5-Star Stocks Worth a Look

Despite the fierce rally, high-quality companies at great prices can still be found. Watch a few minutes of CNBC. Read a few blogs. Talk to a few opinionated people. There's no doubt about it: Fear still isn't hard to find. And that's great news for those on the hunt for great investments.  

Using our Motley Fool CAPS ranking system's screening tool, I scanned for five-star companies -- the highest rating our CAPS community offers -- that might aid your bargain-hunting ambitions. Have a look:

Data from Motley Fool CAPS and Yahoo! Finance, as of Nov. 3, 2009.
TTM = trailing 12 months. P/E = price-to-earnings ratio.

None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can run an update of this screen, if you like.

Consumer staples throwdown: P&G vs. Colgate
Both Procter & Gamble and Colgate-Palmolive deserve your attention. They're both leading consumer staples companies with hugely powerful brands. Both probably line your kitchen, bathroom, and laundry room. Both are solid, time-tested blue chips with a history of rewarding investors like champions. You know the story.

But which one's throwin' down over the other? And which stock is a better buy? We'll try to figure that out right now:

Source: Yahoo! Finance, Capital IQ (a division of Standard & Poor's), and Motley Fool CAPS.
TTM = trailing 12 months. FCF = free cash flow.

Let the battle begin. P&G has grown revenue a hair quicker. Colgate has a small edge with earnings growth. P&G's dividend clearly wins. Colgate has a higher percentage of sales from overseas. Valuation-wise, Coalgate is pricier, especially on a cash-flow basis. All in all, it's a close brawl. No ears gnawed off just yet.

What does our CAPS universe have to say about these two? Earlier this year, NoVaAmPro wrote this about Colgate:

No matter how bad the economy gets, people are still going to brush their teeth and wash their dishes. And as the economy recovers, they'll naturally trade up for top products. I've been loading up in my real-money portfolio during this downturn, and the kind of dividend history that a company like Colgate-Palmolive offers allows any investor to sleep well at night in any economy.

And just recently, CAPS member tekennedy wrote this about Procter & Gamble:

This is just a spectacular company. The reason the company has a competitive advantage is its management and the significant brand equity in owned brands. The management and the scope of company operations help make essentially any consumer good more valuable to P&G than to its previous owner. It is amazing to see how strategic advertising helps reinvigorate stale names and how product extensions help realize further value from their brands. The portfolio of leading brands will help them maintain their space on store shelves and ensure they will continue to earn excess economic returns.

None of which really helps us crown a winner. Our CAPS members love both these companies equally, and typically for the same reasons. It's like corporate sibling rivalry.

But if I had to pick one, it would be (and is) Procter & Gamble. The reason is purely valuation. Both of these are great companies that deserve your admiration. But at a slightly lower multiple than Colgate, and with a noticeably higher dividend, you're bound to get more bang for your buck out of P&G. The results of both companies will be influenced predominantly by the same factors going forward. Paying a premium, even a slight premium, for one over the other doesn't seem justified.

Enough from me. What do you have to say?
Have your own take on any of these companies? More than 140,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

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