3 Stocks That Just Make Sense

"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 some of the companies that may fall into that "fish in a barrel" category, I looked for companies that have shown signs of brilliance. Specifically, I focused on companies with a conservative balance sheet, a forward price-to-earnings ratio below 15, a return on equity above 12%, and a dividend. I've also included the ratings that the Motley Fool CAPS community has given each of these stocks.

Source: CAPS and Capital IQ, a Standard & Poor's company. *TSMC has a negative net interest expense.

While the three companies above aren't meant to be formal recommendations, they are a good starting point for further research. On that note, let's take a closer look at why these potential investments might make a whole lot of sense.

Siemens
I keep looking at GE (NYSE: GE) and wondering whether I should be a buyer of the American giant. Every time I dig in, though, the same thing happens: I get scared off by that massive finance arm. It's very possible that I'm overestimating the (further) damage that it could do to GE, but, to date, that division's kept me sitting on my hands.

What's interesting is that until today, I never really strongly considered Germany's answer to GE: Siemens. With Siemens you get much the same industrial, energy (and, yes, alternative energy!), and health-care exposure, but without the massive finance-business overhang. The numbers on Siemens certainly look good and though it's had hiccups in the past, it's shown that it sure can grow.

U.S. investors with a taste for dividends will probably be interested to know that most websites have Siemens' yield incorrect (which is not that uncommon for foreign stocks) at 2% or below. It's actually around 3%. And there's been recent talk about the pressure the company has been receiving to pay out some of its cash hoard as a special dividend.

Heavy exposure to Europe could be a bit dicey these days, but I think this highly rated stock could make a heck of a lot of sense.

Taiwan Semiconductor
As we continue our tour of great stocks from around the world, our next stop is Taiwan, where we find, as my fellow Fool Tim Beyers put it, "the Intel (Nasdaq: INTC) of its industry."

As an owner and big fan of Intel, that kind of statement certainly catches my eye. So what exactly does it mean? Well, just like Intel, TSMC dominates its industry. In its most recent annual report it notes that in 2010 its "revenue market segment share among dedicated foundries" was 51%. With nearly $15 billion in trailing revenue, it towers over competitors like United Microelectronics (NYSE: UMC) and Semiconductor Manufacturing.

Once again, dividend investors will be interested to know that the stock's yield is closer to what I've noted above, as opposed to the sub-4% number that finance websites are showing. That said, dividend lovers shouldn't get their hopes up about payout growth here, because the company's dividend has been relatively fixed for some time.

My biggest disappointment about TSMC is that I gave it a thumbs-up in my CAPS portfolio back in January 2009 and didn't get that 83% return in my real-life portfolio.

Home Depot
Since I've already covered two companies that you may not come across on a day-to-day basis, let's finish with one that you may at least drive by a few times a week.

There's no question that Home Depot and its prime competitor, Lowe's (NYSE: LOW), have both struggled as the housing market and the economy in general have been in the pits. And as the three-star rating on CAPS suggests, Foolish investors are not quite ready to give Home Depot the benefit of the doubt. But is there reason to jump back in ahead of the crowd?

Late last year, CAPS member Tuftears2 noted: "In tough times, people will choose to fix up their homes rather than buy new ones."

More recently, CAPS All-Star fearandgreed2005 gave a thumbs-up and this bullish quip: "beaten down stock with a great brand temporarily crushed because of housing bust."

The yield is attractive, the price seems reasonable, and analysts are anticipating 14% growth over the next five years. Perhaps this stock isn't a lost cause after all.

Getting down to business
Now the CAPS community wants you. Do you think these stocks make sense? Or will they disappoint investors? Head over to CAPS and join the 175,000-plus members already sharing their thoughts on thousands of stocks.

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