAPS Rating
|
Price-to-Earnings Ratio |
Return on Equity |
Long-Term
|
|---|---|---|---|---|
|
Aflac |
**** |
14.1 |
18.6% |
9% |
|
CVS Caremark |
**** |
12.7 |
10.1% |
25% |
|
Alcon |
**** |
15.0 |
43.6% |
1% |
Source: CAPS.
These are just three of the results that the CAPS screener spit out; you can run the same screen yourself to see the rest of the companies that made the cut. While the three companies above aren't meant to be formal recommendations, they are a good starting point for further research. And on that note, let's take a closer look at these companies.
Aflac
It seems nobody is able to avoid the impact of the financial crisis, not even the Aflac duck. Not only is it tougher to sell supplemental insurance to folks who are trying to cut expenses, but Aflac's investment portfolio has taken some hefty hits. It isn't alone. Major insurers from Berkshire Hathaway
However, for the first nine months of 2009, Aflac's bottom line has been moving in the right direction, and the company expects that full-year earnings per share will be up 13% to 15% over 2008. And if Wall Street analysts are to be believed, the company should see continued growth in the year ahead.
There seem to be a lot of reasons to see Aflac as a quacktastic investment when you factor in a solid balance sheet, heavy exposure to the rapidly aging population in Japan, and a nice dividend payment.
CVS Caremark
I'm not convinced that the world economy is coming out of the dark woods it's been in over the past couple of years. For that reason, I think it's still prudent to be eyeing companies that provide essentials.
And what could be more essential than prescription drugs? CVS Caremark operates in two segments -- pharmacy services and retail pharmacy. The first helps design and administer prescription drug programs that get the right medicines to patients while also controlling drug costs. The other, which is well-known to most people, plops retail pharmacies on street corners all over the country.
Though the company faces tough competition from the likes of Medco Health Solutions
Alcon
As someone who just underwent laser eye surgery, I can attest to the strong desire to have the very best equipment tinkering with your peepers. And what did my surgeon -- who has done more than 28,000 of these procedures -- swear is the best machine on the market? None other than Alcon's Allegretto laser.
Sure, this is only one anecdotal report, but almost anyone who has had eye issues has likely run into Alcon's products. The company covers a huge breadth of the market from surgical lasers, to glaucoma treatment, to contact lens disinfecting solution.
On CAPS, more than 350 members have given Alcon's stock a thumbs-up. Way back in late 2006, CAPS member overley gave Alcon a resounding endorsement:
As an eye doc, this is my favorite eye care company. It has been a leader in opthalmic drug, eg, vigamox, patanol, nevanac, contact lens solution, and surgical devices. This is a best of breed.
Getting down to business
Now the CAPS community wants you. Do you think these stocks make sense? Or is the community off base in its faith? Head over to CAPS and join the 145,000 members already sharing their thoughts on thousands of stocks.
Got an itchy trigger finger on the sell button? Joe Magyer explains how selling a stock that makes sense can cost you a fortune.
