FOOL ON THE HILL
15 Stocks to Want

Maintaining a watch list is one effective way to remember compelling companies you may want to own eventually. Here are a few companies from Selena Maranjian's watch list -- ones she'd love to see in her portfolio one day, if purchased at the right price. You may want to add some of these to your own list.

Format for Printing

Format for printing

Request Reprints

Reuse/Reprint

By Selena Maranjian (TMF Selena)
December 13, 2002

I've written before about my watch list of around 100 companies. As the stock market circled the drain this fall, though, I kept reviewing that long list and dreaming of what my ideal portfolio might look like, if it were composed only of ideal holdings instead of what I own now.

Despite recent rises, the market could sink significantly lower over the coming months (who knows?!) before it eventually resumes its historical upward trend, so I'm not necessarily rushing to take action. But when some stocks dip a little lower, I may pick up a few shares. Over time, I hope to transform my portfolio from one that makes me wince to one that makes me smile and sleep more soundly.

Below is a list of 15 companies in which I'm interested in buying initial or additional shares. It offers you not analysis, but a reminder that some impressive companies are out there, some that may be trading at levels attractive to you -- either now or in coming months. They're not all necessarily bargains right now, but keep an eye on them.

Having been burned by many stupid investing mistakes and investments in companies I didn't understand, I'm now eager to hold shares of big, established powerhouses. Note that the list is hardly comprehensive, and possible additions are already flitting through my mind. Feel free to suggest additional companies in our discussion boards (free trial available!).

Berkshire Hathaway (NYSE: BRK.A/BRK.B)
This is Warren Buffett's company. It's so big that it might not be able to grow fast, but it's being run by an investing genius with boatloads of cash to spend in this economic downturn. In addition to being a giant in the insurance world, Berkshire owns major stock positions in many companies and owns dozens of diverse companies outright, such as Geico, Dairy Queen, Executive Jet, See's Candies, and Fruit of the Loom. Learn more from the master, himself, in Buffett's letters to shareholders. (Oh, and here's a terrific book on Buffett, too.) Berkshire's insurance operations were slammed by Sept. 11 events in 2001, and the company earned $800 million on sales of $38 billion. It has since posted much stronger financial results, and Buffett is busy buying additional companies, such as The Pampered Chef.

Coca-Cola (NYSE: KO)
Coca-Cola is the largest beverage company on earth, in no danger of becoming obsolete. It owns the world's best-known brand and sells four of the world's top five soft drinks. According to the company, "Through the world's largest distribution system, consumers in nearly 200 countries enjoy The Coca-Cola Company's products at a rate of more than 1 billion servings each day." In 2001, Coca-Cola earned $4 billion on revenues of $20 billion. In its third quarter of 2002, it earned $1.1 billion on $5.3 billion in revenues.

Costco (Nasdaq: COST)
My parents frequent and love this warehouse discount retailer, as does Warren Buffett's partner, Charlie Munger, who sits on the company's board of directors. Costco currently operates 411 warehouses, selling everything from furniture to pickles. The Rule Maker Portfolio owns Costco, whose shares now sit below $30, near a 52-week low. The company earned $700 million on $38 billion in sales in fiscal 2002. Of course, Fool Rick Munarriz has a different take at the moment, so you'll have to see what you think about the big-box retailer.

Home Depot (NYSE: HD)
I'm not familiar enough with this retailing niche to know whether Home Depot or its competitor, Lowe's (NYSE: LOW), is a better company for investment, so if you're adding Home Depot to your own watch list, consider adding Lowe's, as well. (I suspect they'll both perform well in the long run.) Home Depot is the world's largest home-improvement retailer; 56-year-old Lowe's is the second largest. Home Depot has some 1,500 stores and employs roughly 300,000 people. Lowe's has more than 800 stores, 115 of which were opened in 2001. Home Depot earned $3 billion on sales of $54 billion in 2001, while Lowe's earned $1 billion on $22 billion in sales.

Johnson & Johnson (NYSE: JNJ)
Another Rule Maker Portfolio holding is Johnson & Johnson. In its own words, "Johnson & Johnson, with approximately 107,000 employees, is the world's most comprehensive and broadly based manufacturer of health-care products, as well as a provider of related services, for the consumer, pharmaceutical, and medical devices and diagnostics markets." In 2001, J&J earned $6 billion on $33 billion in sales.

McDonald's (NYSE: MCD)
McDonald's has grown so large in the United States that its growth prospects aren't tremendous -- here. But there's a wide world out there, and the Golden Arches are out to conquer it. At home, the company is investing in additional food chains, such as Donato's Pizzeria, Boston Market, and Chipotle. Mickey D's is the globe's largest foodservice retailer, with more than 30,000 restaurants serving 46 million customers each day in 121 countries. McDonald's earned $1.6 billion on $15 billion in revenues in 2001. Its current P/E ratio is around 14.

PepsiCo (NYSE: PEP)
When most people think of PepsiCo, they think soft drinks, but they should really think salty snacks. In its own words, "The company consists of Pepsi-Cola Company, the world's second-largest beverage company, Tropicana Products, Inc., the world's largest marketer and producer of branded juices, and Frito-Lay Company, the world's largest manufacturer and distributor of snack chips." PepsiCo has also acquired the Quaker Oats and Gatorade brands, so it's an even more diverse food company. It raked in sales of $27 billion and earnings of $2.7 billion in 2001.

Pfizer (NYSE: PFE)
Pfizer has grown into a pharmaceutical powerhouse, and in order to broaden its pipeline, the company has recently bought or will buy competitors Warner-Lambert and Pharmacia. Pfizer's portfolio includes Lipitor, Norvasc, Zithromax, Diflucan, Viracept, Zoloft, Aricept, Celebrex, and Zyrtec, and features many of the world's top-selling medicines. Eight generate more than $1 billion in annual sales. In 2001, Pfizer raked in nearly $8 billion in earnings on revenues of $32 billion. Its P/E ratio is around 23 these days -- not astronomical for a dominant pharmaceutical company.

Procter & Gamble (NYSE: PG)
It's hard to think of a company with more well-known brand names than Procter & Gamble. The company markets more than 250 brands, such as Pampers, Crest, Tide, Always, Pantene, Bounty, Pringles, Folgers, Charmin, Downy, Iams, Olay, Clairol, Herbal Essences, and Vicks. The company reported sales of $40.2 billion in its most recent fiscal year and earnings of $4.4 billion. 

Southwest Airlines (NYSE: LUV)
While most airlines in America have either languished or gone out of business, Southwest is a rare exception that sports a long history of profitability. By using strategies such as offering few frills and operating only one kind of airplane, the company has grown quite successful. In 2001, Southwest reported earnings of $500 million on revenues of $5.6 billion. While many of its competitors are struggling to stay alive, Southwest has earned (not lost!) about $200 million on revenues of $4 billion in its last three quarters.

Starbucks (Nasdaq: SBUX)
Only three decades old, Starbucks is the world's biggest retailer, roaster, and brand of specialty coffee. It sells coffee, teas, muffins, music, board games, and more through 5,000-plus retail locations, online, and through other distribution channels. When I see long lines of people happily handing over several dollars apiece for cups of coffee at Starbucks, I wish I owned shares. In 2001, Starbucks reported earnings of $180 million on revenues of $2.6 billion. In its last three quarters, it earned $157 million on sales of $2.4 billion.

Tootsie Roll (NYSE: TR)
Fully 106 years old, Tootsie Roll is a giant among confectionery concerns. It's the world's largest lollipop maker (making 16 million per day), for starters. Its brands include Tootsie Roll, Charms, Junior Mints, Sugar Daddy, Charleston Chew, Dots, Cella's, and Andes. The smallest firm in this list, Tootsie Roll, reported earnings of $66 million in 2001 on revenues of $424 million. It's trading near a 52-week low.

Wal-Mart (NYSE: WMT)
From rather humble beginnings in Arkansas, this company now encompasses about 1,600 Wal-Mart stores, 1,244 Supercenters, 520 Sam's Clubs, and 39 Neighborhood Markets -- in the United States alone. Internationally, there are some 1,225 more. The company employs more than 1.3 million people around the globe. In 2001, Wal-Mart reported earnings of $7 billion on whopping sales of $218 billion. (The company is now largest in the world, in terms of annual revenues, recently surpassing ExxonMobil (NYSE: XOM).) In its last three quarters, it earned $5.5 billion on sales of $175 billion.

Wendy's (NYSE: WEN)
Founded in 1969, Wendy's International is the world's third-largest quick-serve hamburger chain and one of the world's largest restaurant operating and franchising companies. It sports more than 8,500 restaurants and system-wide sales topping $8 billion. Its brands include Tim Hortons (a Canadian coffee and baked goods chain) and Baja Fresh (a leader in fast, casual Mexican food). In 2001, Wendy's reported earnings of $190 million on revenues of $2.4 billion.

Yum! Brands (NYSE: YUM)
Despite the exclamation mark in its (new) name, I like this company. The former Tricon Global is parent to Taco Bell, Pizza Hut, and KFC -- global leaders in their respective food categories -- as well as Long John Silver's and A&W. Yum! is the world's largest restaurant company, in terms of system units, with more than 32,500 restaurants in more than 100 countries. In 2001, Yum! Brands posted a profit of $500 million on revenues of $7 billion.

So... what should you do with this list?
Well, don't just invest blindly on my mention of any company here. Instead, here are some suggestions:

  • Research the firms that interest you and get to know them well. Perhaps use Google to search for material. Its Advanced Search page permits you to search through just one website, such as Fool.com. Use Google News to scan through recent articles on various companies. Visit the firms' own websites, learning more in areas labeled "About Us" and "Investor Information." Look up their financial statements and most recent annual report(s), either there or in the Fool's own Quotes & Data area. Compare them to their competitors. Assess their financial health, growth prospects, and competitive advantages.

  • Add any or all of these firms to your watch list and wait for some to become attractive enough to invest in. (Perhaps some already are.)

  • If you want to invest in any, but are skittish about the current economy, consider dollar cost averaging. Doing so means that you invest a set amount into a stock regularly, regardless of its price. So if you're plunking roughly $500 into a stock each quarter, and if its price falls, you'll get more shares. If it rises, you'll get fewer. You won't be committing your entire investable funds to the firm at one price. Another way to do essentially the same thing is to invest via Drips (direct investing plans), where you bypass brokers. (Learn more about Drips.)

  • Discuss any or all of these companies in our discussion boards (free trials available) -- or at least drop in and "lurk" to see what others are saying.

  • Ignore this article completely, and continue investing in your own way. That's a perfectly reasonable response, too.

And while I have your attention, let me point out several of our popular products offering investing ideas and analysis:

Give 'em a whirl, if you're interested.

Also, perhaps as a holiday gift, consider giving teenagers The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of. It's currently the best-selling financial book for teens.

Finally, I can't end without mentioning our sixth annual charity drive, Foolanthropy, in which we're asking you to once more join us in supporting five astonishingly effective organizations in saving millions of lives here and abroad.

Cheers!

Selena Maranjian is smarter than a speeding bullet and faster than a tall building. She owns shares of Berkshire Hathaway, Costco, Johnson & Johnson, and Pfizer. To see Selena's complete stock holdings, view her profile. The Motley Fool is Fools writing for Fools