Introducing My 3 Favorite American Stocks

There have been mountains of articles written about the impending death of the American economy as we know it. Frankly, I'm sick of reading about the "Japanification" of America. One snippet in particular from Time Magazine stood out for me:

Even the economists do not have a name for the present condition, though one has described it as "suspended animation" and "never-never land."

"Never-never land"? I'd be terrified of that unnamed economist's dire prediction ... if it wasn't published in 1992 -- almost 20 years ago!

Deja vu all over again
I've pored through decades-old issues of magazines and newspapers with similar warnings, and I continually come across a common theme:

  1. The United States economy is in uncharted waters.
  2. There's a chance we'll never recover.

Nonsense! Since that Time article was published, the S&P 500 is up 180% and we've witnessed the breakout performance of homegrown companies like Microsoft, skyrocketing 1,100% over the same period.

Today, I'm unveiling my three favorite American companies -- not because investors should blindly buy U.S. stocks -- but because we have an opportunity to profit from strong, iconic American companies today while pundits continue to fret.

Two you've heard of, one perhaps not, but all three are great American companies, and you have the opportunity to profit alongside them.

The patriotic portfolio
First, I'm turning to an old-fashioned, hard-working American industry: steel.

Over the past three years, the steel industry has taken a beating along with the manufacturing and construction industries it supplies. I believe the decline has been overdone. The economy will recover eventually. When it does, the U.S. will use more steel, and the industry will recover as a result.

To that end, we're witnessing a time arbitrage opportunity in steel, and specifically in one stock positioned to profit when the industry recovers. That stock is Nucor (NYSE: NUE  ) . I'm singling it out for one simple reason.

Nucor has a major operating advantage. Its minimills break even at 45% capacity. Compare that to competitor U.S Steel (NYSE: X  ) , whose furnaces require 60% capacity to break even. It's easy to see which company will outperform during an extended industry downturn.

Next, I'm turning to the restaurant industry, notably the most American segment of all: fast food. While that may not as seem as wholesome as the steel industry, this is an industry in which America is a leader, and I see no signs of it slowing.

One company poised to pop in this space is Yum! Brands (NYSE: YUM  ) , the largest restaurant company in the world, and owner of iconic American restaurant brands such as Yum's Kentucky Fried Chicken, Taco Bell, and Pizza Hut. Yum isn't growing its revenue in the United States, but there is one country where it's just raking in the sales: China.

Ten percent of Yum's stores are located in China, and that figure is growing every day. In fact, one new KFC is opened nearly every day in China.

This is remarkable -- even McDonald's (NYSE: MCD  ) has only around 1,200 locations in China versus Yum's 3,600. I like Yum for my investment dollars because it's not purely focused on selling to U.S. citizens, but has been venturing into emerging markets for decades -- most notably with its entrance into China in 1987.

Lastly, I turn to a classic American brand that has been absolutely crushing its Japanese counterpart over the past five years.

Ford (NYSE: F  ) and Toyota (NYSE: TM  ) are both great companies -- in fact, I named Toyota the "AK-47 of the auto industry" in 2007 because of its reliability, cheapness, and availability for the mass markets worldwide. But let's talk about the real winner over the past five and, in my opinion, the next 30 years: Ford.

I recently watched Motley Fool co-founder David Gardner and Million Dollar Portfolio Advisor Ron Gross in a new video interview called Motley Fool Top Picks & Portfolio Perspectives 2011. In it, David laid out three critical points that all potential Ford investors should know:

  1. Ford is about to pass a very important point. It will soon have more cash than debt – one year ahead of schedule. Consider that it's the only U.S. automaker that did not accept a taxpayer-funded bailout and you'll realize the significance of that.
  2. Ford is brilliantly managed. CEO Alan Mulally, an engineer by trade, worked his way up at Boeing and moved to Ford as CEO in 2006, just in time to prepare the company for the impending recession. He has since returned the company to profitability in one of the worst years for the auto industry since 1982.
  3. David and Ron both personally own Ford. I've profited from David's advice on many great stock recommendations, and I get especially excited when I discover a stock he's buying for his own portfolio. Combine that with the fact that Ron, a successful value-focused hedge fund manager, deems it fit for his portfolio, and I'm sold on Ford as a great American investment.

An essential American brand for your portfolio
Back to Motley Fool Top Picks & Portfolio Perspectives 2011. We've decided to release the video for free to 100% of The Motley Fool audience. David and Ron not only expand on why they like Ford's stock, but also reveal the stock David calls the Essential Core Holding For Your Portfolio. This company has zero debt, $3 billion in cash, and -- like Ford -- has a strong leadership position in its industry. Also like Ford, David owns this stock in his personal portfolio, which caught my attention. In fact, I bought this stock for my portfolio, too.

To receive the name of this stock, get instant access to the Top Picks & Portfolio Perspectives video for free, and find out about Ron's market-beating Million Dollar Portfolio, simply enter your email address in the box below.

Jeremy Phillips owns no shares of the companies mentioned in this article. Ford and Nucor are Motley Fool Stock Advisor selections. Microsoft is a Motley Fool Inside Value selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Microsoft, Nucor, and Yum! Brands. 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 Motley Fool has a disclosure policy.


Read/Post Comments (14) | Recommend This Article (83)

Comments from our Foolish Readers

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 November 11, 2010, at 5:18 PM, polenium wrote:

    Ford builds junky cars.

  • Report this Comment On November 11, 2010, at 5:35 PM, Bonefish100 wrote:

    2 years from now, Ford will be the Toyota of America. I've owned Fords and they were great. Just wish I would have purchased Ford one year ago.

  • Report this Comment On November 11, 2010, at 5:37 PM, BioBat wrote:

    Ford USED to build junky cars. The quality of their lineup in the past 5 years has shot up considerably and is now on par with any other automarker.

  • Report this Comment On November 11, 2010, at 5:39 PM, tjwrunhiker wrote:

    my dad and brother both retired from GM. i worked for GM for years. i always loved GM cars and hated Ford and Chrysler cars. today, i love Ford cars. they are among the best looking cars, best fuel efficient cars, and reliable cars. that's happened in a relatively short time. i agree with Jeremy, buy Ford!

  • Report this Comment On November 11, 2010, at 9:50 PM, baldheadeddork wrote:

    If you had $10K to invest in Ford today, regardless if you have it now or not, would you go long or short it?

    I've been a Ford evangelist since the share price was doing the limbo with a $2 bill, and I convinced my wife when it was at $5.50. I still think the stock is very likely to hit $24 by this time next year, and $30 in 2012 is not out of the question. If you bought in last year, the likely return of a dividend in the next couple of years is going to give you the yield of a lifetime.

    But none of that matters very much to the question I asked. Ford is up 66% YTD - and two-thirds of that is in the last sixty days. Their third quarter numbers were good, but not that good. I think there's going to be a lot of profit taking in the near future and a pull back to the 13 range.

  • Report this Comment On November 11, 2010, at 10:48 PM, cadunce wrote:

    Ford has benefited from some shrewd financial moves, and the demise of Chrysler, GM, and Toyota, but the fact remains that they still make crappy cars, and they still haven't embraced the latest technologies. It's just a matter of time before Toyota recovers and eats their lunch... again.

  • Report this Comment On November 12, 2010, at 5:35 AM, cupocoffee wrote:

    To cadunce - "It's just a matter of time before Toyota recovers and eats their lunch...again"-

    I sure hope you are wrong!

  • Report this Comment On November 12, 2010, at 6:55 AM, P90X wrote:

    Ford builds a great product we have Ford trucks with over 200,000.00 miles. Toyota could not handle the work load these trucks do. I also did research on Alan Mulally, another reason I invested in Ford.

    Ford is here to stay.

  • Report this Comment On November 12, 2010, at 10:24 PM, gilga wrote:

    Ford has a significant disadvantage. It must deal with the unions. (UAW)

    That is probably the largest factor in its previous problems and the problems of GM. It has a significant disadvantage in competition with companies that are not hamstrung by unions.

    Also if profits ever become large, the unions will want to stand in front of stock holders in the distribution of those profits.

    It would be much better for all if benefits were separated from the workplace and workers were simply paid a salary sufficient for them to buy the benefits they choose.

  • Report this Comment On November 13, 2010, at 3:12 AM, glenrgraham wrote:

    It's like a Vulcan mind blending thing. I was thinking about the same 3 stocks you are thinking about --- weird stuff. I like YUM foods and it's gone up since I bought it. I like what the future holds for Ford stock - it looks good. NUE - Nucors mini-mills are very profitable. It's all good! I was thinking since the Fed's are buying up 600 billion in bonds that there is going to be inflation in the next 6-8 months and that now would be a good time to buy hard assets - stocks which are inflation proof or somewhat. NUE looks good, but what else? Oil, steel, gold, silver, others? What's best?

  • Report this Comment On November 13, 2010, at 11:50 AM, Gorm wrote:

    Like it or not America is in a world of crap!! Consider only one dimension, ie DEBT.

    Discounting any attempt to repay it, we CANNOT EVEN AFFORD the interest. Per CBO and GAO forecasts of budget deficits and debt service, the latter will rise from current 9.6% of budget to 19.3% in 2020 - assuming deficits come in as projected and interest rates don't escalate much. (When did the government ever underestimate costs?)

    So, given the likeliness for decreased revenues, increased expenses (entitlements, etc) tell me debt service will not materially limit our options, our flexibility, decrease our standard of living.

    Gorm

  • Report this Comment On November 15, 2010, at 10:50 AM, HOGridin wrote:

    The last five Fords we've owned have all gone 150,000 low cost miles. Three still in service, 94, 97 Taurus' & '98 Windstar - all serving kids in college. They just go & go & go. Had to put batteries in two - 8 yr old OEM batteries gave out. Crap I guess, according to some here.

    You can blame unions, or made in America, but you are naive if you believe these are hindering factors long term. Ford has a history of pay for performance; when profits roll in, bonuses go to all, unions too, when profits are thin, unions get no entitlement bonus. This company, and Alan Mullaly, have earned respect that has been lavished on Japanese for too long. Wake up and smell the re-calls. A company is only as good as its current management team.

  • Report this Comment On November 16, 2010, at 5:16 PM, Shepp67 wrote:

    Ford is a turnaround story in the making. I bought last year @ >10.00 and am loving the ride so far. I also own an F250 and love it (2004).

    Ford at this point in time (and for the past year or so) is a perfect Peter Lynch turnaround stock, IMO.

    Long on F, long on USA!

  • Report this Comment On November 22, 2010, at 4:51 AM, tomtrow44 wrote:

    My Ford Focus wagon is approaching 150000 miles and it still gets 31 mpg. The only thing I wish I had done is get cruise control on it. I buy F but will not buy GM until it is on a par with F and drops to it's true value.

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