3 Stocks I Want to Buy

Let's start listing the problems in the world today that could weigh on our global economic "recovery":

  • An earthquake, tsunami, and ongoing nuclear issue in Japan.
  • High unemployment in the U.S. and quantitative easing about to come out of the system.
  • A massive potential banking crisis in China.
  • Political instability in the Middle East.
  • Rising oil prices.
  • A European debt crisis that threatens the future of the euro.
  • Austerity in the U.K.
  • A housing bubble in Australia.

This is not an insignificant list. And yet, world stocks are up more than 5% so far this year. That may not sound like a lot, but it comes on the heels of better than 30% gains in 2009 and 10% gains in 2010. All told, it's a tricky time to be a stock picker. There just aren't many obvious buys on the world markets today. To wit, a money manager friend of mine told me recently that he hasn't had a new idea in months.

All is not lost
To be fair, I am seeing some pockets of opportunity in stocks that don't neatly fit into one category or another. Japan's Universal Entertainment (UETMF.PK), for example, was at one point down more than 20% after the earthquake there. That makes sense if you think of the company as a manufacturer of pachinko machines for the Japanese market, but since nearly all of the company's value lies in its near 20% ownership stake in Wynn Resorts (Nasdaq: WYNN  ) -- a casino operator in Las Vegas and Macau -- the decline actually doesn't make much sense at all.

But Universal Entertainment -- like a lot of the ideas I'm seeing -- is a bit quirky and maybe not appropriate for long-term, individual investors. So is there anything else investors should be doing in these uncertain yet expensive times?

What a Fool's to do
The answer, I think, is to start making a list of great businesses that you would like to own and the prices at which you would like to own them. That's called a watchlist, and if you have it, then you will be prepared to profit once the volatility that has to hit the market this year (again, just look at the list above) strikes.

What companies should be on your list? Here are three I added to my own this week.

Looking for a good time to buy
Odds are you know Swatch (OTC BB: SWGAY.PK) is a Swiss watchmaker, but did you know that the company is growing sales rapidly in Greater China thanks to its sales of well-known luxury brands such as Breguet, Glashutte, and Omega as well as licenses to manufacture watches under brands including Tiffany (NYSE: TIF  ) and Timberland (NYSE: TBL  ) ? That's a trend that should continue given growing Chinese wealth and with a steady 20% operating margin, midteens return on equity, and $2.4 billion of net cash, Swatch shareholders will profit handsomely -- at the right price.

But Swatch stock is up more than 30% since this time last year, and this is the first year the company will be without the guidance of founder and visionary entrepreneur Nicolas Hayek, who died in 2010. Hayek's son is now running the company, and though he has been a Swatch executive since 2003, public companies are notorious for struggling with leadership transitions. Couple that fact with the potential for a slowdown in consumer spending in China and Japan, and 2011 could turn out to be a rocky year for Swatch. That makes me hopeful that investors will be able to buy shares in the future closer to my estimated fair value of $15 per ADR.

A smoking opportunity
I already own shares of Philip Morris International (NYSE: PM  ) , but greedily I want to own more. That's because this stalwart consumer staples business is growing rapidly in the world's emerging markets and generated almost $9 billion of free cash flow last year -- cash the company is using to reward shareholders with dividends and share repurchases.

Yet based on my estimates, the stock's current $63 price tag will give buyers market-matching -- rather than market-beating -- returns. That's not sufficient given the political risks associated with cigarette manufacturers, which is why I'm waiting for something closer to $50 before adding to my position.

This one's in the bag
Like Swatch, Coach (NYSE: COH  ) is a luxury brand doing big business in Asia. And like Swatch, the stock looks expensive despite its strong balance sheet (more than $900 million of net cash), sustained return on equity north of 40%, and dedicated founder/owner/executive Lew Frankfort. But shares are sliding following the earthquake in Japan. That's because Coach earns 20% of its sales there and has been a growth driver for the company. Depressed demand for luxury goods as Japan recovers could certainly weigh on Coach's performance.

Yet there is so much potential international expansion for Coach that the chance to buy this stock below $40 would be a steal.

The global view
Swatch, Philip Morris, and Coach are three stocks on my global watchlist, and given the potential for volatility, I'm waiting for lower prices before buying in. Yet if I get the prices I want, I expect all three to be significant long-term winners. Each offers access to a premiere brand that's gaining in popularity in the world's fast-growing emerging markets.

Add these names to your own watch -- or even start your watchlist -- by clicking here.

Get Tim Hanson's top global stock picks by joining Motley Fool Global Gains. Tim's "Global View" column appears every Thursday on Fool.com.

Tim Hanson is co-advisor of Motley Fool Global Gains. He owns shares of Philip Morris International, which is a Global Gains recommendation. Coach and Timberland are Motley Fool Stock Advisor recommendations. The Fool owns shares of Coach, Philip Morris International, and Timberland. 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 Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (40)

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 March 24, 2011, at 12:59 PM, mm5525 wrote:

    With PM at another 52-week high today, if it ever gets anywhere near 50-ish again, back up the truck and buy all of it you can. I don't think that's ever going to happen, though. The US Dollar is going to continue to decline. It has declined in this global turmoil when it used to be the safe haven when global chaos was in play. I can't imagine how much the USD will sell off if we have peace and tranquility throughout the globe. Asia is rapidly growing, and an emerging middle class is emerging in this region. That's where the growth is. PM is dominating in Asia and Latin America, and that's where the growth is.

  • Report this Comment On March 24, 2011, at 1:00 PM, TMFMmbop wrote:

    ^Agree.

    Tim Hanson

  • Report this Comment On March 24, 2011, at 4:38 PM, 5mackDab wrote:

    Just a comment on MO to do with the Chinese growth expected. China is now banning smoking in public, although the workplace is not included in that. I'm sure MO is still due for a huge surge of Chinese/Asian market growth but it may be losing a bit of future growth prospects.

  • Report this Comment On March 24, 2011, at 6:03 PM, NEVERFADE wrote:

    The only thing stopping me from buying Coach is the same thing stopping me from buying NKE and other designer brands popular in Asia. That would be fakes. Nike estimates 20% of the Nike's sold in China are fake. Anyone tuned in knows that a ton of designer handbags bought in the US are fakes. I can only imgaine how bad it is in Asia. This is a major concern to the executives of these companies and should be a major concern to every investor. There are MULTIPLE ways counterfitting hurts these companies.

  • Report this Comment On March 24, 2011, at 7:01 PM, TMFTomGardner wrote:

    BigPlayers, we'd love to see you share your ideas right here in the comments area, along with all Fools. Linking out just ends up looking like opportunism. Great to have you in the conversation. Dive all the way in, Fool!

  • Report this Comment On March 24, 2011, at 7:54 PM, jorgepl wrote:

    I don't want to sound heartless, but as investors we should be watchful for economic trends and opportunities. I get the sense that there should be a huge opportunity for investing in building and infrastructure providers in Japan. The damage is so extensive that the rebuilding effort could well kick-off a frenzy of economic activity there, perhaps even rekindling an economy that has been sleeping for years. Yet I have not seen a single comment about companies in this sector that could be potential winners in the earthquake-tsunami-Fukushima aftermath.

  • Report this Comment On March 24, 2011, at 8:58 PM, dbtheonly wrote:

    Is that the UTEMF on the "other OTC" exchange? It lists an average daily volume of 18 shares!? can that possibly be right? It's at $31. at the moment but talk about thinly traded.

  • Report this Comment On March 25, 2011, at 6:10 AM, marc5477 wrote:

    There is an old adage that goes something like this:

    Buy when people are scared and sell when people are happy.

    I would stay clear of anything China because they are in the happy stages. You say they have growth, I say they are a laugh. Housing bubble and huge class imbalance. Are they improving? yep but they still do underhanded things to foreigners so never invest in socialism unless you want to be wiped out when they get tired of your profit.

    America is still hurting. The markets might be up but builders are still feeling the pain. This is when you should buy companies that make homes ;-) but be prepared for some boring movement over the next 3-4 years while we hammer through our housing glut. In 5 years, you will kick yourself for not buying them today. Id look at companies like KB, Lennar and similar stuff. These are basically easy doubles in 5-7 years.

    I cannot morally support cigarettes (even though I dont really like people)... else I would agree they are a good business. I would also take a long hard look at ocean shippers who still have not recovered from the global recession (just stay away from Drys and their CEO). Lastly, banks! These are still hurting. STD is my personal favorite because of hefty dividends and huge potential growth with great diversity.

  • Report this Comment On March 25, 2011, at 9:02 AM, TMFMmbop wrote:

    Yes, UETMF.PK trades over the counter with low volume. Again, not for everybody. Its main listing is on the Tokyo Stock Exchange (TSE).

    Note that Philip Morris doesn't yet have a big opportunity in China because the entire tobacco industry there is nationalized and they just license the Marlboro brand to China National Tobacco.

    Thanks for all of the great comments.

    Tim

  • Report this Comment On March 26, 2011, at 8:00 PM, dbtheonly wrote:

    TMFMmbop,

    If I count rightly, UETMF has traded all of 950 shares in the US since the first of the year. Not for everybody seems an understatement. But you make an interesting argument & I'm trying to watch.

    So how do I access the TSE figures?

  • Report this Comment On March 29, 2011, at 12:42 AM, TMFBritcodeftw wrote:

    "growing rapidly in the world's emerging markets" - I fully understand at face value that represents a great opportunity as an investor - but only if you have no ethical qualms about a product contributing to perhaps a million deaths in China every year: http://www.chinadaily.com.cn/opinion/2010-11/22/content_1158...

    This is the dark side of investing that I really can't stomach.

  • Report this Comment On March 29, 2011, at 7:55 AM, Tomohawk52 wrote:

    If understanding the underlying business is a prerequisite for investing, then I have to give Coach and Swatch a pass. I just cannot understand how people can blow a grand on a handbag or a watch. I would always have the feeling that they are all going to wake up one day and say "Hey, I'm an idiot for blowing my paycheque on this crap!" and that's the end of their businesses. ;-)

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